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Are You Ready to Buy a Franchise

Lots of folk think all you have to do is buy a franchise from some company and you are on your way to great success. NOTHING is farther from the truth!!

How do I know? Been there! Done that! It is more often than not a bad deal and a lot of money up front. You’ll pay FUTURE fees for the privilege of doing business. If you don’t like to be told what to do and how to do it, then you probably want to look long and hard before buying a franchise.

It is not a cookie cutter kind of deal. Many of the reasons a franchise is successful in one area of the country may not exist where you live. It could be the weather. Maybe senior citizens. No yuppie folks available to buy your product. Who is your customer? Do they exist where you are? There are many reasons a franchisee fails.

My own experiences prove you have to do your own research. How important it is that you know WHY a franchise is extremely successful. There are lots of reasons. Is it the area of the country? What is your area like? In 1966, 32 years ago, I bought a personnel agency franchise. (Obviously, I was very young!) Which means I didn’t know what I was doing, I let my ego guide my decision.

My own business was an exciting idea. President of a personnel agency with ownership. The home office (franchiser) was doing great and there was every reason to believe that we could do the same in our city.

What Did We Miss??

It just happened to slip by us that the manager of the home office was hired to run the company AFTER being very active (an officer) in the personnel association in his city. Do you already see OUR problem? The buyers of personnel services belong to the personnel association! NO ONE on our staff was a member nor were any of us known by the members of the personnel Association. He had an inside track!! He already knew the buyers, not only as trusted friends, but they knew him as a trusted and knowledgeable personnel executive.

I’ll tell you later how I came out ahead in this deal. It takes us back to realizing that we are on a journey, not a destination. This is not where we ended. Good things happen when we keep on keeping on thru life. We can’t give up!

BUSINESS TIP: Buying a FRANCHISE is NO GUARANTEE of Success. YOU must know the reasons others are successful. LOCATION is important. FINANCES are extremely important. BEST DEAL…go WORK for another franchisee… FREE! YOU will quickly LEARN more than you ever wanted to know…

No Personal Guarantees….Your Best Deal!!

Things you may not expect USUALLY HAPPEN! Here’s what happened to a good friend of mine several years ago. Timing doesn’t matter, it could happen TODAY.

My friend went out of town on vacation. Upon his return, he discovered that his “PARTNERS” had signed a MAJOR contract to PURCHASE an expensive computer system WITHOUT even consulting with him.

This is why your AGREEMENTS are so IMPORTANT and MUST be in WRITING! My point is…this can happen to you unless your LEGAL advisor has PROTECTED your best interest in the business. You DO NOT want someone making decisions for you when it is YOUR money at RISK. Even more serious is being on the hook for any borrowed funds from your banker.

Small business owners usually sign PERSONAL guarantees with their banker, which means everything YOU own backs up the company debt. Your % ownership is NOT CONSIDERED unless your legal counsel has protected YOU!

It is a MAJOR decision on your part, just as it has been in my case, to be involved with diverse ownership of your business. You could own 8%, 10% of the firm, however, if YOU sign personal guarantees for the debt of the company then you are backing up 100% of the debt, not just the 8% or 10% based on your ownership.

This is very important for you to understand in your business dealings. Do not THINK these personal guarantees don’t hold “water”. Heaven forbid, but IF your business fails and you (your company) owe the bank money, YOUR FRIENDLY BANKER changes his/her personality.

He now becomes your friendly COLLECTOR and demands full payment (immediately!). It is an amazing sight to see. But, you will not be a happy camper with this new person you are about to find on your doorstep.

Keep in mind, the bank will go after the most LIQUID ASSETS owned by you and/or the other partners. Or the easiest property to sell and convert to CASH. It makes no difference to the banker (now collector) who the fortunate one is to cough up the assets or cash from PERSONAL assets.

The bank expects to be PAID. The bank has ONE concern. Protecting their client’s (customer’s) money. You are facing tough times, yet you agreed to hold them harmless by backing up your loan with personal assets.

With good legal advice, you may be able to limit your liability to the % of stock owned rather than to the whole amount owed. You must put this in place as part of your agreement with the bank at the beginning, not after things go sour.

Obviously, NO PERSONAL GUARANTEES is the best deal of all for YOU! Seek your funds from different sources and try to find a bank that will NOT require a personal endorsement. You have served your firm well when you accomplish this goal.

BUSINESS TIP: Let your legal advisor guide you in everything you do; every paper you sign; every decision you make in business. PROTECT the INTEREST of YOUR LOVED ONES!! Do not think, NOTHING can go wrong!! Hire the VERY BEST COUNSEL. OWN 51% of the Stock in your company. THINK long and hard BEFORE accepting any less. Consider all the options available to you

EBITDA – What Does It Mean To You??

If you are just starting your own business, great! If you already have a business, GREAT!! It really does not matter what stage you are currently facing. You MUST have one GOAL in mind when you begin a business.

BUILD YOUR BUSINESS TO SELL!!!

This is the ONLY good reason to start or run your own business. An ideal plan is to set yourself up to sell out and start over every 5 years until you reach the ultimate goal to RETIRE. Obviously, this is not an easy thing to do, but it certainly is a great goal to set into your business plan. Hopefully, you won’t have to face a recession every 5 to 6 years as we did in our 40 plus years business life.

What is EBITDA?? This is a formula that plays into how much you can expect someone to pay for your business in the future. Code: E = earnings; B = before; I = interest; T = taxes; D = depreciation; and the A = amortization. It says, what are your EARNINGS BEFORE INTEREST / TAXES / DEPRECIATION / and AMORTIZATION.

What is your Cash Flow? Your Receivables? Sales Dollars? Expenses? Any buyer will want to know answers to these questions. Plus many more in deciding if they want to buy your business. Another major concern is…who are your customers/clients? How many? Volume of annual business with each? Loyalty to your firm? Will you stay and run the business for the new buyer? Will you carry the note or do you require all cash? Part cash/part stock in a public firm?

You need to know that a publicly traded firm (stock on one of the exchanges) can and will (most likely) pay more for your business than a private suitor. It never hurts to let both private and public firms make you an offer to buy, as you have no way of knowing WHY anybody wants your firm. Everyone will have a different reason based on their future goals and plans in the marketplace.

Just understand NOBODY will love the company like you do today. It’s your BABY. You have raised it from infancy and your life BLOOD / SWEAT and TEARS are all tied up in YOUR value but NOT in the way a buyer will see it. Don’t get your feelings hurt in the process if you really want to sell your business

BUSINESS TIP: A smart business person BUILDS his / her business with ONE GOAL in mind – to turn their effort into VALUE $$$ for a BUYER. NEVER sell to the 1st buyer! Create an AUCTION. People buy a business for reasons YOU may never understand. NOT important! HIRE YOURSELF A DEAL MAKER!!

Just for fun…we will assume (a bad idea!) that you are already in business. Your success will “HINGE” on your ability or savvy in hiring staff (personnel). This one responsibility will become your most important JOB!

Obviously, you have to FUND (money) the venture (your business). There are some things we will simply take for granted. You have to pay your staff; buy inventory; rent the building/office; pay for insurance; pay your lawyer and accountants. All of these expenses are automatic. No need to begin if you don’t have the money.

Hiring staff is extremely important. Get experts to help you set up your personnel department BEFORE you hire the first employee (unless it is your spouse or kids!).

You cannot LOOK at a person and make a judgment call simply because you LIKE them. I know, it may be your best friend. Don’t hire him/her! Usually a very bad decision. Remember, we are starting a business, not a buddy group where we will always eat together; work together; sing in the church choir together!

Do you get my point? Don’t do it! It is YOUR money! Your banker expects YOU to pay back the loan. No one else. YOU!! It is your neck that is on the line.

How do you go about hiring staff? Have you ever had the responsibility of hiring in a previous job? Deciding on the best candidate for you to hire? Maybe you have been the hiring authority for a previous employer; could have been a national firm or even a small privately owned firm. It really doesn’t matter. Could have been on a committee responsible for hiring your minister or the director of education or the choirmaster. The point is… this is an extremely important responsibility for any of us to undertake on behalf of our firm, church, association, fraternity, etc.

Investigate the Resume in Detail

It is estimated that over 40% of all resumes have some discrepancy….this means the truth has been stretched to make the person look better than they are. There are professional resume writers that know how to use words. Not always understood as presented…i.e. taking graduate courses, etc. (this apparently means to some that they are taking courses to graduate). I’m sure you understand the point. THEY ARE LIARS!

BUSINESS TIP: Inspect what you expect….an old saying but a wise one. HIRING a new employee is a critical process. Check backgrounds in DETAIL! Resumes are built by professionals…NOT on YOUR TEAM! Take absolutely No chances. Good employees WILL MAKE YOU. BAD EMPLOYEES WILL DESTROY YOU!

Do you want to succeed in business? Life? Parenthood? Marriage? Friendships?

Obviously, all of us would quickly say YES! Such a dumb question for someone to ask us! I didn’t ask the question to make any of us look dumb, but to get our thoughts on the right track.

Certainly, we want success in all areas of life. My suggestion is that you select outstanding advisors to help you when faced with tough decisions in every area you face, particularly where you are about to make big decisions without knowledge or experience.

We are primarily concerned about business decisions in these discussions; however, some of us go into business the same way we go into marriage…no experience…no training…no education…poor role models …and then we are expected to bring happiness to another person to whom we are now married.

Usually, we try to do this by changing the other person into what we think they should be, while they are trying to do the same to us. It does not work! Most of us will never change! We don’t want to change for one thing and if we did, it would already be done.

ADVISORS are extremely important. You must have them to be successful. There are 4 important Persons you need to select BEFORE you begin your business:

LAWYER ACCOUNTANT BANKER INSURER

You don’t have to be a brain surgeon to know the obvious. Unfortunately, there is sadness to how easily folks are suckered. Led astray. Betrayed. So easy, yet often it’s only hindsight that wakes us up. Certainly, it’s NOT going to happen to you.

Is it a franchise? Starting a business from scratch? Buying a business that is already successful? It doesn’t really matter. There is NO GUARANTEE for you to start or continue a business successfully. Sometimes there are underlying assets; or connections; or special knowledge; or lots of money (that you don’t know about!)

Are you getting the picture? You must DIG DEEP into the past history of any business you plan to own. It may not even be a business. You could even be thinking about getting married (you really need to look hard!) Marriage and business have some of the same basic issues. You have to work very hard to make either of them successful.

Just don’t go into business too quickly. Do I need to give the same advice when it comes to marriage? Both can be the most wonderful decision you have ever made or it can be the WORST decision you have ever made. I’ll pray that you do your homework and due diligence before you JUMP!

My own experience tells me I’m giving you good advice. You are taking on a PARTNER when you enter your own business. Don’t think so? If you borrow any money from the bank (this is your FIRST partner!) Your family is your SECOND partner (you will either be happy or sad) and will either make your day or give you grief from the git-go. Everyone has to AGREE that you are doing the right thing.

Back to the franchise. Too many folk think that buying a franchise will guarantee their success. Nothing could be further from the truth. As a matter of fact, I have owned 2 different franchises in my career. Both were losers. I lost money. A bundle of it. Just know that it is not automatic! Too often there are underlying reasons for somebody’s success.

A few more ideas to think over BEFORE you step on a mine field…..

BUSINESS TIP: LISTEN! You may not like what you hear, but it may just be the very best advice YOU NEED….none of us are as SMART as we often THINK….try a little “humble pie” before you end up with a big black crow. TEST,TEST,TEST the details for hidden manna from above……

You are about to begin a journey into the future. It matters not where you have been in the past. All of us are on the same track toward home. However, watch out for the turns in the road. How you arrive at your destination is the key.

What am I talking about?? It could be marriage! A new job or position within your company. Maybe you’re taking a trip or vacation. Maybe you have just decided it’s about time that you owned your OWN BUSINESS. Everyone seems to think owning your own business is the key. Make lots of money and arrive on the golden road to happiness.

TRUE OR FALSE?? Only time will give you the answer. DO I TAKE A PARTNER? Over these next few weeks my articles will take a look. Some of the pros and cons. Stay with me.

Have you ever looked at the beautiful home on top of the ridge? Could have cost a cool fortune to build. Maybe a million $$$ or two? Did you see the beautiful cars driving up the road? Parking in front of the house? Big circling driveway? A Mercedes in front? Probably Moms’ car! Dads’ BMW behind followed by the sons’ Jaguar sedan. Little sister has a red convertible with all the goodies. WOW!!

Something to get excited about and wonder…IF that could just be MY home sitting on the next mountaintop ridge. Big white columns across the front porch. Fancy cars out front. Country club membership. Golf club privileges. Vacations on the newest cruise ships. On and on we can build pictures in our minds about the future we’d like to enjoy. If you don’t like to drive, add a chauffeur too. Cellular phones, videos and color TV’s in the car for keeping up with the latest news and movies. Our imagination could dream for days on end.

Do I know anything about all this stuff?? YOU BET! I have spent the last 40 years in the real world of business! You can benefit from my experience as we share ideas together. Every week I want to bring you helpful thoughts to consider BEFORE making some of the same mistakes I did. Fortunately, I have made some good decisions too…I’ll share them with you also….stay tuned!

Business Tip: Dreams can turn into YOUR reality. Just remember that LIFE is a JOURNEY, not a destination. Yes, our GOAL is the PLACE we are trying to reach. Our CHALLENGE is answering the “HOW TO” get there! Today is the first day of the rest of your life. Take your time. Better late than sorry. LOOK before you LEAP!