Buying into a franchise is a big step, but it has a lot of potential to lead to economic success. It can also be a confusing step, since it isn’t always easy to choose between all of the options that are available. Making the right choice is crucial to having a successful business, so it’s important to work through the question as thoroughly and methodically as possible.
Investigate Financing Options
Some people can get their franchise started from their savings, but most people need to get a loan. It’s important to start with this step so that you know what sort of resources you have available when you look into all of the other options. Be sure to shop around with multiple lenders to make sure that you get the best possible deal. It’s never too early to cut costs, even when the business hasn’t opened yet, and prudent financing can lay the foundation for later profits.
Check Your Budget
Loans can make up a big part of your budget, but you should have other sources of income. Some people can rely on extra funds from a spouse or other relative in an emergency, while others can bring their savings to bear to help fund the business. Find the total of every source of income that you have available and your anticipated future income, and then decide how much of it you are willing to risk as an investment to find your total budget for the business. Once you have that information, you will know what sort of business you are capable of funding.
Know Your Preferences
People often think of business as a matter of pure numbers, but those individuals fail to realize that there is often an emotional component to management. It’s important to choose a franchise with which you feel comfortable, since any additional stress can lead you to make poor choices down the road. If you are enthusiastic about the products, that enthusiasm can often keep you motivated when times are hard. It’s important to choose a business that can turn a profit in your local market, but never forget that you need to be able to live with your choice.
Know Your Market
NTY Franchise Company said, “The success of a business depends as much on the local market as it does on the business owner.” It can be risky to open a franchise that will have a lot of local competition, but it’s also possible for a market to support several similar businesses if there is sufficient demand. It’s never easy to assess a market, but it’s possible to get a general idea by figuring out what people need and doing research to see how easy it is for them to get it. In large areas with complex markets, it may be best to ask an expert. Many governments offer support for local small business owners, and this is a good time to consult with them.
Run the Numbers
Once you know what you can do and what you want to do, it’s time to figure out if it can turn a profit. Calculate your expected expenses and take your best guess at your future sales to see if you can turn a profit. It’s hard to get more than a general estimate at this stage, so it’s best to overestimate expenses and underestimate income to make sure the business can survive hard times.
Know the Risks
Franchises are relatively safe investments, but nothing is entirely free from risk. Look into the success rate of similar businesses in your area to try and gauge your odds of success. Once you know the odds, decide if you feel comfortable with them. If you don’t, look into changing your business plan to minimize the risk, or consider a different franchise.
Never be afraid to ask for help. It’s always better to find a solution to a problem with support from a friend than it is to fail alone. Sometimes, that means calling it people with specific legal or financial skills. Other times, it means calling on your friends for emotional support. Try to get your support network in place before you get started with the business. It’s always better to be prepared than to look for help once the problem has already started.