Perhaps you’re a technician who wants to be the boss someday, or you’re biding your time working a corporate job for when the time is right to go out on your own. If opening a franchise is on your long-term list of goals, you need to start working today to be ready to open a franchise one, five, or ten years down the road.
Franchisors have high standards and requirements for those whom they select to run their franchises, as that person will represent their brand to the public. They look very closely at a candidate’s credit history, assets, and experience, as well as intangible attributes such as attitude, interpersonal skills, and character. Here are several things for you to start working on even if you’re not ready for franchise ownership quite yet.
10 Years Out:
- Start saving. A franchise investment can cost anywhere between $25,000 to $1,000,000+, depending on the industry. While much of this can be financed, it’s preferable to start up with as little debt as possible. For a home-service franchise, you will need a net worth of at least $75,000 and a minimum cash liquidity of $25,000 (depending on the franchise opportunity, this number could range as high as $200,000-$300,000). Calculate how much you would like to have saved when you open a franchise and how much you will need to put aside each month to reach this goal. You might also consider meeting with a financial professional to lay out a plan for you to reach these financial goals.
- Improve your credit score. Your credit history goes back for seven years, so if your financial health is poor, you will need time to repair it. Most lenders require a minimum credit-score of 700-720 for a small business loan. Your credit card history and revolving debt is an important part of what lenders consider, in addition to cash liquidity.
- Stay out of trouble! A criminal record is a red flag for franchisors.
5 Years Out:
- Pursue certifications or licenses. Depending on the industry, you may need to have specific licenses or certifications in place before opening a certain franchise. If you want to open an electrical franchise, for instance, you will need to first become a master licensed electrician.
- Develop community relationships. When you open a business, you want to have a strong local network that you can use to market your business through word of mouth. If you try to build these relationships right as you open a business, you risk seeming inauthentic. Build your network with local business leaders now— attending local BNI or Chamber of Commerce events is a good place to start.
- Build leadership experience. The skill that most new franchise owners lack is managerial and leadership experience. Even if you don’t have room for advancement or managerial experience in your current job, don’t be afraid to ask your boss for more responsibility. You can also take on leadership roles in local nonprofits or associations or hire a management coach.
- Become financially literate. Learn how to read a balance sheet and a Profit & Loss Statement. If you’re familiar with basic accounting principles before opening a franchise, you will be ahead of the game.
1 Year Out:
- Assess your finances. Take an assessment of your financial situation and consider whether you are in a place to open a franchise. Talk to lenders about securing a small business loan.
- Consider a business partner. Of course, not everyone needs a business partner, but if you choose to go this route, carefully consider whom you choose. Find someone whose strengths complement your weaknesses, and consider how working together will impact your relationship. Sometimes your spouse or high school buddy may not be the right choice.
- Develop a relationship with suppliers and other industry groups. Get to know the local supply houses in your area. Many of these supply relationships are credit-based, so it’s best to have a working relationship in place as you build your business inventory.
- Begin due diligence. The due diligence process can take anywhere from 2 months up to a year or more, and opening your doors can take another one to six months after signing on, so start researching early. Don’t be afraid to ask the franchisor and existing franchisees the tough questions—if it’s not a good fit, you want to find out early so both parties can move on.
Business ownership is tough, but worth it in the end. There is nothing as satisfying as making and meeting a goal, and becoming your own boss with the support of a national brand behind you. Having a hard time staying motivated? Read some of our franchisee success stories.