Team Immense Business

Buying a franchise business is very different from buying an online business. Each business model represents two ways of doing business. One is not necessarily better than the other. They are each a good fit for the right business owner.

Let’s break down three areas that you will need to consider when buying either business. You want to look at what kind of investment capital you will need. You want to look at what kind of overhead costs are involved, what kind of profits can be obtained, and finally what kind of daily challenges you will face.

Investment capital can not be avoided by any real business owner. It takes money to get a business going. In some cases, the business owner may need to constantly fund the business. Let’s look at the cost of buying a franchise. It usually can cost between $250,000 to $1.5 million depending on the type of product, and the company you associate yourself with. If you consider paying any less, you will most likely end up investing more at some point in your start up.

Let’s examine the cost of buying a successful online business. There are many out there, and you want to do your homework. You should expect to pay between $500 and $20,000 depending on your income goals. In this business model you would be paying a fraction of the cost of a franchise. Make sure it is legitimate, and a partnership you can be proud of.

With an online business, you should look for a business that includes complete online training, and a website set up so you can market immediately. Your monthly overhead will be minimal since you can do the work from home. You will need a good computer, internet connection, and a marketing budget.

With a franchise, your monthly overhead will be extensive. You will want a complete list of all the areas of operation. You will have a lease to pay for a high traffic space, employees to pay, workman’s comp insurance, building insurance, inventory, and maintenance costs. Some of these items are big ticket items so you will want to make sure you have a fair amount of working start up capital to fund these items while you get your business going.

One of the most important areas to look at in owning your own business is the profit and loss category. You must make sure that after your overhead is covered, your profits are still there. With the large expenses of a brick and mortar business, it is easy find the profits are low and your return on investment is not always there.

With a quality online business, profits can be very high. Overhead is low and there is more room for profit in your pocket. There are two things to look for when your evaluating which online business to go with. Look for a quality product that has high commission sales. This will allow you to make a high monthly online income. Make sure that the marketing and website system doesn’t require more than twenty percent of your profits to reinvest back into marketing and advertising.

Daily challenges with both businesses are inevitable. With a franchise you will be challenged by the head aches that come with managing employees, managing the fine line of stocking inventory to meet demand. You will have paperwork to file, submit and coordinate to keep your books in line to manage the company efficiently.

The online business model has completely different challenges. The number one challenge is learning something new if you are not familiar with online marketing. With this in mind the learning curve is quick with the right mentors. This challenge comes with a huge reward of learning how to market anything, to anyone, from anywhere in the world.

Only you can decide if you are a good fit for a brick and mortar business model, or if you would be better suited with the freedom of working online. I have personally worked both business models and find that the online business model works better for me and those I coach.

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How can I find a franchise with a good return on investment? First lets define the term “return on investment” or what people call “ROI.”

Return on Investment Defined

Return on Investment (ROI) is defined as the percentage of earnings gained on an investment, net of cost.  Investors typically decide on which opportunities to partake in by estimating the return that they expect to earn. 

Since franchising is an active investment rather than a passive one, it is necessary to include the time invested in addition to the financial investment into the calculation.  Therefore a franchising ROI should be higher than that of an ordinary monetary investment. 

About how much ROI should you expect from a franchise?

Typically a good ROI on a passive investment ranges between 10 and 15 percent.  Consequently, the ROI on a franchise should be a bit higher than that to be worth your while. 

The expected ROI will be directly affected at least in part by the skills and expertise that you offer to the franchise.  The type of business, the business model, and the market will also be contributing factors.

In general, research demonstrates that greater returns typically transpire with financial investments of less than $200,000.  Many times decent returns have been discovered even by beginning with cash of less than $50,000. 

Factors to consider in determining the expected ROI from a Franchise

There is some important information that can be gathered by examining the Franchise Disclosure Document (FDD) of a franchise. This document should include the initial investment necessary to purchase a unit. 

Additionally, you may be able to discover what the average earnings have been by other locations within the organization.  It would also be helpful to find the earnings of a typical unit over its first three years of operation. 

Depending on how much of this information is disclosed, you should be able to project an ROI for that franchise investment for three to five years.

Further, contacting other franchise owners could provide you with essential data on anticipated earnings.

Achieve the best ROI possible with your Franchise

In order to have the best chance of achieving successful results, one of the most important ingredients is to be sure that you are investing in a top quality franchise. The other is to be certain that your own offerings to the franchise with regards to skills, experience, and talents are a good match for the franchise.

Have you noticed how much you hear the “R” word lately? There certainly isn’t a shortage of news reports on negative financial news out there. As the threat of an U.S. recession continues to grow, you need to ask yourself a question:

“Would you struggle through an economical recession or would you thrive in it?”

There are several products and services that do well in recessionary times. Even as people cut back on expenses and frivolous items, there will still be some products and services that will do well in recessionary times. In fact some will actually thrive in a recession.

- Online Businesses

Online businesses are simple and inexpensive to start up and can be very profitable if done right. It is estimated that U.S. online spending will increase 17% in 2008. This double digit growth is expected to continue for many years as consumers become increasingly comfortable purchasing online and enjoy the conveniences and cost savings of not driving to the mall. Almost every aspect of starting an online business can be outsourced and with almost no overhead, profits tend to be much higher then a high risk retail store.

- Credit and Debt Management

As more American’s lose their jobs to downsizing and lose their homes to foreclosures, credit ratings and debt levels are directly affected. Marketing these services is ideal but doing the actual credit repair or debt collections/negotiations can be rather difficult. By finding the right business model within these industries you can have a product in high demand.

- Healthcare

Despite a lagging economy, people will continue to need healthcare. As the baby boomer generation continues to age, so does the need for services in this industry. By finding a profitable niche in this industry you are assured to see increased demand over the next 30 years.

There are many opportunities for entrepreneurs during a recession and we have just touched upon what to look for. The secret to your success is “finding the right business model” to explore.

You could just as easily start a new business in any of the 3 above categories and be dragged down by a business that requires all of your time, doesn’t have the profit margins needed or has high start up costs & high risks.

Don’t make the mistake of starting a flawed business. Play particular attention to the type of business model you get into when looking at the above 3 industries.