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When is the right time to buy a franchise?
Is there such a thing?
In this post, I’m going to share my thoughts about timing when it comes to purchasing a franchise business. And more.
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When Should You Buy A Franchise?
The first answer that pops into my head is an obvious one. It’s when you’re ready.
But ready how? Financially? Psychologically?
Or maybe “a state of calm attentiveness in which one's actions (yours), are guided by intuition rather than by conscious effort. In other words, Zen. I like that one. Especially since I trust my own intuition immensely.
But if you’re like most people, you’re first inclination is to focus on your financials. Specifically, “do I have enough money to purchase a franchise business?”
I hope so.
And you do need to have enough money. And then some (for ongoing business expenses plus your living expenses while your franchise gets going).
Is Your Timing Right, Financially?
That’s for you to decide.
For instance, if you’re in the middle stages of your career, you want to leave your job (or already have), you have a stay-at-home spouse that’s not employed, and have two kids to send through college soon, your timing may not be ideal. Unless...
You possess a significant net worth. But how significant?
If the example above fits your situation, and let’s say you’re looking to buy a franchise that requires 2,000 square feet of space, inventory, 10 employees, and costs $375,000, you’ll need to have a net worth approaching $1 million.*
Why?
For one, you’ll need to come up with the initial investment. In most cases that means you’ll need to get a small business loan for a portion of it. Of course you’ll be paying that loan back monthly.
In addition, you’ll have all the ongoing monthly business expenses you’ll be responsible for. And don’t forget your household living expenses. That money will need to come out of your savings until you start collecting a paycheck for yourself.
*Note: That’s how much of a net worth I feel you need to have. I’m not a financial expert. Every situation is different. My suggestion is to talk to your financial planner for advice and counsel on this matter.
That said, I always lean towards having a lot of money to fall back on in case things don’t go as planned.
To conclude, I’ve undoubtedly turned your mental financial calculator on. Good! Now’s the time to look at where you’re at financially. Because doing so will help you time your entrance into the world of franchise business ownership correctly.
Is Your Head In The Right Place To Buy A Franchise Business?
Transitioning from employee to employer is a big deal. There’s a massive difference between depositing a paycheck (yours), to depositing money into your business checking account to provide a paycheck to someone else.
Furthermore, you’ll be doing so before you pay yourself.
Now I’m not telling you this to frighten you. I’m only sharing this because it’s the reality of the early part of owning a franchise business.
I say early, because eventually you’ll be printing off your own paycheck. And, if you’ve made a good choice in a franchise to own, your paycheck will continue to get bigger and bigger.
The question you need to ask yourself has to do with patience. Specifically, can you be patient?
Simply stated, will you be able to cope with not having a steady paycheck until your franchise business hits its stride? Not only financially, but psychologically.
The good news is: If you did good research on the franchise you purchased, you’ll know going in when you’re approximate break-even point is, and when you’ll be able to collect a paycheck. It’s part of what you put in your business plan!
Regardless, here are two questions you need to ask yourself:
- “Is my head in the right place to do this now?”
- “Am I ready for this career transition?”
You Can Do This!
Buying a franchise takes a certain amount of courage. Just like buying your first car did. And buying your first home.
But you didn’t go into either purchase blind.
You did research.
You probably asked for help from people who knew a lot about cars and houses too.
And you found it in you to move forward. To say yes.
You can do it here too. Be methodical. Talk to a lot of existing franchisees. Ask them lots of questions. Ask them how their transition from employee to employer went. And get some tips from them on how to do it.
As to timing, if your bank account and your head are in the right place, the time may be now!
The Franchise King®, Joel Libava, is a top franchise expert. He’s written over 2,000 different articles on franchise ownership and personally consults with people who are looking to buy a profitable franchise. Go here to find out how The Franchise King® can help you become your own boss.