FRANCHISING YOUR BUSINESS
Legacy! The number one reason business owners started their own business was to build a legacy for their families. However, several things get in the way down the road. Some kids are not interested in the family business. For some, it’s a good job but not really wealth-building. And, the IRS has its hands in your estate.
So how does today’s business owner build something to overcome these obstacles? Generational wealth comes from building enough outlets or distribution to attract the right buyers and leave a true legacy to your family.
One method for rapid growth is franchising. If your business is one that can be replicated by sharing your processes and culture for success, then collecting fees from those whom you teach your business to can be a way to expand your business today and cash out big in the future.
Here is how it works. Let’s say you build a business that earns you $200,000. Typically, businesses sell for a multiple of 3-4 times cash flow. Your business is then worth upwards of $800,000. After taxes, broker fees, and everything else, you might end up with half of that.
Replicating your business through a franchise model can change that. 100 operations doing exactly what you do today, remitting a recurring revenue stream through royalties, might be worth tens of millions of dollars or more. Private equity firms love the franchise system and pay multiples of cash from 7 to 12 times cash flow. The opportunity is real.
So how do you make that happen? There are several firms out there that can help small businesses become the next regional, national, or global brand by helping business owners take their brand to market under a franchise model. Many will collect money and help you set the table to go to market. Others will provide ongoing support through the process. The key is to find a firm or consultant who will help in all phases of the process and help build something special. It’s a long-term commitment so find the right person or company to help make your entrepreneurial dreams come true.