Owning your own business can be life-changing. The difference between a good life change and a bad life change is having the right expectations from the beginning. Knowing the reality of owning a business is your first step toward success.
Here are some of the misconceptions people may have:
- Buying a business will solve my near-term financial issues
- A business will quickly replace my lost salary
- There will be immediate cash flow/profit available
- I can start a business without any money down
- There will be no additional investment needed after the initial purchase
- The business will create wealthy on Day One
Here is the reality:
- A new business will not solve any short-term financial needs. In fact, it can do just the opposite. A new business may not show profits for 6-month, 12-month, sometimes 24 months, or more.
- You may need to put money into the business to help it grow. Therefore, you may not see a salary for 6 to 12+ months.
- Wealth creation may take longer than you think. Many people do not understand revenue, cash flows and profits. Just because you received $100 in sales does not mean you have $100 in your pocket.
Quality of Life misconceptions:
- Once I open the doors, people will be coming in
- I can take a lot of time off
- Other people can run the business; I will manage from a distance with minimal effort; or I will just hire people to run the business
- I can just hire friends and family without regard to whether they are the best fit for the job
- I can buy personal luxuries to appear successful i.e. going out and buying a BMW to show people I am a successful business owner
The reality of what your life may look like as a business owner:
- When starting a business, you may need to put in long hours or be “hands on.” You will need to understand the day-to-day workings of the business. You may be working more hours than your current job. Nobody is going to have the drive or incentive to start and grow the business the way you will. Remember, you just invested thousands of dollars to start your business. You should want to know how the business works.
- All this work is not the long-term solutions. Your long hours will pay off with the ability to hire the right management staff and you will have gained an acute knowledge of expense management which is critical to your business survival
Myth: Buying a franchise will Guarantee success
Reality: There is no guarantee of success when starting a business. A franchise can provide you a better chance for success but it you are not the right fit, don’t dedicate yourself to its success or don’t follow the system, your business can fail.
Myth: The franchisor provides you solutions for all your problems
Reality: Every business and business owner is different. There is no “cookie-cutter” business. A franchise provides a system that has been proven to be successful many times over. If you follow their system, your chances of success will increase but it may not solve all the problems you may encounter. You must be able to solve problems and come up with creative solutions.
Myth: A franchise is a business that can run itself
Reality: A franchise has a proven system, but it cannot run itself. It needs a strong owner to ensure the system is being followed. That is why finding the right franchise that fits your business style is important. You can launch a ship into the ocean but without the right Captain, it will just float aimlessly.
Myth: The franchise will provide support to prevent failure
Reality: A good franchise will provide you initial and on-going support to help you become successful. That does not prevent a bad owner from performing poorly. The owner may ignore the system, they may not put in the hours need to run the business or just may be a bad fit.
Myth: If my business fails, I am only out of my initial investment
Reality: Your financial losses could be more far-reaching than you think.
- When starting your business, you may get a loan or take out a second mortgage. If you take out a loan you will need to make a personal guarantee for that loan. If your business fails, you still need to pay off that personally guaranteed loan or you may lose your house.
- If you leased any equipment, you will still need to make payments
- If you leased retail or office space, the landlord will still expect you to make payments
- The franchise will expect you to pay future royalties
- You may incur litigation costs
Owning a business is not for the faint of heart. There are many risks that you must take into consideration. You must weigh the rewards against the risks.
What are your long term goals? More time with family? Wealth creation? Work for yourself and not others?
If you are willing to put in the time and effort, business ownership can be a path to reaching those goals.
Once you understand the realities of owning a business, the next important step is finding the right fit.
If you would like to explore which franchises are a fit for you, start by completing our Business Profile Assessment: Click Here to Begin