How Much Money Can I Make with a Franchise? How long does it take?
These are the same basic questions everyone has as they give any thought to buying a franchise. The short and simple answer to if you how much money can make money with a franchise is “It depends.” I know what you are thinking, that’s a cop-out answer. But it is really the right answer and for these reasons:
- Almost all of franchisees are making money (that’s why they are in business)…… but how much is possible?
- What differentiates the really successful owners from the others?
- What is your “definition of success” and what will it take to accomplish it?
- How hard do you want to work and for how long?
- How well do your skills match up with the traits of other successful owners of the business that you am interested in?
- Do you really understand what a successful owner of the business does every day to make it work so well and are you capable/willing of doing those things?
Therefore it’s important to understand what your financial requirements are; how much do you need to make, how much do you want to make? Then we look for businesses that have a demonstrated success pattern of developing new business owners to achieve those results.
Don’t forget about the major benefit of business ownership; building equity. For while the business throws off the income you need to live your lifestyle, the wealth creation opportunity is the real differentiator. How much is a business worth that has a history of repeatable cash flow, strong customer base and maybe some hard assets? This is the real goal of any business.
How long does it take to make money with a franchise?
It’s also important to be able to separate your monthly living expenses from what the business can return. Yes, you need to be able to earn enough to cover your monthly living expenses but you need to be able to provide for them outside of your consideration for what you need to operate your business initially. Realize that it will take time to ramp up the business to cover not only monthly operating expenses but also your living expenses. In other words, if your financial health is such that you are worried about how quickly the business will provide a certain level of income, then you better be sure you have ample resources available to provide for those expenses.
The time factor is also dependent on other things that you’ll deal with when first getting started. For example, a retail business will take longer to ramp up simply due to the time it takes to find a proper location, get it built out and staffed and ready to open. With a home based sole proprietor business, usually you’re ready to open the day you get back from training. Service businesses fall in between these 2 examples.
Additionally the nature of the business will affect the ramp up time. If you need to go out and build a network of prospects/clients and then allow for a typical “sale cycle” for the business, all this adds to the ramp up time.
Lastly, the final and most important factor in a business’s financial success is how well the traits of a successful owner match up with you and your abilities. This is the secret that we want to uncover during due diligence. When you understand this then you can readily accept the premise that it’s not about what the business does that is most important but rather you’re ability to do what it takes to make it successful.
So while the time frame varies and depends on a lot of factors, the good news is that you will learn what this time frame looks like as you go thru the due diligence process of discovery. More on that in later articles.