It’s good to enter a new business venture with confidence and enthusiasm. It’s also good to enter with your eyes open. If you do that, you’ll quickly see one of the advantages franchises have over independent start ups.
Do you think your new business will face problems? The answer should be, “Yes.” If you think you won’t face problems, you’re letting enthusiasm triumph over realism to an irrational degree. Let’s examine just a few of the problems new businesses are likely to encounter.
- Developing systems that actually work takes up a lot of time in a new business. Just getting the invoices out the door or the inventory onto the shelves can be a major challenge for a start up. Few new business owners are completely competent with accounting, logistics, sourcing, marketing, sales, negotiation, and all the other skill sets needed as a business starts up and grows. Often a new business owner spends a lot of time just putting out fires.
- Slow times come up for all seasonal businesses, and even for businesses that aren’t seasonal in nature. World events, weather, changes in the economy, and changes in fashion lead to natural ups and down in sales and revenue. These slowdowns can lead to cash flow issues, and many businesses are under-capitalized, often because the owners just didn’t foresee the slow times.
- New competitors come onto the scene — sometimes they don’t stay long, since it has become so easy to start a new business, but they can still threaten your business while they’re there. Responding to competitors can be a dangerous distraction from growing your own business, especially if both businesses are small and new.
- Regulations, from sales tax laws to safety requirements, change over time. When you don’t foresee a change in rules, you can get caught having to make costly changes to meet the new requirements. Sometimes businesses close over rules changes; often they’re financially stretched.
- Finding and keeping good staff is on most businesspeople’s list of major challenges, along with training, managing, and developing staff. High turnover in some industries means that employee training is an ongoing challenge, and many new business owners don’t have the skills they need to train workers effectively.
- Landlord issues, from leaky roofs to rents that go up way too often, are thorns in the sides of many business owners. Add the problems of finding a good location or living with a bad one and you can have a lot of problems.
- Marketing can create a vicious circle for businesses, as new companies struggle to come up with enough money to make the marketing investment that will make it possible for them to afford the marketing investment that… What’s more, the initial costs of developing a marketing plan, building a website, creating and paying for ads, and so forth can be high. Businesses may cut corners and end up spending on ineffective efforts.
Franchisees have a leg up with all these problems. Instead of spending months (or years) in trial and error mode, a franchise business owner starts with successful systems and access to experience. Often, professionally developed marketing and training materials are part of the franchise opportunity, along with name recognition and mentoring that an independent business couldn’t buy.
If you look for trouble — not with a pessimistic attitude but with a realistic one — you’ll see the benefits of buying into a good franchise business even more clearly.