The allure of buying a franchise is that the bulk of the work in putting together a business is already done for you. You’re buying into a concept and a brand that people already know, all you need to do is open your doors. But it’s not that easy. There are still decisions to be made and plans to be followed. And avoiding mistakes along the way can make the difference between a great experience and being stuck pulling your hair out.
When buying a franchise, avoid these five common mistakes to stay on the road to profit:
Thinking additional research is not required on your part (i.e. it’s a slam dunk!)
Just because you like the food or the brand doesn’t mean you can skip the research. No matter how good their burger is, you still need to do your due diligence. Also, just because something’s trendy doesn’t mean it’s right for your market. Make sure you understand your local customer base and what they’re looking for. Then look for franchises that fit that criteria and are within your budget.
Not seeking the advice of other franchise owners
In the process of your research you should definitely speak to other owners of the franchise you’re looking to buy. While you can get good advice from anywhere, what they have to say will be gold. It’s especially important to listen to your franchisor. When buying into a franchise you’re essentially making an agreement with them to execute their vision and uphold all the plans and values that are in place for each location. If you don’t think you can agree to what the franchisor is asking, you should probably look for something different.
Marching to the beat of your own drum
It’s great to be unique and to bring your own personality to everything that you do. And that includes your franchise. You can easily make it your own with little things here and there. But if you were planning on totally changing the menu, or the layout, or even a sign, think again. You’re buying into a brand that the franchisor has worked tirelessly to build. You can’t do anything to change or affect that brand in any way. If you have ideas for improvements, you probably want to discuss those with the franchisor before you sign on. If you want to go completely off the beaten path, you might want to consider opening your own small business, that way you have full creative control.
Trying to do it all
It’s important to understand how all the aspects of your business work. That expertise will come in handy if you need to step into someone else’s role temporarily or help tackle a problem. You shouldn’t, however, try and do everything yourself. You’re the owner, therefore it’s your job to make sure each area of your small business is run by someone who knows that field. Trying to do everything will not only slow you down, it could mean you’re missing out on valuable knowledge that an expert could bring.
Underestimating your total costs (and future investment)
Startup costs can differ depending on the franchise. And that one-time buy-in cost isn’t the only time you’re going to need capital for your business. A robust business plan will tell you when and where you’re going to need cash, but it’s also a good idea to have a little extra. You’ll also need that plan in place if you plan to seek investment. Don’t be afraid to make decisions on where and how you’re going to allocate your cash. Do you want the newest and best of everything? Or is pre-owned equipment ok? Working with a financial advisor early in the process can help you keep a cap on your budget and still be successful.
Buying into a franchise is exciting. In just a short while you’ll have a fully functioning small business (or a large business depending on how much you invest). No need to waste time dreaming up business ideas or slave away over new marketing campaigns. You’ll have the backing of your franchisor to help make the transition into entrepreneurship. As long as you do your research, listen to your franchisor, and don’t make any of these basic mistakes, you’ll be ready to open your doors and starting bringing in the money in no time. If you’re thinking about opening a franchise, or you already own one and need help with your bookkeeping, get a free consultation today.
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As with most “great deals,” though, there are potential pitfalls. It’s important to take the process seriously and abide by the rules in order to reap the benefits while avoiding some very serious penalties.
Let’s take a look at the benefits and potential pitfalls of filing as an S Corp, and how you can pay yourself in a way that maximizes your tax benefits while minimizing your compliance risks.
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Filing as an S Corp eliminates the self-employment tax on all income that many small businesses pay, while at the same time keeping some income out of reach of things like Medicare and Social Security taxes. It offers you the opportunity to take part of your income as a W-2 salary, with the associated federal program taxes, and the rest of it as distributions that are not subject to those taxes.
As with most “great deals,” though, there are potential pitfalls. It’s important to take the process seriously and abide by the rules in order to reap the benefits while avoiding some very serious penalties.
Let’s take a look at the benefits and potential pitfalls of filing as an S Corp, and how you can pay yourself in a way that maximizes your tax benefits while minimizing your compliance risks.
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