When it comes to building wealth, the American Dream can feel very unrealistic and out of touch for the average person. The reality is that becoming a self-made person is less about digging in your heels and rolling up your sleeves and more about working smart with goals in mind. Although there are many ways to earn profits, two of the most common are that you can trade your labor to help someone else build their asset base, or you can be a self-employed business owner.
When you trade your labor to foster the growth of someone else’s financial future, there is very little opportunity to save above and beyond your earnings. In most cases, all of your time is allocated to the wealth accumulation of the organization or company you work for. Therefore, to get ahead, you most likely have to work in your spare time to put money aside.
Being a self-employed business owner does come with perks that trading labor does not, but it also comes with increased risk and the necessity of being an industry expert, taking on the roles of marketing, sales, operations, and all other aspects that go hand-in-hand with ownership.
So although you might have the freedom that comes with being a boss, it usually does not enhance your overall financial security or status that much more. So when it comes right down to it, the first two options of using physical labor in exchange for earnings sounds, well, exhausting and with no guarantee of ever achieving the wealth accumulation that you desire.
The Other Two Options to Achieve Income
The good news is that there are two additional options to earn a living, which are business owners and investors. In a business owner position, you don’t trade your labor to build someone else’s fortune; you have others using their labor to build yours. As a business owner, you still have to put in the time and effort, but your labor isn’t directly responsible for the majority of the revenue that your company earns.
When you purchase a successful or established business model, such as a franchise, you are not in a position to work the grind for someone else to prosper. Instead, you prosper yourself while also enjoying tax advantages and the freedom that comes with being the boss.
The main advantage of being an investor is that you have your money work for you instead of you for it. An investor reaps the benefits of passive income via multi streams and watches their finances accumulate without their labor required. And you can reinvest the income that you generate to incorporate new ways to accumulate money, enjoy your freedom, and live your best life.
The Advantages of Being a Business Owner
As a business owner, you get the perks of paying yourself a salary, gaining tax savings, and gaining equity growth. In addition, as a business owner, you can make your own schedule, which means vacationing or taking days for family necessities, choosing where you live, and being in charge of things like what you wear, who you hire, and making the rules.
Unlike being an employee, you also enjoy a great deal of job security and are not limited by pay halts or being stuck in one positional capacity. Business owners do not devalue an organization as they age or stay stagnant in salary when they hit a cap. As a business owner, your possibilities are endless.
Traditional Business Owner Versus Franchising
Business ownership and franchising share a lot of similarities and benefits, but they also differ in some critical and advantageous ways. Statistics tell us that nearly 20% of all businesses will not survive the first year, with up to 50% not celebrating their fifth anniversary.
So being a small business startup does come with inherent risks that might make you stop and consider the risk versus reward of being a new business owner. Franchising, however, has a success rate of 90% the first year, which is a lot less risky. And the percentages get better when you go out five years, ten years, etc... Franchises just have a higher likelihood of success. Franchises also enjoy many other benefits that are not afforded to small business startups.
They Come with Brand Recognition and Loyalty
When you open a new business, you have to start from scratch and win over consumers through marketing and advertising as well as branding efforts, which can take years to decades to develop. A franchise, however, comes with the reward of already having a brand presence and loyalty. When you buy a franchise, the difficulties that arise from laying the groundwork are already taken care of so you have things like brand recognition and brand loyalty from the moment you put up your “open for business” sign.
Starting a business alone is a make-it-or-break-it situation. In the beginning, you have to go it alone and often wear many hats because you don’t have the resources to pay other people. That can lead to you spreading yourself too thin and not having enough time to get the business off of the ground, or neglecting those things that help a business to succeed versus fail.
Franchises come with the support of the franchisor who has “been there” and “done that.” Support is often given upfront with things like providing technological systems, hiring, marketing, and training. And typically, franchises also come with ongoing support once you are up and running to ensure the highest likelihood of success. With a franchise, you don’t have to muddle through the first couple of years to decades; you have a trusted partner who already knows the process and how to get from start-up to success.
Starting a new business comes with a tremendous amount of trial and error, and unfortunately, it leans heavily toward the error side. Since no one has ever traveled the same path, you are left to sort through the complexities and hurdles that come with small business start-ups.
When you buy a franchise, however, you are given a proven playbook at the start. All you have to do is use that book and play by the rules and you are almost guaranteed to find success. There is no muddling through the process of trying things to see what works; you already know what works and implement it from the very start.
A small business startup is starting from scratch. That means that they have very little influence when it comes to purchasing equipment or necessities to get the ball rolling. And they typically pay retail for what they need, which can be costly and put a business owner in the red immediately. With a franchise, you have great buying power in bulk. Franchisors typically have the advantage of getting special vendor and bulk pricing, which translates into higher bottom-line earnings. When you pay more for the materials you need, you get the advantage of keeping more for what you sell- it’s just basic math.
Switch Gears Without Industry Knowledge
Being a small business owner means that you know the ins and outs of an industry and have the experience necessary to be an expert. A franchise allows you to switch gears midlife to do things that are outside of your wheelhouse. Since you are provided training, assistance, and a high degree of support, you can start a new venture without any experience or education required. That is very alluring for people who are working full-time in an industry that they no longer find satisfying and are just looking for a change of pace. Franchise ownership allows you to do what you want without going through the rigors of getting up to speed first.
Securing Money is Easier
With the high failure rate associated with business ownership, it can be difficult to secure financing. Not many lenders are keen on taking on a new business model without proven success and so many uncertainties. Franchises come with a proven system and a road map about how to get where you need to be. Therefore, lenders are more apt to foster a new franchise purchase than to lend money to a small business owner who has made up a business model based on theory and speculation.
How to Build Wealth Through Franchising
Although a franchise is less risky than a startup, not all franchises survive or have great earning potential, so it does matter which one you choose. Some specific habits and tactics will help you accumulate wealth when owning a franchise. The first and most critical one is making sure that you are starting with a concept that has the potential for exponential growth. For example, if your franchise is guided by things like territorial restraints, the locale that you choose is significantly going to affect how successful you are.
There are two types of franchise models - one being the “owner-operator” and the other being the “executive” business model. As the owner-operator, you are the boots on the ground overseeing the day-to-day operations and personally rolling up your sleeves. The executive model is one where you can build multi-units that work without your daily presence. They are managed by someone other than you, so other people are trading their labor for your wealth accumulation.
There are many pros and cons to each type of ownership model. In the owner-operator model, you exert greater control over the quality and consistency of your operation, and it typically requires less capital to get started. But with an executive model, you can continue to work in another capacity while someone else runs the business, so you have multiple streams of income before you even grow additional units.
Scalability is also a major factor. Scalability means the measure of how much you can expand a business due to limitations of locale or other factors. When you buy a scalable franchise that doesn’t require the boundaries of a brick and mortar or the expenses of real estate and operational costs, expanding to multi-units is often much easier and possible. So although franchises have the potential to accumulate wealth and more of it over a shorter period of time, the type of franchise you choose does matter.
Statistics tell us that 54% of franchise units are operated and owned by multi-unit owners. When you consider that the more franchises you own the more profits you realize, multi-unit operations are going to be the best way to build your empire. So choosing the right franchise for you to grow quickly is going to be critical to securing your financial future and enjoying the independence of fewer hours at work and more hours at play.
In the business world, you can work hard and long hours, or you can work smart. The reality is there is only one clear way to accumulate wealth, and it doesn’t involve trading the hours of your precious life working to make someone else rich. If you would like the security and freedom of being your own boss, along with the opportunity to grow exponential wealth while minimizing risk, then a franchise is the way to go!
A franchise gives you all the benefits of business ownership without all the hurdles of a startup. It does involve finding the right franchise to suit your needs and one that has the highest probability of success, but how do you know which of the thousands of franchises to choose? The good news is you don’t have to go it alone.
At Frannexus, we have the advantage of not only knowing the franchise-buying process; we have an in with lenders and other financial resources to help you realize your franchise-building dream. Contact us today and let’s get you down the path of securing your financial future and finding satisfaction in your work/life balance!