Make a million from your franchise
OK, so you want to make millions – can you do it with a franchise? I think you can if you follow the right strategies...
The easiest way, of course is to buy a franchise that is already making a million but if you haven’t got the capital to get in at that level you will have to build up to it slowly. And actually, there are distinct advantages to building up your own fortune using your own sweat equity, as it’s called – not least because it will all belong to you in the end!
The important thing is to make sure you buy a franchise that is capable of making millions – a lot of franchises are simply not in that league, so you’re at a disadvantage from the beginning. Also, be aware that the type of franchise model you buy into will make a difference to how big you can grow. There are basically two basic models – the owner operated franchise model, where you work in the business yourself. The other is the executive model where you hire a manager to run the business on a day-to-day basis.
The owner operated model
When you run your franchise business yourself, you have greater control over it than with the executive model. You also need less capital expenditure, generally speaking. However, the biggest disadvantage with the owner operated model is that it’s slow to develop into a big business compared to the executive model.
The executive model
Generally, the executive model is more likely to be suitable if you intend to build a big business capable of making millions – it’s designed to grow big. This is because you may be able to develop several units that operate independently and are each capable of turning a good profit. You literally create multiple income streams. Growth is also relatively quicker that with the owner operated model too, although it usually requires more capital.
In both models, you have to make sure you have the potential to grow big with a single operation. Think about the following:
If you want to run a franchise based on a particular territory, you have to make sure it covers a big enough population of potential customers to support sales that will make you a millionaire. Don’t look at the total population of people – which may be impressive – but look at the target market and whether there are enough customers out there that want your product or service. Even a McDonalds franchise, for example, might not do so well in a heavily populated seaside town if the population consists of elderly people in residential homes. McDonalds appeals more to a younger element of the population, so think of your target market – always.
Don’t forget, whatever franchise model you go for, you may end up with a business that requires a lot of staff to run the operation on a day-to-day basis. Staff cost money and eat into your profits, so think about this aspect too. The less staff you need to run a franchise, the more potential there is to make your million – however, do consider that delegating some of the work can actually help you to grow your business into the big league. See my article on this.
Level of profit
It should be obvious but if you want to make big money from a business of any sort – not just a franchise – you should make sure you are making a decent level of profit. OK, you can sell something that makes just 50c/50p profit to 2 million people and you’ve made yourself a gross profit of $2/£2 million. But is that likely?
Look at the figures carefully and consider whether the products or services of the franchise are capable of returning a sizeable profit – and more importantly, look at the profit and the size of your market together. Even if you can make a decent profit, can you sell enough units to get into the big time?
If you are thinking of running an owner operated franchise, it’s likely that you need your profits to make a living while you make your million. If you make only modest profits, you may not make enough to fund the capital expenditure needed to grow your business, so think about how you will finance your business growth – and in what time-frame.
Do your sums
Before you even think of looking for a franchise that will make you a millionaire, calculate your financial figures very carefully. Look at how much capital you have to invest and how much you need to take out of the business to support yourself over the first few years – do the profits allow you to do this and make a million in a reasonable time?
If you have your end goal clearly in sight, you can begin to seek the right franchise to fulfil your aspirations – don’t go franchise shopping until you have this figured out!
Good luck – there are some great franchises out there. See my article on what makes a great franchise...