You’re going to need it. But not because investing in a franchise of your own is a bad thing. It’s just that lots of people that invest in franchises forget one really important thing….
They forget to set aside enough money to meet their monthly obligations. In a typical franchise business plan, there isn’t a line for “Personal Monthly Obligations.” Should there be?
If there was, maybe more people would set aside these monthly expenses;
- Mortgage payment
- Utility bills
- Car payments
- Kid’s braces
- Car/house/life insurance
- Misc.
I’ll also suggest something that may or may not be well received by franchise company executives;
Remind prospective franchise owners that they will need to set aside their personal expenses in addition to having some business working capital.
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I feel that the success rate of franchise ownerscould go up a percentage or two by doing this. After all, don’t a lot of franchisees fail because they run out of money? Logic dictates that if they are totally prepared for that tough 1st year as a new franchise owner, that they will have a much better chance of success, which will in turn help validate the system, which will help the system grow.
Be the change.
I wrote an article titled “Investing In A Franchise Is Not A Sure Thing,” over at OPEN FORUM By American Express a few months ago, and I discussed the “no paycheck reality” of being a new franchise owner;
“If you are used to working for someone else, that means you are used to getting a steady paycheck. (Or if you were in sales, a fairly steady paycheck!) I feel that the most difficult part of transitioning from an employee to a small business owner is that you will not be getting a steady paycheck. As a matter of fact, the 1st year in your franchise business may not yield you a paycheck of any size. This is why I always recommend that you have some funds set aside for your household expenses. Building a small business means that you are starting at zero and it’s hopefully uphill from there. I feel that it’s worth the short term financial pain.”
Here’s the entire article.
Are you going to set aside some personal expenses in your own sock drawer? Franchise company executives, are you going to remind your prospective new franchisees to do the same?
Thank you so much for the reminder! I know folks who have gone into their own businesses, and forgot to set aside some money for their everyday living costs.
It wasn’t a pretty site.
James Page