Position yourself for growth in 2017—join us live at the Entrepreneur 360™ Conference in Long Beach, Calif. on Nov. 16. Secure Your Seat »
Last month, I introduced you to Jack and Diane (not their real names), a couple in their 40s who, in years prior, couldn't afford a Subway franchise and instead started a venture manufacturing and distributing golf apparel. The business had grown but was not financially rewarding. And splitting work that required the energy of three people between the two of them was taking its toll. A decision had to be made.
The windshield wipers spank the glass as Jack maneuvers through the rain so typical in the Pacific Northwest. Jack's burning desire to leave his career as an advertising sales representative is about to undergo a trial of wills. Jack and Diane are making a comfortable living with their "real jobs," but their fledgling homebased golf apparel business now needs full-time attention to prosper.
Jack tests the water: "Do you think you might want to leave your job for the business?"
"No. Do you?" Diane asks. Jack decides he can't forego his lucrative lifestyle, and now, a few years later, all that's left of their start-up is a box of golf shirts in the garage. Rest in peace, newborn business.
This story is repeated across the nation. We dabble with businesses while trying to hold on to what we have. Typically, the great rewards come only to those who take on great risk. Trying to build a business while maintaining a day job reminds me of the difference between the chicken and the hog. Although they're both essential in providing the ingredients of the all-American breakfast, the chicken can run away afterward, while the hog is truly committed.
However, Jack and Diane are much smarter than the average chicken, and a little genius can supply a subtle change in a direction that works.
|Missed the first episode of "Real Life"? Click here to catch the beginning of Jack and Diane's journey toward franchise success.|
Still a golf fanatic, but now armed with the experience of his and Diane's first business, Jack improved his skill set by creating his own Web site. To this day, www.golfinggallery.com still exists selling golf-related artwork.
Certainly, such a business is great for "passive" income, but our couple still faced the reality that their business venture was hardly more than a hobby. A Web site without constant promotion is lost in a sea of URLs.
A franchise is a huge commitment, so the couple started looking for help. Jack's reasons for investigating franchises were typical. "We didn't know a lot about owning and operating a business, and we wanted the structure and support of an existing successful company," he says.
So the search was on. Our intrepid franchise shoppers began their due diligence by driving around town to look at existing businesses close to home. They also surfed the Web and scanned business magazines in search of hot trends and concepts.
Soon, franchise brochures began to fill the mailbox. Says Jack: "All the materials we received were well-done, so from that standpoint, it was a wash. The costs of entry and of operating the franchise and the available territories were some deciding factors."
Jack's observation makes an important point-many brochures are relatively meaningless due to the subjective nature of their claims. You see, franchisors and their consultants have a good handle on a prospective franchisee's hot buttons. Accordingly, most savvy franchisors claim to have a comprehensive operating system, professional marketing materials, excellent training and thorough site selection.
These claims are the essence of a good franchise, but it's up to you to investigate further. For example, I've seen "thorough site selection assistance" turn out to be everything from comprehensive demographic analysis and active lease negotiations to a representative who buys you a beer, drives by the location (you found) and says "Looks pretty good to me."
Into the Frying
When Jack did his search, he wisely called existing owners of franchised businesses in the area and asked whether they were interested in selling. This is a great strategy, because you learn about that type of business and the local market, and you may be able to review financial information about the unit. Even if you don't make the acquisition, you have equipped yourself with special knowledge about the area.
The other great move Jack and Diane made was to meet with their banker to discuss the opportunity before they made any type of commitment. Bankers will usually point out anything wrong, but the banker Jack consults considered the idea worthy of financing. There was just one catch.
"No way. I am not going to do it," Diane told him after the banker informed them their home and personal guaranties were required as collateral. Betting the farm while abandoning your job is no small step, and it was only after a great deal of pillow talk and soul searching that Jack heard those words he yearned for; namely, "Well, if it's really that important to you-then OK."
A few days later, our friends wrote a big check and signed a contract to enter an auto oil change franchise. Why Jack chose to spend his life under a hot engine block is a mystery, but the sound of the bacon hitting the skillet was heard two counties away.