Franchise Research: Are You Ready to be the Boss?

So you’re contemplating business ownership… While recent economic events may give you pause, it may still be an attractive option for people who have the resources and ability to be successful. If you happen to be someone seriously considering this option, here are a few thoughts you may find helpful. It all starts with the approach. More often than not, most people start with their research considering the quantitative factors which is defined as: Quantitative Factors: Considerations relevant to a decision that can be measured in terms of money or quantitative units. Examples are incremental revenue, added cost, and initial outlay. Here are a few examples of qualitative questions to ask during your research: 1. What is the total investment including working capital?
2. Can the business generate the income I need?
3. How long will it take to turn a profit?
4. Is there enough demand for the product/service in my market
Qualitative factors are important, and while there are no guarantees of success, you’ll want to research the model to see if it can actually make money. The problem is this research can be time consuming. It takes weeks of diligence to determine if a business is worth the investment. A better approach is start from a qualitative standpoint. Qualitative Factors: considerations in decision making, in addition to the quantitative or financial factors highlighted by incremental analysis. They are the factors relevant to a decision that are difficult to measure in terms of money. Qualitative factors may include: (1) effect on employee morale, schedules and other internal elements;
(2) relationships with and commitments to suppliers;
(3) effect on present and future customers; and
(4) long-term future effect on profitability.
In some decision-making situations, qualitative aspects are more important than immediate financial benefit from a decision. We’re programmed to start with the numbers and statistics. How much does it cost? What is my ROI (return on investment) or IRR (Internal Rate of Return)? While these factors are important, they can wait until later stages in the process. I find it best to first determine if business ownership is something RIGHT for you. As most entrepreneurs will tell you, it can be lonely at the top. What is driving you to want to be a business owner. How long have you considered it? If you had a choice, would you be more comfortable being employed with a salary? Owning a business can be very rewarding as there’s a pride of ownership and a sense of freedom different from being an employee. You control your destiny but it can come with stress you may not be comfortable with. Your business isn’t just a source of income; it’s also a lifestyle. Here are some more qualitative questions to think about: 1. How much income is needed to support your lifestyle?
2. What industries are you passionate about?
3. Where do you want to work, at home, in an office in a store?
4. Is your family supportive of your decision?
The qualitative aspects are more important in the early stages. While financial details are important, they’re irrelevant if business ownership isn’t right for you. Take some time and think about why you want to own a business. Is your reasoning sound? Is your spouse or partner comfortable with the idea? Will you be happy? Answer these questions first. The details can come later…