Starting a Franchise Business in a Down Economy
Why buying a franchise makes sense now
Author: Jason Rager
Organization: Franchise Analyzer
About the Author:
Jason Rager is the author of: The Franchise Insider's Guide, the most comprehensive franchise resource available, and No Money Down Franchising, the only system developed to help you buy a franchise business for little or no money down. Mr. Rager has over seven years of franchising experience owning six different franchise brands in three industries. He is also Founder and President of Franchise Analyzer a software company that develops software solutions for the franchise industry.
Date Published: 08/01/2012
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I personally believe that starting a franchise business in a slow or down economy is a GREAT idea. While for most people this may seem counterintuitive, I will highlight a few reasons below that may get you thinking on the same lines as I do.
First, the axiom of buy low, sell high applies to starting a franchise business in a down economy, then growing it during a recovery and selling it when the economy is running strong. By entering the market and exiting at a top you will fully maximize your return on investment -- you will also make a decent profit along the way.
Second, the most successful franchise systems and proven business models are successful in a down economy. So if you are joining a company that is doing well now, it will be clear sailing ahead when the economy is running at full strength.
Third, when money is difficult to get access to as it is right now, as an entrepreneur you will be more attentive to your franchise business and find ways to creatively pinch your pennies. This "sweat equity" is really where you can create a lot of value for yourself as you grow your business to full capacity. When you sell your business in a couple of years down the road, you will be able to cash in on the equity you have built up through long hours and hard work growing your business.
Fourth, land, labor and capital are all very cheap in a poor economy. If you are buying or leasing space for your business you can negotiate a better deal because it's a buyer's market. Additionally landlords have plenty of vacancy and they will compete to earn your business as a tenant. In terms of hiring, you can get very highly qualified individuals to help you grow your business for rock-bottom prices. You will also get many more applicants for open job positions that you post online or in local media outlets within your community. If you are low on cash, you may be able to negotiate deals with people to trade your products or services in exchange for their help. As you may already know interest rates are extremely low right now. If you are able to get a loan (and unfortunately, it's a big if right now), you should definitely take advantage of the low rates while they are available. By using cheap capital you can build or expand your business at a very low cost to achieve a higher return on your investment.
Finally as a first time business owner it can take some time to fully learn how to run your business and maximize your profits. If you are in the learning phase when the economy is doing well, by the time you are really gearing to grow your business the economy may tank and you will have to fight an uphill battle until the economy recovers. So the sooner you can get over the learning curve, the better off you will be as a franchise business owner and career entrepreneur.
I wish you the greatest success starting your franchise business.