Quit your job to start a business? What you should know
You’ve always wanted to run your own business, but you haven’t come up with that killer idea yet. A friend suggests, “How about a franchise?” and suddenly the idea of becoming an entrepreneur seems even more tempting, especially as a franchise would give you the support of a well-known brand to boost your venture. It looks like it’s time to look at franchise investment opportunities and quit your day job.
However, before you tell the boss you’re striking out on your own, it may be time to press the pause button and take a closer look at the franchise model. Is it what you really want to do? Do you have the money to buy a franchise licence? Do you have enough working capital to keep you going until the profits start to come in? And, most importantly, are you prepared to put in long hours, including weekends and bank holidays?
You’ll have to push yourself harder than you’ve ever done before and have the courage to make what is effectively the biggest business leap you’ve ever taken. Let’s have a look at some things to consider before you leave your job and sign up for that franchise agreement.
1. Are you sure – really sure?
Franchising isn’t for everyone. It involves a particular type of business model that suits a particular personality. When you join a franchise, you become a franchisee and are supported by the franchisor, who has developed the franchise from scratch. They’ll have plenty of experience and should be prepared to give you all the tools you’ll need to make your business a success.
However, they’ll have a vested interest in the business you launch, as it’ll be operating under the brand name that they’ve created. If your business flops or receives negative press, you could tarnish the reputation of the entire brand. That’s why the franchisor will generally have control over how you run your business.
Of course, you’ll hire employees and manage the day-to-day operations, but the big decisions are made by the franchisor. You must be prepared to stick to the business model and only present the company in the way you’re told to. Existing franchisees will already be running their franchise outlets in the same way, so it’s highly unlikely that you will be able to change the franchisor’s mind if you’d like to alter an operational procedure.
So, if you are able to play by the rules and adhere to set criteria, the franchising model is probably for you. If you find it difficult to follow guidelines and complete instructions without challenging them, perhaps you should look into starting your own independent business.
Also, consider the reality of launching a franchise outlet in your local market. What’s out there and would your franchise perform well? Do your research and look at key points such as:
- The type of franchises on offer – What do you want your business to be? Are you a keen amateur chef looking for a food outlet on the high street or are you in the gym six days a week and hope to turn your passion into a business? Would you like to work from home? Would you like to work part-time? The type of franchise you choose is entirely up to you, so start off by seeing what’s on offer.
- Your skillset – Do you have experience of running your own business? Do you know what running a franchise outlet involves? If not, you might want to sign up to some evening classes in business management before you quit your job to get a real understanding of launching what a franchise business entails.
- Is there demand in your area for another gym/restaurant/clothes shop? – The idea may be first class, the brand may be trusted by customers and you may feel ready to sign up first thing tomorrow. However, if your area is already saturated with competitors, you’re going to face a tough battle to get your franchise off the ground. Take a walk around your community and see if there is really a demand for another outlet.
Any business decision should be thought about carefully. You wouldn’t rush into another job without checking what your salary would be, how many hours you’d work, what support you’d get from your boss and what would be expected of you. The same should apply to a franchise agreement.
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2. Do you have a family?
Becoming a successful franchisee is hard work. Expect to work long hours, say goodbye to weekends (at least in the beginning) and forget about bank holidays. At the start of your franchising journey, quality time with your friends and family might be in short supply and, just like any other business, you’re going to be dedicating a lot of time to your new venture.
Also, many franchises, such as tutoring, photography and pet-sitting businesses, can be run from home. If you’re planning on introducing your new business into your house, you should ensure your family are comfortable with that. You’ll need to make space for any necessary equipment or paperwork, and be confident that, if you have children, they understand not to touch or damage it.
Talk your ideas over with your family and explain the level of commitment involved in starting a franchise business. Make sure that your family are on board and that everyone’s happy about your decision. Remember: running a franchise doesn’t necessarily mean that you’ll have less time to spend with your family in the long run. Many franchise businesses can be managed part-time or allow the flexibility to mould your working hours around existing commitments.
3. How well do you handle stress?
Running a franchise business puts a huge amount of pressure on you, demanding not only your time, but hard work too. You’ll need to be able to juggle several responsibilities at once and work through the bad times as well as the good. While you’ll have the support of your franchisor, the success of your business is ultimately down to you. It’s your level of dedication that will determine how well it performs. However, because your franchisor is still invested in the business model, you’ll need to keep them happy too. If they feel you’re polluting their brand through bad management or poor customer service, you could be under even more pressure.
You’ll have plenty of financial considerations to consider too (more on that in a minute), from buying in supplies through to paying VAT. There’s a good chance that any franchise opportunities you buy into will involve a loan of some sort, so be aware that there’ll be pressure to succeed from your lender too.
4. Do you have the financial capability?
Having a monthly wage packet means you can plan ahead – pay your rent on time, put food on the table and even put a little away for a holiday. In franchising, your monthly salary is entirely dependent on the success of your business. That means you’re going to need some serious working capital before you sign a franchise agreement.
Your franchisor will expect you to put in around 30 percent of the initial capital personally (excluding personal loans). Because even the simplest franchise models and licences can be worth thousands of pounds, you’re probably going to need to save up first. There are lenders who specialise in financing part of the investment cost, but you will need to show that you have some pretty solid finances in place first (and a potentially profitable business model) before they’ll even look at your application for funding.
You’ll need both start-up and working capital to cover everything from licensing agreements, rent and supplies, right down to Post-It notes and wages. Sit down and do the maths first – and be realistic about the numbers.
5. Do you have the drive to succeed?
You cannot go into a franchise agreement half-heartedly. You need to be truly passionate about succeeding and confident that you’ll enjoy running the business. To get the most from a franchise, you need to throw yourself into making it profitable. If you feel that after 12 months your enthusiasm may start to falter, perhaps franchising isn’t for you.
If you’re struggling to find a franchise you truly feel passionate about, consider businesses that are personally rewarding, such as home care agencies. Even helping people find their perfect home with an estate agency franchise or teaching business owners how to improve their profitability with a business coaching franchise, for example, could be extremely rewarding.
At the end of the day, if you’re prepared to work hard and commit to making your franchise a success, there’s no reason why you shouldn’t succeed. With the support of your franchisor, a strong aptitude for business, some serious working capital and a true understanding of the commitment you’re making, you should be set for success. Who knows, this could be the start of your very own business empire…
Alice Tuffery, Point Franchise ©
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