As a franchisee, it’s never too early to plan your exit, Andrew Wareing, managing director of Voucher Packs, says
You’re thinking about investing in your first franchise and are filled with excitement about what the future has in store. It’s far too soon to think about getting out of the business, right? Wrong.
A wise man once said failing to prepare was preparing to fail. And very few people would get into a new business without putting together a business plan. But have you given a thought to a crucial element of this plan - your exit strategy? After all, most business owners will at some point want to make a return on the hard work and money they have invested. Your exit strategy is just this.
In fact, it’s important to think about your strategy even before you make a decision on what franchise is right for you. Planning your path carefully can help keep your focus on the end goal - essentially, the reason you have decided to take the leap into franchising in the first place.
When looking at potential franchises, consider what your initial outlay will be and how long it will take for you to get that money back. Buying low and selling high will always be a good idea. But what will your business have to look like to reach that level?
Also think about how easy your investment will be to sell when the time eventually comes. Are you getting into a business that will require key skills and narrow your potential resale market?
It is also worth carefully examining the terms and conditions surrounding an exit. In the vast majority of cases, you will be unable to sell your business without the permission of the franchisor and the person who will take it on will need to be approved by it too. These conditions are in place to ensure the brand remains protected, which is positive for all concerned.
But ask the right questions and make sure you read your franchise agreement carefully. Also consider whether the franchisor will help you sell your business when the time is right and what it will ask for in return.
Ultimately, franchisors want people to grow and often when the time has come to sell it means a business has stopped growing or there are no plans to grow beyond what is currently in place. Generally speaking, franchisors want what is best for the business as much as you do. That’s one of the significant attractions to becoming involved in a franchise in the first place. An ever growing business benefits the franchise system as a whole by increasing the brand value.
Your exit strategy could come in many different forms. Are you planning on working for a period of time and then selling the business when you reach retirement age? Do you want to structure the business so you don’t need to be there all the time? Maybe you are hoping your children will become involved and will take on the business when the time comes to slow down?
Involving a second generation in the business is something many people aspire towards, but it’s not always considered an exit strategy. It is. Just make sure you keep in mind when this might happen and how long any transfer might take.
A business sale might also come in the form of an existing franchisee who is looking to grow their territory. It can be easier than you think to make a sale because if you have a pool of franchisees you also have a pool of people who might want to buy. This is another of the key benefits of the franchise system.
A sale can take place at any time and doesn’t have to be when your licence has ended. The important thing is to keep in mind how much your business will be worth based on the length of your agreement.
Whichever route you choose to go down, the end destination needs to be decided before you set off. As with any business, the route may change as you go along the way, but as long as you know where you will end up it can keep your focus and ultimately achieve what it is you want.
Most people who struggle in business do so because they are not sure what their destination is. They have not thought it through enough. Getting professional help in this area is never a bad thing.
I’m of the opinion that many people fail to think about their own goals because their thought process is geared towards working for other people and making money now. When you start working for yourself, it opens up a whole range of possibilities, which is extremely exciting, but can also be very daunting.
Sit down and have a think about where you see yourself and your business in five to 10 years’ time. If you have no desire to be working full-time, make that clear in your business plan. That’s the only way you can ensure it actually happens in a structured and worthwhile way.
Think about how your business will have to look for you to achieve your goal. Revenue and profit are just two measurements.
Will you need multiple operations, a whole team of staff or just a few key individuals?
It’s entirely natural to feel a little topsy turvy about starting a business, while also making steps to end it. As you make the exciting leap into the world of franchising, it hardly seems right to consider the eventual outcome. But by planning your exit strategy in advance, you can ensure you reap the rewards your hard work deserves.