In a report that aired on TV last night, more and more Americans are returning to their entrepreneurial roots. How? They are opening franchises. As more Americans lose confidence in their employer and the job they counted upon to retire from, they are investing (big money) in the wealth of franchise opportunities that exist today.
The first thing that these folks discover is the fact that many franchises have a “franchise fee” of $10,000 or more. In fact the average is between $20,000-30,000, not including additional capital required to open the business (fixtures, furniture, staff, rent, etc.) While these businesses offer a “turn key” model, many franchisees quickly discover that they have traded in their job for a full time venture in which they have great personal financial exposure, the responsibility to manage (baby sit?) a hired staff, and have to adhere to the rules of the franchising company. Hmmm… a golden opportunity?
Not for me! I’m a fan of the “home based business” franchise model. From the get-go there are some significant differences between a home based business entrepreneur and a “brick and mortar” franchisee. First, the start up fees are minimal to start most home based businesses (typically well under $1000.) Additionally, in a home based business, you typically do not have a physical business address, fixtures, employees and such to worry about.
Having been in and out of the home based business industry for much of my adult life, I have often been asked “Why do I have to pay to join a business?” For me, the answer to that is simple. Just as if you are paying McDonalds thousands to become a franchisee (with the prospect of typically earning about $30,000 per year from your store – despite the high overhead and responsibility you incur as a franchisee of this corporation – and know that I’m NOT picking on McDonalds, most corporate franchise agreements will result in a similar arrangement), you pay to start up with most home based businesses. These fees primarily go into three areas (as I see it) – creating “replicated” websites for the new representative, a simple marketing system that the “independent business owner” can employ and a tracking system for your business activity.
Looking at the business I am currently building, we are provided with two websites. Each website is hosted by the company, tracks those who acquire our service from our website, as well as those who join our team. The back office system tracks all sales and team activity and provides a wide array of training and marketing materials. I fully understand there are costs to the company to provide these services and track business for each representative.
Some companies however turn these necessary features into an additional profit center – for the company. I view this action by the companies that do this as a “red flag”. If this is how they build profit, I have to question what their real mission statement is. If you are willing to join a team and dedicate time to learning how to build the business, the company should support those efforts and not profit from the representative as they proceed to help the company grow.
So, why do most who join a home based business fail? There are lots of reasons, but it all boils down to whether they are treating their business like a business and whether they are investing in their business. When I say investing, this can include trainings provided by the company, personal development, marketing and advertising funds. The product offered by the company is also a significant factor… if you join a juice company with a $30 bottle of blue-juice, you need to ask yourself, how many people would really want this product?
Personally, I have chosen a company with a service that actually has value to lots of people who have no interest in our “business opportunity”. Why? Retail sales! If your service (or product) has real value, even those who “join your team” and later decide they don’t want to put forth the effort (which is many people you will encounter), with a good service or product, they will continue to use that product and you continue to earn residuals from that business.
============Speaking of the money you earn…
You will want to invest it wisely. That also requires information from the right source
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Additionally, it is far easier to get into profit mode with a home based business than a full franchise. Since the initial outlay of funds is minimal, usually a few recruits or sales generate enough income to offset any startup fees. Perhaps the biggest mistake home business entrepreneurs make is to not think of their business as a “real” business. That is, you need to develop a marketing plan (a good sponsor – and there are VERY few good sponsors – will help you to develop a marketing plan). Personally, I use a mix of “offline” and “online” marketing strategies – and yes, I have and continue to invest in my business as I purchase marketing materials and use paid advertising via the Internet.
Another factor to consider when signing up for a home based business franchise is how will your sponsor help you to grow. I already mentioned training and a marketing plan as factors to consider. Internet marketing in particular is critical to growing a strong business in the 21st century. Is your sponsor well versed in that area, will they help you develop in that area, or will you have to pay for additional training? These are important questions to consider when deciding who to sign up with!
Another area of training you’ll need (and frankly if people understood this, they would have started a home based business a long time ago), is how to maximize the tax advantages of your business. Once you are in your own home based business, you can file a Schedule C on your taxes or register as a LLC and a world of deductions are open to you! Of course, consult a tax professional to learn what you can and can not deduct.
Lastly (for now), a home based business can be a “part time, spare time” venture; in contrast a franchise is often all consuming (and considering the required investment – it has to be a full time venture!) That said, the more you treat your home based business like a business – whether it is for 5 hours a week or 50 hours a week, the more you’ll derive from it.
Hey, thanks for allowing me to share my thoughts in this arena. I want to invite your comments, thoughts, and even questions – feel free to pass this post along via FB or Twitter or post your comments below. If you want to learn more about me, take a look at the “about me” and “work with al” links above, join my page on the side and/or accept my offer of a free boot camp – also along the side.
Whenever you find yourself reading this… have a great day!