Wondering When the Profits Will Start Rolling In? Find Out Before You Invest in a New Franchise!

Wondering When the Profits Will Start Rolling In?  Find Out Before You Invest in a New Franchise!

So you’ve selected a franchise and have your initial investment capital saved and now you want to know: How much money will I make? To answer the question you’ll need to weigh your costs against expected potential revenues.

The beauty of a franchise is you actually have a good shot at figuring all these numbers out. Between the financial disclosure document (FDD) and information available from existing franchisees, you can get a good feel for expenses, as well as potential revenues, so long as you factor in differences related to location, local market and, not to be forgotten, the range of talents and experience individual franchisees bring to their businesses.

Why is it so important to do this math upfront? In a phrase, operating capital.

Lots of folks eager to become entrepreneurs for all the usual reasons -to control your own schedule, achieve work-life balance, be your own boss, and make more money -may neglect to factor in all the capital requirements.

At the beginning of a new business comes the transitional stage. This means you need money to run your business until you learn your way around a new market, new procedures and customer care. During this transition, you won’t generate enough revenue to cover expenses. So it’s essential you have enough capital to keep the circuits humming.

Your first task is to get a realistic sense of how much capital you need to get started. Fortunately, the FDD will provide this view of your costs. Some companies will even provide an idea of potential earnings. A franchise coach can help guide you through the process, but it’s never too early to start your research.

Three Keys to Understanding Your Potential Earnings

Know your Timetable

Most businesses take three to 12 months to start earning profits. The slowest to become profitable are franchises with a lot of costs or ones that take longer to build a customer base. And if the margins are thinner, you need to generate more volume. For example, a document shredding franchise, which requires expensive equipment, may take as long as 18 months to run in the black but can eventually become quite lucrative. Retail franchises can be among the quickest to turn a profit because a good location will quickly draw customers.

Accurately Estimate Your Fixed Costs

The franchise disclosure document provides a list of all your costs -everything you need to open -which are far more extensive than just the initial franchise fee. Examples of the types of fees you’ll find under Items 5 and 6 in the FDD are: IT and system setup and initial marketing. Then comes ongoing fees, such as local marketing additional training, ongoing IT or software costs, costs for audits, insurance, and on and on. In short, all of the costs you would expect to encounter.

In your calculations, you should also factor in the cost of consulting an attorney and accountant, which we strongly recommend.

Estimate Potential Income

Flip now to Item 19 of the FDD to read if the franchisor has made any earnings claims. Only about one-third of franchisors make earnings claims, and how franchise companies address this issue varies.

To fill out the picture, your most important information can be found in Item 20, where you’ll find a list of franchisees. You want to call as many franchisees as possible, preferably those operating in locations similar to yours, to verify all the information in the FDD and get an idea on profits. Word to the wise, avoid the question: How much money do you earn? Instead, try a softer approach, such as: “How long until I can expect to make $100,000.”Then try out different income amounts.

All three steps are essential to your preparation. Doing the due diligence required to choose the right franchise upfront will help you experience the pleasure of being your own boss for years to come.

 

Ready to make your dream of becoming an entrepreneur come true?

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Contact Dan Citrenbaum to help you create the career you’ve always wanted. As a franchise coach, Dan brings years of experience helping people select and buy a franchise or existing business. You can reach Dan at dcitrenbaum@gmail.com or at (484)278-4589.

 

©Dan Citrenbaum 01/2015

Wondering How Much Money You Can Earn in Your Own Business? Learn the Art of the Franchise Intereview

Wondering how much money you can earn in your own business?

Learn the art of the franchisee interview 

On the verge of jumping ship, saying sayonara to your status as employee to forge ahead as an entrepreneur? Or just ready to stretch your creative muscles for a change and reap all the fruits of your labor?

All great reasons to start your own business. The real question: Can you increase your earnings by going out on your own?

One way to get a handle on your potential earnings is to choose a franchise since you can get realistic data from the financial disclosure document, a veritable roadmap to a franchisor’s business, as well as from franchisees currently in business or out of business.

Conducting research is critical, but knowing how to conduct a good franchisee interview is key to getting a real read on the business.

Only about one-third of franchise companies disclose earnings numbers in the disclosure document, which is why you’ll need to delve deeper. You’ll need to use what all franchise companies are required to disclose: a list of every franchisee along with their contact information.

You want to talk to as many as possible, preferably those operating in areas the most similar to your location. Talk to those not operating any longer, also. But there is an art to interviewing franchisees.

As anyone knows who’s ever watched TV news, some interviews lead to surprising revelations, while others end up as duds. The trick is to get the most from these conversations your first time around. A franchise coach can help you plan your interview so you can get a true picture of a particular franchise, including earnings potential. Here are a few tricks of the trade.

Five Keys to a Revealing Interview

Respect

First and foremost, you should be courteous toward this person who is taking time from his or her busy day to help you. Ask for a specified amount of time, such as 15 to 30 minutes, and stick to it. If you have a few extra questions, politely ask if the franchisee can spare a few more minutes. And don’t forget to thank the franchisee for talking to you.

Listen

In American culture, we have a tendency to interrupt. Squelch that instinct and listen to the franchisee. You’re asking for information you don’t already have, so be careful not to put words in this person’s mouth. What you want, after all, is to hear things you don’t expect.

Clarify

Even when you’re listening carefully, you still might not quite feel you fully understand a point being made in the interview. People like it when you ask for clarification because it shows you’re listening. The absolute worst result is to get an incorrect impression due to a misunderstanding.

Plan

Start with a list of questions. Since your goal is to find out the most about this franchise operation without making your source uncomfortable, start with easy questions. Ask about the franchisee’s personal journey: why choose this franchise? Has it met expectations? Has the franchisor offered sufficient support and training? Were the upfront fees easily recouped by generating sufficient revenues?

You do want to get a window into earnings, but we strongly advise against asking this question outright. Instead try: How long should it take me before I can expect to make $100,000 a year. You can ask the question several times, substituting progressively higher numbers. This way you’re not asking about the individual’s business per se, but the franchisee will give you a good idea of what you can realistically expect to earn.

Follow up

If the franchisee mentions an aspect of the business you hadn’t planned to discuss, but it’s something he or she obviously deems important, by all means, follow up. This is how some of the most pertinent pieces of information arise that may prove critical to your eventual decision to buy this franchise or not.

Everyone knows starting a new business requires a capital investment, but it also demands intellectual capital -yours. It’s always better to know as much as you can about a business in which you’re about to invest your money and yourself, so go out there and interview people with experience.

 

 

Dan Citrenbaum is a franchise coach and consultant to entrepreneurs, who helps people achieve their dreams as small business owners. He has a proven track record helping people select and buy a franchise or existing business. Contact Dan at dcitrenbaum@gmail.com or at (484)278-4589 and view his company website at www.entrepreneuroption.com.

 

©Dan Citrenbaum 12/2014

 

Looking for a Second Act? Start a Business!

Looking for a Second Act? Start a Business!

 

            Laid off or downsized or just looking for a change in our troubled economy entrepreneurship may be just what you need to craft your dream job. And whether due to the midlife doldrums or a career that let you down, lots of folks see an opportunity to find new meaning in their work.

            About 35 percent of all new businesses in 2013 were started by people over the age of 50, according to a recent study by the Kauffman Foundation and LegalZoom. The subject of the midlife entrepreneur was even the subject of a recent U.S. Senate hearing titled, “In Search of a Second Act: The Challenges and Advantages of Senior Entrepreneurship.”

            According to testimony before the committee, entrepreneurs between the ages of 55 and 64 are starting businesses at a faster rate than people in their 20s and 30s.

            But the news is hardly surprising since everyone knows 60 is the new 40, and extensive life and business experience can pay big dividends in business.

            Don’t worry if you don’t have a background in your new business. A franchise may be just the ticket to your second career and, before you hesitate, that doesn’t mean fast food. In fact, there are lots of franchise opportunities in service businesses, where you can find ways to make a real difference in people’s lives and use the skills you developed in your first careers.

            The International Franchise Association projects business and commercial and residential services to be the fastest growing sectors of the franchise business next year. So, if you’re interested in helping people get control over an aspect of their personal or professional lives, there may be no better time to start your next stage.

            The advantage of franchises is they offer ready made systems tested over many years for running a business, plus training and ongoing support. And while the world of franchising is huge 75 industries are represented a franchise coach can help you get started with your research.

            Opportunities in the growing service sector include:

Senior Care

As Baby Boomers age, opportunities abound. The greatest need is for home health aides to help seniors stay safe and healthy throughout the day in their own homes.

Health and Wellness

You might start a business to help fit people with hearing aids or get fit with an exercise program. A range of possibilities include franchises for massage therapy or urgent medical care, as well as fitness for seniors and baby boomers.

Home Modifications for Handicap Access

Lots of opportunities exist to help people renovate their homes to be accessible to older or disabled folks.

Academic Tutoring

You might want to devote your working life to help augment educational opportunities by going into the tutoring business. Lots of businesses are thriving in this area, including Above Grade Level, which sells in-home tutoring services.

Disaster Recovery

This business fills a critical need to help people cope with the awful after-effects of a natural disaster, be it a tornado or flood or even a burst pipe. When people don’t know where to turn after experiencing severe damage to their homes, they can turn to companies like ServPro.

Green Energy/Recycling

In this growing area of our economy, you can be a part of the green revolution, by not only by helping people to reduce pollution but by cutting their energy costs, as well.

Whichever business you choose to enter, topmost in your mind should be your specific personal goals, whether that’s work-life balance or maximizing earnings. Either way, you can find what you’re looking for in the world of franchising.

 

 

Dan Citrenbaum is a franchise coach and consultant to entrepreneurs, who helps people achieve their dreams as small business owners. He has a proven track record helping people select and buy a franchise or existing business. Contact Dan at dcitrenbaum@gmail.com or at (484) 278-4589 and view his company website at www.entrepreneuroption.com.

 

©Dan Citrenbaum 11/2014

 

Starting a Business? Control Your Risk With a Franchise!!

Starting a Business? Control Your Risk with a Franchise!!

So you want to start your own business but don’t know where to start? Maybe you’re concerned about risk, lack of experience in the specific business that caught your fancy or are nervous about blazing an entirely new trail.

For the thousands of folks looking to gain control over their working lives each year, a franchise offers some compelling advantages. For one thing, instead of beginning your research
by talking to people operating a similar business, you can learn the ins and outs from people in the very same business. A franchise operation offers a veritable network of support, plus a treasure trove of statistics and operating history is available to give you a leg up in the marketplace.

By contrast, when you start an independent business, you must invent your concept and innovate your own marketing, inventory and accounting controls and countless other procedures from scratch, some ahead of time, and, inevitably, some on the fly as you go along, which will likely significantly impact your bottom line as you get started and optimize your systems.

For some, therein lies the excitement. These are the folks willing and able to accept far more uncertainty, but many others prefer a less bumpy path.

With a franchise, many of those risky variables disappear since the franchise company has already figured out a system that works. The tricky part comes in selecting a franchise that’s right for you and has a good track record of success, which can be challenging in an arena in which about 800,000 franchise establishments operate in 75 different industries, generating a $2.1 trillion impact on the domestic economy, according to a 2007 study by the International Franchise Association.

Getting some assistance is as easy as locating a franchise coach who can help steer you toward reputable franchise companies. Of course, like everything else associated with your own business, the responsibility lies with you to do your due diligence before signing your name to any dotted lines.

We suggest you start with these five steps to narrow down your franchise search and maximize your success with your new business:

Conduct a personal Inventory
Write a list of your professional and personal skills. Then write a wish list of the types of businesses you would like to operate and the types of skills necessary to run these businesses. See where they intersect!

Research Possible Franchises
Check the website of the International Franchise Association for a comprehensive listing of franchises that suit your personal profile. Consider consulting a franchise coach, who will already have vetted many franchise companies.

Zero in on a few franchises
Request a copy of the franchise disclosure document for your selected list of franchises and read through these for: the franchisor’s background, initial and ongoing costs, litigation history, plus information about the types of training and support they offer, as well as their method for advertising, including who pays.

Interview Existing Franchisees
Learn about the types of support offered by the franchise companies, how it helps them, and find out how much their businesses are earning to check if it matches information in company disclosure documents. Franchisee profits can vary widely due to geography as well as other factors. You want to find out what it takes to succeed with this franchise.

Interview former Franchisees
Learn why things didn’t work out for them. You might get an earful about the franchise company’s shortcomings, or you might hear the franchisee wasn’t really cut out for this type of
business.

The knowledge you gain by going through this research process is indispensable to you in whatever business you start. As you’ve likely heard before, success happens where opportunity meets preparation. And your research is critical to your preparation.

Dan Citrenbaum is a franchise coach and consultant to entrepreneurs, who helps people achieve their dreams as small business owners. He has a proven track record helping people select and buy a franchise or existing business. Contact Dan at dcitrenbaum@gmail.com or at (484) 278-4589 and view his company website at www.entrepreneuroption.com.

©Dan Citrenbaum 09/2014

Shopping for a Franchise? Stay Away from the Next New Craze!

Shopping for a Franchise? – Stay Away from the Next New Craze!

Cupcakes are all the rage these days in franchising, and while they make a pretty window, their long-term appeal may be fleeting. Frozen yogurt is also making a strong comeback after almost disappearing some years ago. But it doesn’t take much to saturate the market, and you know it’s a fad when it fizzles out fast.

What’s hot and what’s not may be a typical headline on a fashion spread, but you probably want to stay away from fads when it comes to franchises. Sort of like the flavor of the month, when folks get tired of it, they stop buying.

A better focus is to pinpoint what people need. After all, people are not likely to buy specialty cupcakes on a regular basis or continue buying frozen yogurt when the weather turns cold, which are just a couple of reasons why these businesses tend to come and go as often as the weather changes.

Some of the best opportunities are with franchises in well-established markets where the field may already be crowded. But there’s a lot to be said for the tried and true. After all, savvy buyers choose the economic sectors with consistent growth.

When starting a new business, your goal is to capitalize on long-term economic trends as opposed to the flashy fad. Case in point: the International Franchise Association projects business and commercial and residential services will be the fastest growing sector of the franchise business in 2014.

The specific areas we like include health care, temporary staffing and other service businesses.

Solid Trends for Franchises

Health Care

The health care industry has experienced good growth in recent years, and, as the baby boomers start to retire, the prospects for the future may even be better. You can find franchises that specialize in modifying homes for seniors, as well as supplying home health care aides.

Temporary Staffing

As many companies cut jobs as a result of the Great Recession and a slow growing economy, they now rely more on temporary or contract workers. So the demand for temporary staffing services is on the rise with no clear end in sight.

Service Businesses

A panoply of service businesses are thriving, particularly ones that tend to be recession resistant, not easily outsourced overseas or conducted over the internet. Examples include firms that conduct workplace drug and alcohol testing, mandated by the government for some industries, and companies specializing in the restoration of water damaged homes, since disasters, like floods or broken pipes, regularly occur without regard to our economic cycle.

While you don’t want to be seduced by the latest fad, you do want to anticipate future trends in the American economy. A strong business idea fulfills a deep-seated market need, which, as we know, some people may have not yet realized. Who would ever have guessed 20 years ago that Americans would now be so addicted to their espresso drinks!

 

 

Dan Citrenbaum is a franchise coach and consultant to entrepreneurs, who helps people achieve their dreams as small business owners. He has a proven track record helping people select and buy a franchise or existing business. Contact Dan at dcitrenbaum@gmail.com or at (484)278-4589 and view his company website at www.entrepreneuroption.com.

 

©Dan Citrenbaum 10/2014