by Estelle Logan
last updated 25/03/2021
Reducing The Risks of Self-Employment
by Estelle Logan
last updated 25/03/2021
Estelle Logan outlines some of the ways that buying a franchise can make going into business for yourself an attractive option
Working for somebody else isn’t exactly secure these days. When you own your own business, you’re more in control of when you work and what you do. It also means you can act quickly to meet your customers’ needs and secure your livelihood. But working for yourself does mean taking a risk.
The trick in business is to reduce that risk as far as possible. That’s where buying a franchise can pay off. If you do your pre-purchase research (otherwise called ‘due diligence’) carefully, then choosing the right franchise business can reduce your risk considerably.
Reduce the risks
You see, while you might know a lot about yourself – your willingness to work hard, your ability to overcome problems, your determination to succeed, your pleasure in doing a good job – you don’t necessarily understand everything you need to know about running a business. As national franchisor for V.I.P. Home Services in New Zealand for over 26 years, I’ve often heard people say, ‘Why would you buy a franchise to mow lawns or clean houses? It’s so easy!’ Well, the answer is that there’s an art to mowing lawns and cleaning houses professionally and knowing how to make money and build a business while doing it.
Think about your own property. How long does it take you to do your housework or mow the lawns? Most people we talk to will say, ‘It usually it takes me all Saturday morning.’ If you were doing it as a business and it took half a day per time, could you really make money only doing 10 properties a week? But a franchise will not only help you find customers – it will teach you how to clean 5-6 houses per day or 10-15 lawns or more per day to a professional standard. That’s the difference between doing a job and running a business.
Here are some examples to show how franchising can help you reduce the risks involved in going into business. These are mostly drawn from the home services sector, but the same applies to franchises in all sorts of industries. Remember, franchising is not just about branding and marketing – it’s about training and systems that allow you to make the most of the time you put in and help you achieve a profitable return on your investment.
Reduce trial & error
What equipment do you need to start your new business? Where can you get the best deal? How will it be supported? What products should you use to get the best results in an efficient way? What are industry standards?
These are all important questions when you first start, but they’re questions to which your franchisor will know the answers. They will have researched the best possible methods, and researched new products and equipment as they come on the market. With the strength of the franchise, they’ll also have negotiated good deals. As a franchisee, you have immediate access to all these advantages from the very start of your business.
Mistakes are costly – both in time and in the growth of your business. In our business, if you use the wrong sprays or damage trees because you don’t know any better, the cost of remediation can be huge. Scratching tinted windows when you clean them can be very expensive, while using the wrong products on showers or bench tops can void manufacturers’ warranties. This sort of knowledge is included in your training and regularly updated. It keeps your risks down and your reputation high.
When you first start in business you’ll spend a lot of time learning how to do things, when to do things, how to get customers, etc. If you’re doing it alone, you’ll only learn from your mistakes. If you’re trying to build a mobile business, you’ll probably find you spend more time travelling to jobs than actually doing the work that brings in the money. It could take a long time to start turning a profit.
Also, how do you quote each job to ensure that you can make a fair profit while being competitive? As a franchisee, you will be taught this and more by experienced professionals. This minimises the time from training to profitability as you apply the knowledge of a proven system. One of my favourite sayings is, ‘The only bad job is an under-priced one!’ No matter how difficult or time-consuming a job may be, if it has been priced correctly it will be a good job. Under-pricing will lose you money or cause you to cut corners and make customers unhappy.
A lot of people get into business for themselves to get away from working for others, to be rewarded for the efforts they put in, and to make their own decisions. But being a business owner is stressful – it requires discipline, knowledge, training, assistance and advice. That stress doesn’t just fall on you – it can also affect your partner, children, family and home life. As a franchisee, you are not alone. You have a support team available at the touch of a phone, other franchisees to share experiences with, and someone to turn to for advice when things get tough – like they did last year. When Covid hit, all kinds of businesses had to adapt fast. From online ordering to in-store or in-home practices, specialist products and procedures had to be introduced – along with manuals and training in how to deliver them. Franchisees were saved a lot of time and stress because the franchise team did all that for them, as well as helping them understand and access the various subsidies available.
Guessing what products to buy, what to charge, where to advertise, when to replace equipment or expand your offer is no way to run a business. With a franchise, you’ll have access to manuals, advice, formulas and recommendations from people with real experience. They’ll have seen and helped other people who have faced exactly the same questions as you, and will have data and information to help you make the right decisions as you grow. That means you can focus instead upon serving your customers and growing your business.
If you’re running an independent business, where do you go for information and how do you know how good it is? What are the best chemical-free cleaning methods? You can go to three different suppliers and all will promote their products or equipment but what really is the best for you? What’s the best way to reach new clients? Franchisors do this research, which means you don’t have to spend your own time doing it. That gives you more time to spend out on the tools or serving customers – the things that actually generate income.
Because franchisors can negotiate on behalf of tens or hundreds of franchisees, they have much better buying power than independent business owners. That applies not just to equipment and products, but to all sorts of services such as insurance or communications. Such deals can improve costs, payment terms or servicing arrangements. Some franchises also have preferential arrangements with banks, making it easier to secure finance – you may even be able to borrow against the business itself.
Having an established name behind you will bring in customers right from the start and save you the cost of building your own brand from scratch. The level of knowledge required to keep up with changes in the digital marketing world is ever-increasing, and if you’re on your own you’ll have to pay for that either in wages or to a third party.
It’s worth looking at the way a franchise operates to see how else it can help you become more efficient or profitable, too. For example, for a mobile business, spending time travelling to and from far-flung jobs can be frustrating and time-consuming – and means you can’t service so many customers in a day. V.I.P. works a geographical system which reduces franchisee down-time by providing them with new enquiries in the area they are already working. As the business grows, travelling time is reduced – increasing earning power.
The transition between employment and working for yourself is immense. No longer do you receive regular pay; no longer do you get sick pay, holiday pay or days in lieu. Instead, you have to accept that when you’re not working, you’re not earning, and you have to put money away for GST and tax requirements, too. That takes organisation. With a franchise, you’ll be provided with systems to help you get on top of all that and make the transition into self-employment easier. V.I.P. provides business mentoring and regular support meetings with ongoing training to help franchisees manage their businesses better.
Reduce the unknown
Going into business for yourself is scary. The truth is that, until you do it, you cannot be certain whether you are going to make money or not. Even then, things like loans, cashflow, taxes and unexpected costs mean that it might be many months before your accountant can tell you how you are really doing.
It’s different when you buy a franchise. A franchisor will know exactly what costs are involved in setting up the business, and be able to give you examples of how other franchisees have grown and progressed over time. They will explain funding and cashflow requirements and know about any seasonal variations in their particular industry. In some cases, they may even offer paid training or work guarantees. The result is that you have a clearer picture of what is required, and what is possible, from day one.
Best of all, you won’t be left on your own to struggle. With any franchise, you will be required to pay ongoing franchise fees in some form: a flat weekly fee, a percentage of turnover, a mark-up on product or service supplied, or one of several other methods. In return, you’ll receive ongoing advice, assistance and information, from specialists experienced in your own particular business – something that’s been especially valuable to franchisees during the past year, when support and group interaction has helped many franchises get through times of uncertainty.
The franchisor's purpose is to help you succeed and build the best possible business you can. Add this to all the other advantages, and you’ll quickly see why a good franchise can be a far more attractive – and far less risky – option than going it alone.
This article appeared in Franchise New Zealand (Year 30, Issue 1) and can also be read in our digital issue of the magazine.
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