← Unemployable with Jeff Dudan
Unemployable with Jeff Dudan
The Only Question That Matters Before Buying a Franchise (Most People Never Ask It) with Jeff Dudan
00:10:55
Loading summary
Transcript1 lines
- [00:01]
A
Hey everybody. Welcome back to Franchise Friday. I'm Jeff Duden. Along with my team, I have awarded over 800 franchises in franchise companies that I have owned, operated and built and maybe thousands of franchise awards for companies that I've represented in the sales process. In my opinion, not one person has ever asked me the most important question they should ask when considering a franchise business opportunity. No, I'm not going to make you wait for it to the end. I'm going to give you the question right up front. And then over the next few minutes I will give you the four aspects of a franchise opportunity that you are going to need to evaluate if you're going to answer that question directly and correctly. And of course, while you're listening, if you're interested in browsing our franchise offerings, just go to homefrontbrands.com and look at our incredible property service offerings. They are fantastic. Franchise owners are expanding rapidly across the country. Also, if you're interested in having a framework to evaluate this inflection point in your life that you're obviously going through or else you wouldn't be here, I suggest you click on the link and download a free copy of my book, the Business Athlete's Regimen for a Great Life Through Better Decisions that will help you build a framework of filters that you can use to to make sure that you are making the best possible decision for you and the people that you care the most about. Okay, I promised you'd get up right up front. Drumroll if you have to. Here it is. Four simple words. Will anybody buy it? Will anybody buy it? There are many great reasons that people decide to get into business ownership for the first time. And there are just as many good reasons for people to eventually sell a business that they have built. Business ownership is the cornerstone of wealth building. It allows you to take advantage of the tax code in many different ways. It allows interplay between owned real estate, complementary businesses or investments, regular stocks and bonds through tax deferred vehicles designed specifically for you as a business owner. Two things people overlook are these Number one, businesses provide the freedom to pursue your own curiosity. Get in rooms with great people who are also building a business. Pursue education that is important to your journey in building your business and to you as the business owner. And decide whether you want to acquire the needed capabilities that you now understand you need in yourself or whether these are capabilities that you want to buy from somebody else or even a third party company. But you have the freedom to pursue the answers to all of these questions. The second thing is that one of the predictors of future success as a business owner is exposure to an entrepreneurial experience at a young age. And maybe you're the first person in your family to pursue business ownership, but you might have children or nieces, nephews, friends who are in your proximity watching you do it. And you have no idea the impact that your courageous decision and your daily devotion are having on these people. But the most important part of any story is the last chapter. How does it all end? And if you're truly an outcome focused organization, then you are working backwards from a very specific future that you have defined. And the business is just a vehicle or a tool to fulfill that part of your vision. So it only makes sense to say that if you want to have a great outcome when you sell your business, then you have to build a business that is attractive to people who have the means and the motivation to pay you an outrageous price for it. And that's what we're talking about today. These buyers that you're looking for, they fall into two categories. They're similar, which is sophisticated. They have capital, they have resources, they know what they're doing. Or strategic. Your business is accretive to what they already have going on. People who have access to capital, resources. People that understand how to make a business efficient and how to manage those businesses specifically to an outcome of their design that fits into their vision and their plan. That's what you're building. So now that you realize you're building this business for a very specific buyer, this can now inform you today, before you ever get started, the type of business that you should consider. There are four characteristics that you should consider, and I'm giving them to you now so you can write them down. Their scalability, durability, sustainability, and a compelling value. First, for a business to be scalable, you have to understand things like the size of the market. Are there known competitors that have scaled these types of businesses to be extremely large? That would prove the market size, because if they can do it, maybe you can too. Do the margins of the business improve with scale? Such as investing in inventory or building out your supply chain to get more discounts or better rates? Building a team of salespeople versus doing the sales of yourself. And does the opportunity in the business provide incentive and compensation for key people like managers, like an executive to run the business who isn't you? Or talented salespeople? All of these people, is there enough meat on the bone for them to commit their talents to help you build your business? Look, there's a lot of Great tiny little businesses out there. It look like a lot of fun. But not only did you buy yourself an exhausting job, no sophisticated or strategic buyer will ever buy that business from you. So why did you even start if nobody will buy the business from you? Even if it has cash flow that's dependent upon you, it's going to be severely depressed in terms of market value. You need to grow a big business to sell them because there is no outcome without income. And the more income you can generate, the more attractive your business is to the right buyer who can write the check that's going to motivate you. The second characteristic is durability. Now the reason Homefront Brands builds businesses in the home and property service space is because we know that there's going to be 150 million more people in this country by 2050 and that there's already a shortage of houses, schools, retail and institution like hospitals and universities. All of this building uses all of the services that our Homefront Brands franchise owners provide. Very durable as far as the eye can see. Yeah, these are blue collar services that are going to be the last disrupted by AI, but they're best run by sophisticated, well capitalized white collar owners who understand the opportunity and who can bring the resources, the leadership, the commitment and focus to be one of the leading providers in their marketplace. The third characteristic, sustainability, which is similar to durability with a couple of small exceptions. Yes, obsolescence needs to be considered. Is the product or service that something that people need and will continue to need as long as we can see into the future. But you also have to look at things from a sustainability perspective like customer concentration. Is this business have 60 or 70% of the business is at risk from a single customer source? And can that customer source go away with the changing of the guard of that company or the expiration of a contractual relationship? If so, then the sustainability of your business is under threat in its current form. And I would also say that whether or not the business can run day to day involvement of the owner without the day to day involvement of the owner would indicate that the business has built a sustainable set of systems or of processes and procedures that are replicable. So that if something happens to a key person, and it could be the owner, or it could be the key manager, the president, or maybe the top sales dog, the business is is likely if something happens to these people, will the business continue under its current trajectory? And then you need to look around at regulations, kind of macro things current and future to see if there's anything outside of your control 100% is going to significantly change or disrupt the way this business operates or the way the service is provided. Maybe medical type things that are currently unregulated or if there's industries that are looking to be licensed that are not currently licensed, those could have a big impact on the way that you operate. And the last characteristic number four is compelling. And what I mean by that is, does the business have a compelling position in the marketplace? Does it have a competitive advantage and does it have an identifiable group of customers who will continue to have this need if we continue to provide great service and then they buy it from us? Can you say clearly articulate within 30 or 60 seconds why is this a great business and why do they win in the marketplace? And what is it about the business that the hardcore group of raving customer fans would say is the reason they are loyal to continue to patronize this business? If you answered those questions yes, then your business is compelling. It will be much more attractive to a sophisticated or strategic buyer who again is ready to write you that check. Okay, guys, that's good for today. I hope that helps. I can't believe that with 800 franchise owners that I've personally talked to that they have never asked me this question one time. It's all about beginning with the end in mind. It's all about speaking a bold and powerful future into existence. And those are the questions that we answered for you at Homefront Brands when we put our offering and our systems and our processes and we chose the businesses that we're in. So if you want to cheat the drill, just head on over to Homefront Brands. And again, I honestly can't believe that more people don't ask that question and work backwards. The future that they are trying to create for themselves, you know? And ask yourself, hey, if I follow the plan and if I commit my time, energy and resources, who is the natural and obvious owner who can write a check for this business that I will feel happy and gladly willing to accept? Put that in your decision filter and smoke it. And I promise you that you will rearrange the order of any opportunities that you're looking at immediately and you will never see this process the same again. And if you want to see how we do it on the home front, just go to homefrontbrands. Com or use the link below to get a free copy of my book Discernment the Business Athletes Regimen for a Great Life Through Better Decisions. I'm Jeff Duden. Thanks for listening.