003A: 10 Critical Steps to Buying Your Best Franchise – Part 2

Jim Deitz, The Franchise Doctor
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Show Notes for 10 Critical Steps to Buying Your Best Franchise© -Part 2

 (Note, we began this discussion in Episode 1A and if it’s been more than a week since you heard that podcast, we’d suggest that you listen to it first.)

Critical Step 2  Finding the Funds to Invest  – This Step will take from 3 months to 10 years to complete.  

{These Show Notes are provided to summarize important topics in Podcast 003A. They include links to resources that will keep you moving towards your goal of franchise ownership but they should not be considered a substitute to listening to the full podcast.}

Now we’ve come to one of the most critical steps in planning for your future franchise ownership.  It could be called the “Show Me The Money” stage.

Franchising is a highly successful form of business expansion for many reasons—one of which is the fact that you need money to join. If you don’t have it today, you can’t join today.

If you have a personal goal to own your own business someday and the drive to succeed, there’s no reason you can’t be a player in 2, 4, or 6 years — if you’re willing to pay the price for success. Those who do will almost always succeed because they’re “driven!”

First, you should get your personal finances in order.

Take an assessment of your current situation and determine how much you could invest this month, if the right opportunity presented itself.

Create a Personal Financial Statement for yourself and your family showing everything you own and everything you owe. Here’s the link to an SBA form you can use, https://www.sba.gov/content/financial-statements

Every franchisor is going to ask you to complete this form (also called a Balance Sheet) before they spend a lot of time and resources “courting” you to join their system so you might as well get familiar with it now.

In one column, on the left of the page, you’ll list all your assets–everything you own. On the Right side, you’ll list everything you owe to others for loans and mortgages. When you subtract what you owe from what you own, you’re left with your Net Worth. This should indicate how you and your spouse have been managing your finances to date.

Too much debt can undermine your success for decades. If you get started now, you can knock out your debt, build savings and own a franchise in just a few years but burying you head in the sand is not an answer.

If you want to own your own franchise and build wealth so that you can retire young, you’ve got to start “paying the price.” Giving up some things now so that you can enjoy life later. See Our Poster.  

The quickest formula to get debt free are often found on the Dave Ramsey Show… syndicated on talk radio stations and a great podcast on iTunes. His book, Total Money Makeover is a great place to get started. If you and your spouse read this book, agree to “give it a chance,” and work on it for a year, I’m positive you’ll be amazed at the progress you’ve made.

Some early steps are selling your toys, trading away cars with $500 car payments for a “beater” that costs $3,500, and taking a second job. Consider this your “audition” to entrepreneurship. Are you willing to pay the price to take charge of your career and start making the money you need to achieve your Life Goals?

Dave Ramsey will introduce you to hundreds of couples who have paid off $10,000, $25,000 even $100,000 of debt in 2 to 5 years while building up savings at the same time. If you continue the practices he teaches, you can amass  money to invest in your own business in 3, 6 or 10 years even if you’re heavily in debt today.

If you keep on doing what you’ve always done, you’ll have more of what you’ve got. If you don’t address your weaknesses, you can continue working for others and complain about the pay, the lack of promotions and your inability to get your ideas accepted by management. You should also hope you don’t get caught up in the next layoffs.

The Federal Government has several loan programs to help small businesses grow. In fact, there’s even a program called “the Franchise Registry” that assists Franchisors in getting their franchisees SBA financing on a “fast track” program greatly reducing the time and migraines often involved in borrowing.

You should also check out these introductory materials on the SBA’s website :

Small Business Loan Programs  and — Small Business Loan Program for Veterans

If you have retirement funds in 401k’s and IRA’s from former employers, you may be able to tap these funds to invest in your company without paying penalties or taxes on these amounts. The beauty of this program is that you don’t have a set repayment time schedule and you’re not paying interest to others to use your money. Still, when you start making good profits, you’ll want to repay this money to your retirement account to avoid tax issues that are built into the program. There are several companies that can guide you through the paperwork in these programs to ensure your full IRS compliance. (Visit our Show Notes for those links.)

 Whether you spend a few months or several years getting your personal finances in order, you’ll have achieved a goal that millions of families never reach. By deciding that you’ll do now what most people won’t, you’re building a foundation to allow you to live like most people can’t in the future.   By the way, we’ve got a great Poster available through the Show Notes with this Motivational Quote.

 

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Critical Step Number 3:  Your Education Continues—This Critical Step is Never-Ending.

In the past, most Americans felt that a “Degree” meant that they’d completed their education.

Today, Lifelong Learning must become a norm for successful business owners. Foreseeing, recognizing, understanding and reacting to change are foundational for the “captains” of every ship. While you should build these traits in yourself, you’ll want to look for these traits on the franchisor’s administrative team, as well. When you become a franchisee, you will share with your franchisor’s management team new ideas that you’ve discovered for marketing, production, operations, and human resources to ensure that the business model doesn’t become stale and fall behind the competition.

 Goals!: How to Get Everything You Want – Faster Than You Ever Thought Possible by Brian Tracy

Most highly successful business people use written goals and envision how and when they will achieve them to reach even greater objectives.. See the Show Notes for Episode 003A to obtain a copy of this great book.

Ask yourself “What attracts you to business ownership—besides making big bank deposits?”

How well are you prepared to operate a franchise? What’s your experience? Any related education?

You will need a good level of knowledge in Sales, Management, Accounting, Banking, Pricing, Human Resources, Advertising, Marketing, Customer Service, Training, Production, Legal, Strategic Planning, Budgeting, Goal Setting and other skills to run a company. Follow this link for a List and a Chart to help you Decide When Your Experience or Education has prepared you sufficiently for Franchise Ownership.

 Take an online or classroom course in small business accounting.

We find that many successful business people have a very limited understanding of accounting although they may have extensive experience in sales or production. Completing an online course in Accounting could be a great place for you to begin laying your foundation for business ownership. A quick Google search for “free basic accounting course” yielded dozens of matches. One from the Accounting Coach seems very thorough and they offer a pro version which includes video training for a lifetime cost of only $49.

Educational Courses are available in many formats, from many sources. Local College Classrooms, College Online Courses, Web Training Online, the Small Business Administration (SBA), Service Corps of Retired Executives (SCORE), Traveling Seminars–Fred Pryor and CareerTrack Seminars.  Understanding Financial Statements is a popular Fred Pryor Seminars offered in many cities across the country, as well as on line.

If I were you, I’d start a list of the business knowledge and skills I’d gained up to this point in my life.  Then I’d honestly rate myself I. “Beginner”, II. “Good Understanding and Conversant Skill,” or III. “Master of the Topic and Experience in Using the Skill.”

Here’s the General List of Skills Needed for all Franchise Owners. You should add to it and amend it as you learn from the franchisor’s management team and existing franchisees what elements drive the business.

I’ve listed these in descending level of priority.

  • Accounting (Financial Reports, Key Business Ratios, Inventory Control, Receivables Management, Cost Controls)
  • Sales (Lead Generation & Development, Pricing, Negotiation, Closing Techniques, Contracts, Warranties, Customer Service)
  • Communication Skills (Understanding and Being Understood by Employees, Customers & Vendors)
  • Advertising & Marketing (including SEO, PPC, & Social Media)
  • Human Resources (Hiring, Motivating, Managing, Scheduling, Dispute Resolution, Training)
  • General Business Management (Budgeting, Pricing, Business Model Analysis)

Rate yourself on this Chart now and set personal goals for improvement. Then post the chart where you can see it and change your ratings once a month as you improve.” see the Show Notes

 The E Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It  The  author, Michael Gerber walks you through the steps in the life of a business from entrepreneurial infancy, through adolescent growing pains, to the mature entrepreneurial perspective, the guiding light of all businesses that succeed. Gerber also draws the vital, often overlooked distinction between working on your business and working in your business.

One of The Franchise Doctor’s clients, Jim Muehlhausen has written the definitive book on Business Models. Understanding the material covered will strengthen your skills when evaluating franchise systems. You don’t want to invest in a company like Blockbuster Video which went from 9,000 stores worldwide in 2000 to none in 2015 because of its failure to react to changes brought on by online delivery systems from Netflix and others. The book is Business Models for Dummies by Jim Muehlhausen  

 Small Business Development Centers (SBDC’s), which provide counseling, training and resources to small and emerging companies at no (or nominal) cost are co-sponsored by the SBA and local Colleges. Most offer 1 on 1 counseling as well as seminars on various topics of interest to those considering business ownership.

To Get Your Education–Don’t be afraid to Spend your own moneyafter all it is YOUR future!!

 Listen closely to each podcast, you’ll be better prepared to succeed as a franchise owner and you may learn about a franchise system that could be your perfect match.  

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More Free Resources!

  1. Insiders’ Secrets to Buying a Franchise: A Free 100-Page eBook to get you started on the road to franchise ownership. Written by Jim Deitz, The Franchise Doctor.

       2.  The FranchiseFit Entrepreneurial Survey: A Tool to help you find the Job Description in franchising where you can        optimize your success.