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Planning to leave a business you don’t even own yet might sound counterintuitive, but an important part of getting into a business is making a plan to get out. Not because you’re expecting to fail or need to escape, but because it's wise to think through the entire lifecycle of your future business.
Once you’ve dedicated yourself to building a successful franchise, you will want to reap the rewards. As a franchisee, those rewards initially come through the stellar product or service you provide. Ideally, the rewards will provide a satisfactory income and lifestyle for you. Later, it might provide your nest egg or a family business that successive generations enjoy. You’re building something that serves you, and you want to manage its growth and success every step of the way.
What is your long-term plan? Do you want to sell the franchise after your kids are out of college? Or do you imagine handing over the reins to your adult children who will manage it for decades to come? Knowing when and how you plan to gracefully exit is part of planning a grand entrance into franchising.
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Option #1: Keep the Biz in the Family
There are three choices for the exit of your business. Either you keep it for posterity or you sell it, sooner or later. If you think you will hold onto your business for future generations, then your plan will include a succession plan that incorporates your children. Your choice of franchise matters, too; a franchise with staying power will be around longer than a new food fad.
Family preferences are also important, but they might not be what you expect. While you see building something to help your family, your grown children may have no interest in shouldering your franchise. And that’s ok, but then you’ll need to consider your two options for selling your business. If keeping it in the family is your plan, your sale options are part of your back-up planning, too.
Option #2: Sell Soon
Soon is a relative term, so let’s say that you plan to buy a franchise. You want to grow the business, sell in three years, take the profit, and then move on to another project. In this case, be sure to research growth patterns among your possible franchises. If one franchise model shows maximum value after five years, that’s not a good franchise if you want to exit in three years. It could work, but it’s not ideal.
Recessionary times are also a concern with selling fairly quickly. Let’s say you plan to sell so that you can use the sales funds to finance your kids’ college. If you need to be out of the business at a specific time, it is important to seek a recession-proof franchise with strong demand when you are ready to sell.
Option #3: Sell Later
Selling in several years might be the most flexible option because it allows you to choose when the time is right to sell. You could earmark the sales proceeds to sweeten your retirement, and you don’t need specific timing in mind. You can choose to sell when your performance and financial statements bring the highest selling price.
For long-term holds, prospective franchise owners should investigate how long other owners usually keep their business and their exit reasons. When history shows successful long-term sales, then it is a franchise that could meet your longer-term hold and exit needs.
Franchisor Support is There
Franchisor support is a factor in purchasing a franchise instead of going it alone. Just as franchisors help new units get established and growing, some franchisors offer support when you’re ready to sell your franchise unit—they might even have prospective buyers for you who are eager to take over your business
Having an exit strategy doesn’t necessarily mean you have to stick to it, but it is important to consider—before you start—how and when you will wrap up your franchise adventure.
Operating and growing a business can be very rewarding, and the value can support your goals for many years. With good planning, your exit will be as grand as your entrance.
Anne Daniells is a co-owner of Enterprising Solutions, a professional services firm specializing in corporate communication and financial improvement for businesses where she shares decades of corporate and entrepreneurial experience—including franchise ownership—in her writings on business culture. She has authored hundreds of articles for publications including AllBusiness.com, TweakYourBiz.com, and MSN.com. Reach out via her website for more on where corporate culture, communication, and human architecture collide.