last updated 23/09/2019
Turn Your Experience Into A Business
last updated 23/09/2019
Daniel Cloete from Westpac discusses how to use your corporate, government or service experience to good effect in choosing a franchise
As corporates introduce digital technology and use cost-out and other cost-cutting strategies to support profitability, a large number of very experienced people are pursuing the dream of owning their own business using the skills and experience they learned in a corporate environment. The current economic conditions make going into business an attractive option and, even better, as the owner you get to keep the profits you make by running the business well.
Equally, many women returning from maternity leave and Kiwis returning from OE’s also choose not to re-join corporate life with its inflexible hours and constant travel, or look to make a fresh start in the regions where the lifestyle is better, the traffic lighter and the property prices more affordable.
And government departments and the service industries produce experienced and capable people who can do well in a structured business model like a franchise. Not everyone is suited for going into business, but many of the skills people have acquired working or even travelling overseas can be converted to good use in tried and tested franchise businesses, where such experience can prove invaluable.
With the economy still strong, despite the rate of growth slowing, people are looking at business opportunities with new eyes. Sales growth over the last three years has generally been very positive, although it does vary according to industry and geography. Franchises in industries such as tourism (travel & accommodation), cafés/restaurants/bars, and home and building supplies (especially in some regions) are creating very attractive business opportunities.
Franchising offers a range of opportunities to suit the management abilities and financial means of most people. As well as different levels of investment, they also suit different lifestyle requirements, so it’s worth looking at some key considerations.
Funding options. Franchises offer a number of well-known advantages: proven business model, joint purchasing power, branding, training and support, and so on. For new entrants requiring finance, though, one of the most important benefits is that as part of a well-known and successful brand, you may be able to get funding against the business and cash flow for a large part of the investment.
Franchisor businesses. Over the past few years, there’s been a big increase in the number of franchise brands in the market. Some have been developed from existing successful businesses, some have been taken over by new owners, and some have been introduced from overseas under master licence agreements. Owning and managing a whole franchise network requires a significant skill set and, usually, substantial financial backing. Sometimes, it’s important to have experience in a specific sector. If successful, a franchise can grow into a very large business in short order.
Large franchises and multi-unit operation. Some franchises are larger than others. For something like Mitre 10 Mega, Pak’n’Save or New World, the investment can be substantial. The same applies for multi-unit operations in franchise systems like McDonald’s and Subway. In general, most such franchisees start with smaller or single outlets within the same group and grow the business over time. If you have the desire and ability to build such an operation, this is a realistic option, but it’s also worth noting that some great opportunities also exist as current owners retire. Franchisors will be keen to talk to experienced people who will bring new energy to the brand.
Investment-type franchises. There is probably no such thing as a franchise business that can run successfully without the direct involvement of its owners. Having said that, some recurring income models may need less day-to-day input from the owner once fully established. Those types of franchise are often more capital intensive; examples would include equipment hire businesses or cabin rental, storage facilities or serviced apartments.
Service franchises. The skill-set you have developed as a professional – whether contractor, builder, marketing manager or accountant – would allow you to join a number of franchise systems while still having the brand, marketing and training benefits you would normally find in the corporate environment. This could be a lot less risky than trying to go it alone as a consultant in your old industry, no matter how experienced you are. In many cases, a relatively low up-front investment is required with the potential of high returns.
Interest/hobby franchises. If you have a particular hobby outside the office, such as photography, renovation, gardening or drones, could you turn this into your business by joining a franchise? I know of a number of bankers and accountants who took up franchises in their specific field of interest and were much more fulfilled as a result.
the funding advantage
Franchisors generally welcome applications from potential franchisees with a corporate or service background. They have developed skills, valuable experience and often have the necessary access to capital in the form of super or redundancy payouts, or equity in property.
In turn, a specialist franchise banker will welcome such people and be able to support their investment in proven franchise systems with lending, transactional and personal banking solutions which are tailored for the specific industry and brand.
Combining customers who have experience and substance with a proven franchise system also means that a bank which understands the key performance indicators of the brand would be much more likely to provide additional funding. This not only means you require less equity, but could also enable you to afford a much larger business than when setting up as an independent in the same industry – something that may require 100 percent security. It’s therefore worth talking to a specialist franchise banker and accountant about the possibilities.
People who come from corporate or services backgrounds often make good franchisees. They know how to work with established systems, have experience which, even if not in that industry is still relevant and transferrable, and like structures that are proven. A good franchise system provides the support structures lacking in independent small businesses, such as management information systems. This is also helpful because banks like getting timely, good quality financial information, making getting funding a lot easier.
A word of warning for those changing careers after restructuring or resettlement, though. We sometimes find that when people have had a large payout, for whatever reason, they tend to spend it on the first good idea that comes around – whether it is the right fit for them or not. If you like the industry and the business concept, then, take your time to research it thoroughly. Get information from the franchise itself, do proper due diligence and talk to other franchisees. Finally, be prepared to pay for advisors like specialist franchise accountants and lawyers that know the sector. Approach it like the professional you are if you want to make sure you are investing in a successful, profitable concept.
The information contained in this article is intended as a guide only and is not intended as an exhaustive list of matters to be considered. Persons entering into franchise agreements should seek their own professional legal, accounting and other advice.
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