I am always shocked by how many potential Franchisees go and start the discussions with Franchisors and start to carry out due diligence without first having set some goals for their new business.
Imagine going and looking at new cars to buy, test driving them, discussing the finance options before you even decided your basic needs for a car. For instance how many seats do you need, what kind of driving will you be doing long distance or short commuting.
So before you start to look at which will be the best buy franchise, you really need to set out some high level goals for your new business venture.
Do a home budget (this is worth doing even you are not looking at starting a business). What are your monthly fixed out goings, fixed are thing like mortgage, insurance etc. Then list out your variable outgoings such as food, entertainment and so on. You should now have an idea of exactly how much profit you need to make each month to carry on living as you are.
Try and decide what is going to be your exit strategy, I know it sounds strange but unless you intend to work until you die you will need to decide an end point for your business.
How long do you want to run your business for? Until you retire? Or you can set your end point in terms of money i.e. cash in the bank lets a $1m clear profit, its up to you but you get the idea.
It would be perfect if you can envisage a time deadline and a monetary deadline, for instance $2m clear profit in 10 years.
The reason you need to do this is because if you’re best buy franchise opportunity will only generate $60,000 of profit a year and you living expenses are $40,000 then you are not going to hit your goals and you need to keep looking and find something more substantial with a more substantial profit return.
Now you need to have an idea of how much you want to spend and therefore which will be your best buy franchise, so start looking at your assets these will include your house (if you own it) and how much it is worth over and above what you paid for it, cars, do you own it/them? How much finance is left on it? Also include any other things of significant value such as Jet bikes, boats, motorbikes, antiques, paintings, you get the idea. How much do you have in savings, insurance policies, stocks etc.
After you have completed this you will then have an idea of your net worth, this will be very useful for you but it will also show any potential franchisor that you have been doing your homework.
So now you now how much you can raise in startup capital, you know how much you need to clear a month, you know what you end point will be; so you are now ready to start the initial information gathering stage of your new best buy franchise business!
Good luck!
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Gary Burns is an independent advisor and had been involved in franchising for over ten years. |
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