Should I Buy a Franchise?
Amanda: All right. So let’s get into things. We talked to and we left our journey off kind of covered the whole continuum of is business ownership really for me? What does the industry look like? And then finally, as far as companies go, and got a little bit into what you wanna look for in a company.
And my listeners are asking, you know, “Mike, why should I buy a franchise?”
And what I wanna dig into a little bit before that is before you determine whether or not you wanna buy a franchise, right, do you wanna be a business owner? So let’s talk a little bit about that.
Mike Magid: Do you wanna start off?
Mike Powers: Sure. Yes. It’s a big decision, you know. And what’s happening today is, so the buying spectrum of franchising has changed dramatically over the last five or so years. There’s a lot of millennial buyers out there. They’re looking for opportunities. And I admire what they’re doing and how they’re going about their search. But you’ve got a lot of Gen X folks out there that are still looking at franchises and they search a little bit differently and they think a little bit differently. And then you’ve got your share of baby boomers that are out there searching for franchise opportunities.
So, you know, if I’m thinking about being a business owner, the approach I’m gonna take is gonna depend on where I fall generationally. I may be looking for different things as a millennial in terms of what’s important to me and what I wanna consider and where I’m gonna go with a business, versus if I’m a baby boomer.
And there was a lot of things consider when you talk about, you know, “Should I buy a business and do it in a franchising delivery system?” Because franchising is a delivery system for how to get where you wanna go and without having to recreate or I should say create everything from scratch.
So I think if you’re deciding on business ownership, it depends on how risk averse you are, how much time and energy you wanna put into building something on your own because your ego wants you to create something on your own and drive it for success or whether I don’t mind doing it through a delivery model like franchising where somebody else has kind of figured it out for me, has all the basics down that I can follow. And then I’m not as ego-driven to say I need to create it from scratch. I’ll take somebody else’s framework and then my ego will drive that framework to accomplish what I need and reach the goals I wanna, you know, set for myself and, and it’s probably a little bit safer.
So I think it starts there. You know, I think a franchise delivery system is the way to go. And I’m partial because I’ve been in it for a long time. But there are things you have really have to be prepared for before you would ever make that decision.
Most people and a very small percentage of people in this country buy a franchise over buy a business is you know, there’s not a large percentage that are risk takers enough to put their money on the line and then put their reputation on the line. You know, because once you buy a business, your reputation is on the line. Either you make it succeed or you fail. And that can be very humbling for people.
And it’s a different animal when you’re working for yourself. I know we’ll probably talk more about that as we get into it, but if I’ve never worked for myself and I wanna work for myself, and so I go out and begin researching opportunities and I buy a franchise and now I am working for myself. Yes, the old adage with the franchise system is you’re in business for yourself, but not by yourself. But I am still working for myself. I am the CEO, I am the top of the hub. So if there’s a problem, I can’t go to my boss and say, “Hey, what do we do about it? What do you think?” You take the risk, you make the decision, right? That falls on me as the owner.
And I think one of the things that you have to think about when buying a business is, “Am I ready to take on that responsibility? Do I surround myself with people that when I need to go for information or advice, I’ve got the people in my network to be able to do that with that I trust that I know will give me good sound advice and let me make my own decision?” But when I have a job I don’t have to worry about, I just push it up and then it’s not my responsibility anymore.
So those are some of the things I think big picture that you have to think through when you’re trying to decide whether you wanna be a business owner, especially in a delivery model like franchising.
Amanda: Yeah. Let’s dig into that a little bit more. And Mike, feel free to pile on here if you’d like. But making that transition, right? I’ve worked for a company for my whole career and I’ll use myself as an example, and I’ve always reported up to some structure, whether that was in the retail industry or you know, here at Griswold Home Care, and it’s great, right? The grass is always greener. So work for yourself and have that flexibility and the freedom and be able to build something, whether it’s within a franchise or something you’re starting from the ground up. But what are some things that our audience would really wanna take a good look, you know, in the mirror, almost? And let’s dig into is business ownership really for me, question.
Mike Magid: Well, you know, I think no matter what generation you’re from, you acquire certain skill sets. And I think you know, much like you said, there’s a lot of folks out there that look at the traditional route for employment, working for someone. It may harness what they believe to be their incredible skill sets, their energy and where they can apply it. And that comes from whether you’ve been in corporate America for a number of years and you’ve got those skill sets and you’re ready say, now to apply those in your own business or you’re starting out and you’re saying, “Hey, I wanna do something different because I’ve witnessed how people have worked, you know, for a company for a number of years and they don’t have the key things that are important.” And what might they be?
Well, independence might be one, right? Why would someone wanna get into business? They have the ability to be independent, have that work-life balance, which is really important, right? You know, they work hard, you know, and play hard. That old common comment. But it’s so true because you invest a lot in yourself, a lot in your business, but you can also reap those life-work balance rewards.
Another thing might be, someone has to look at you know, creating wealth. Am I able to build a business that’s going to help me not only pay my bills but enabled me to prepare for retirement, prepare for things that I wanna do? So creating that wealth around my own business. You can take advantage of that as you build the organization no matter, in many ways, how you build the organization.
Also equity. You know, building a business that not only thrives and is profitable but also looking at ways to either maybe pass on a legacy to a family member or to build the asset, increase the value of the assets so you can take your equity out at some point, which is another benefit of ownership of business.
Amanda: At retail. You have a real estate background.
Mike Magid: Yeah, exactly. Sorry about that. But when you think about equity, let’s use that, that’s a great example. You build equity, you buy a home for a number and when you sell it, you sell it for more of that equity, that value that’s in there. You’re able to take that out. And then, you know, reducing some of your debts through the benefits of the business where you’re able to pay down those debts which increases your asset value?
So there’s a lot of different reasons. I think folks get to a point where they see that they have the skill sets, they have the confidence, as Mike had said, talking about, you know, taking those risks. Those confidence levels that they’ve built over their career enable them to then take it to the next step. And then some of those, whether it be dollars and time, sweat equity into business, they get a return on that investment. And that comes with a variety of ways.
Amanda: Absolutely. Great comment.
Mike Powers: Yeah. And I really appreciate this. So the acronym that I’ll use for what Mike rolled out. And we use this a lot when we talk to potential buyers of business what franchise in our case is ILWED, I-L-W-E-D. The income, lifestyle, wealth-building, equity-building, and debt-reduction.
And it’s really critical because it’s relevant to every generational buyer. It just may mean something a little bit different, you know, when you’re a defining what wealth-building is for a millennial versus somebody in the Gen X category or the Baby Boom category, maybe different, but they’re all applicable to what people want when they buy a business. “If I can’t earn the living I wanna earn, if I can’t build the kind of wealth that I define in my mind as, you know, a comfortable wealth-building number to help me in my retirement. If I can’t, you know, get the lifestyle I want. If I can’t buy something that has equity then I’m buying a job. If I can’t build equity in it, how do I build wealth from buying a job?” Right?
And you know, we all have problems paying bills at times and we wanna make sure the business can do that. Those are critical and they apply to any generation.
I think, and I’ll go back and I said this before and I think it’s worth repeating. If I’m gonna buy a business or I’m gonna buy a franchise, let’s just put it out on the table. There are two critical components that will help you to succeed or create your failure. You either are undercapitalized. So you went in and you didn’t have enough money and the business didn’t ramp up based on your business plan the way you hoped it would. And now I’m running out of money and I start making bad decisions because I don’t have the money to make good decisions.
And you know, anybody will tell you when business is down, you spend more. But that’s not human nature. When business is down and I’m trying to figure out, you know, whether I can meet my you know, business demands and my payroll demands, I’m tightening up, you know, the belt buckle and I’m spending less, which is exactly the opposite of what creates success.
So if I’m buying a business and I’m thinking about, “Should I buy a business?” I have to be thinking about, “Do I have the ability during those early times,” whether it’s the first year or two when the business ramping up, “am I financially stable enough to get past that? Will I make good decisions when the pressure is on?”
I mentioned this in a meeting I had. I said everybody is a good leader until they have to make payroll. And then you find out who’s really a good leader and who isn’t. Because if I have to struggle to figure out how I’m gonna make payroll, I may not be a good leader. I may start making bad decisions. I may ask my team to be doing things that I shouldn’t be asking them to do. I may change the dynamic of my culture all because I’m gripped with fear, legitimate fear.
And when I think about buying a business, I think about all those things. I think about whether or not I have the money.
And then the second thing is ego. I am a big believer that if you put money aside, businesses fail or succeed purely on ego. You know, I shouldn’t say, purely on ego. That is the driver behind success or failure. And it’s an interesting dichotomy in franchising that when you look for candidates that are qualified to buy your business, you count on that ego. I mean, they’ve had successful careers, whether they’ve owned businesses in the past or they’ve moved up the ladder in the corporate world, they’ve created a brand for themselves and success for themselves because their ego drives them to succeed, harder than it does other people. And you count on that ego when you’re bringing them into the system.
And the problem is that same ego than you count on when they’re not succeeding early on and they’re not looking in the mirror and taking blame for what they’re doing, that creates that lack of success. And as a franchiser who’s there to support, to help them get through those challenges begins to point out the challenges and why that same ego that you approved to drive success is the same ego that gets in the way when you’re trying to help them repair their business and grow it for success because their ego is too strong to take blame. And typically, the blame goes to the outside world. All these things are creating the problem, not me.
So if I’m gonna buy a business, I better be able to check my ego at the door because if I can’t, it’s gonna get in a way. If I don’t ramp up right, I’m not on my goals and I’m not meeting my business plan and that money tightens up, my ego is gonna get in the way. So I always talk to people about making sure you check your ego at the door before you ever make a decision about getting into a business. Because if you can’t listen to somebody else who’s done it before, the people that you bought that system from because you liked the success they created that are now coming back to you and saying, “Here’s what you need to do, here’s what you should be considering, here’s where the wheels should be and here’s where you’re at and let’s get you back over here.” Those people that are trying to help you on the franchisor side, if your ego gets in the way, you’re not gonna succeed. And that to me is critical in what I’ve got to consider when I’m buying a business or franchise.
Amanda: Absolutely. And I think, you know, you made the comment, you’re in business for yourself but not by yourself when you talk about a franchise. And we’ve made that decision at this point to transition from, I’ll say a job, right? A lifelong career person who’s always reported up through the corporate ladder and the structure and I’m gonna strike out on my own and build something. But there’s some safety in a franchise, right? There are people who have forged ahead and paved the road for you. So you are on your own and you’re building your own business, but not by yourself. There’s a proven model.
So I think that’s the right way for me to go as we continue on my journey here.