Updated: Oct 5, 2020
by John Anderson
My favorite saying is "we make plans and god laughs." The same can be said about making career plans. We make career plans and the corporations laugh. In other words, we plan out our careers but changes happens. Sooner or later we are going to have change thrust upon us; will you be ready? What can you do today to be ready for tomorrow?
We are trained growing up to graduate highs school, get a college degree and go to work for someone else. This works for a lot of people. They build a great life, own a home, a nice car and over 40 years build up a nice 401K. But they don’t build real wealth. A simple google search turns up that real wealth is generated from business ownership and real estate investing.
Interestingly, most people come to me looking at franchising not even considering the wealth building aspect. They are just tired of working 50 hours a week or more to build wealth for someone else. They are tired of being at the beck and call of a boss.
They want to be the boss. They want to control their day, their week, their life. FREEDOM.
Can you have both? Absolutely I know a lot of franchise owners who have built million dollar assets out of $50,000 investments. I have to add here there is no guarantee. There are also plenty of examples of people who lost their entire investment.
But, if you have the skills, the motivation and are matched with a great franchise, you have a very good opportunity to gain the freedom you crave to come and go as you want AND build wealth and equity in the process. Most franchisees will spend that 50 hours a week and then some the first couple years building their business and learning the ins and outs of the industry they chose. They still control their schedule though. And most gain much more flexibility over time as the install management and become more like a CEO.
That is why we got into franchising. FREEDOM. We never had visions of building a huge asset but we did have a vision of leveraging awesome managers and employees to help build our business and provide a good income while my wife and I focused on the family, coaching soccer and baseball, going camping with scouts, and of course contributing at school in homerooms, PTA and other events.
What about a great job? Doesn’t it provide more security?
You tell me. Does it? It does until you lose that job.
Sure, you don’t invest capital or take out loans to get a job. But what if you are fired or laid off? As a reference I am writing this in September 2020. We have had historic job losses over the last 6 months. I have had dozens of meetings this summer with people who thought they had “security” and now are looking into franchising.
Some of those meetings are with others who really enjoyed the freedom (see that word popping up again?) of working from home during the pandemic. They want to know about transitioning into business ownership as a career to keep that flexibility they grew to love.
Before I wrap, I want to touch on how does one build wealth and equity in a franchise. Let’s take an example or two. One of my favorite businesses is staffing and personnel. Boring but very straightforward and predictable. I probably have met more millionaires who go there from a $150,000 investment in a staffing franchise than any other industry. I know a lot of folks who built multi million dollar empires in food franchises but I assure none of them got started for $150,000. A single location that might make $100K a year, costs $500,000 and up to start. Many are over $1,000,000 to start.
Back to my staffing example. An existing business will typically sell for 2.5 to 3.5 times net income plus some factor for assets if its an asset heavy business. Staffing is not so let’s look at someone who built a business over 10 years generating net income of $500,000 per year. At 3 times earnings, you have a saleable asset worth $1,500,000 or more. That is real wealth. And if they invested some of the substantial earnings over those 10 years, they have a lot more.
Still not convinced? Or maybe you don’t even have $150,000? You can typically get a loan for part of your start up investment although for reasons beyond the scope of today, staffing financing is a little tricky. But you can get started in Home Health Care, Maids services or many other home maintenance and home care services for $50,000.
Let’s say you start one for $50K. Maybe you take a $100K loan for total start up capitalization of $150K. I have talked to lots of franchisees who took that to $500,000 a year but let’s say it’s only $200K per year. At 3 times earnings you still have an asset that grew from $50K to $600K (in the process you made a good living AND paid the loan off). Not bad for leaving a “Secure” job where you worked tirelessly for someone else AND gained FREEDOM and flexibility along the way.
If these stories seem interesting or compelling to you, reach out on my web page www.ThatFranchiseGuy.comor on LinkedIn at https://www.linkedin.com/in/thatfranchiseguy/. You’ll find some tremendous resources for researching franchising in both places.