Franchising Is A Great Way To Start As An Entrepreneur
I recently read a quote from a judge in a local entrepreneurship contest (Ernst and Young Entrepreneur of the Year - Utah) that mentioned how he was looking at contestants based on not necessarily how much money their business made, or how high their sales were, but rather how innovative their idea was. If it was at least moderately successful in both sales and profits, and it was a new idea, then that was the entrepreneur that would get the quoted judges vote. I thought about his viewpoint for a minute and realized that I will probably never win the entrepreneur of the year award………….and I am okay with that. At least I won’t win one where his criteria are used.
Why?
Because the vast majority of my experience and ownership is and has been in businesses that are franchise concepts. They aren’t new and exciting compared to say some new web 2.0 software startup in Silicon Valley with 13 ex-Microsoft engineers and a bunch of VC money backing the business. Of course you could also sell bean-bags that are cool looking and expensive - as long as you sell a lot of them, and fast- and win a bunch of awards (including entrepreneur of the year) just prior to going bankrupt. I am not interested in winning awards; I am interested in making money. I don’t really care if what I do isn’t new - in fact, I kind of like the old proven stuff (thus increasing my chances for success). I think most entrepreneurs who are getting started would do themselves quite a service if they owned and operated a franchise before going out and starting their internet based web 2.0 buzzword of the moment business. Why? Because whether or not you are running a Taco Bell or Bell Labs, there are some common business principles that apply to all companies - old and new. I just don’t understand why you wouldn’t want to walk and then jog and then run - particularly if you are a younger entrepreneur and don’t have a ton of work experience. If you haven’t seen it done before, why not learn it yourself in a structured environment with a much higher degree of success? I am most certainly not saying that franchise businesses are what you should base your entrepreneurial career around. In fact, I am saying you shouldn’t. Go out there and start a company that really is new and different………..but consider owning and operating a franchise business first. There are a lot of great skills and concepts you can take into your new startup from day one if you do. Namely:
- Learn how to hire, fire and deal with employees. What, you haven’t had employees before and you want to start Yahoo! in your dorm room? Hey, go for it. I am telling you though, even if you only had two kids working at your auction-Ebay-stuff-for-other-people-in-a-strip-mall business before it went under (and all of those places eventually will), you will learn a lot about employee management. Payroll taxes, insurance, workers comp, schedules, vacation tracking, bonuses and pay rates - these things are not unique to franchise employee management. You will use them in the billion dollar technology start-up that you take public in a few years! Just don’t forget to give me some pre-IPO shares.
- Customers are another unifying trait amongst all things business. Although customers come in all shapes and sizes, dealing with them can be very similar despite their idiosyncrasies. They all want to get your product on time, for a fair price, and have it work the way it is supposed to. Pizza, software, bicycles, consulting hours - you name it, customers use the measurements I just described to value your product or service. Learning how to deal with customer complaints is a unique skill in its own that is universally valuable.
- Money management, regardless of how big or small the numbers get, is always easier to get a handle on when you are doing it yourself. Receivables, payables, and learning QuickBooks are all skills that will help any startup. How does the money move in and out of your business? It is easy to play spreadsheet bingo when you are doing your startup business plan stuff, but having some real world experience with actual dollars will help your financial projections get more accurate in a hurry. It will also make you more frugal. Running a franchise business can often be about nickels and dimes. Your startup probably doesn’t have a lot of nickels and dimes in excel forecasts you created. It is important that you acquaint yourself with these smaller denominations because they can be great contributors (or detractors) to net income!
- Negotiation is another universal tactic that you cannot learn in a classroom or as some grunt in a giant corporation. Negotiation is learned on the front lines. It is a battle tested skill and you have to have some wounds before you can be good at it. Why not get into a fight with some gloves first instead of going straight to bare knuckle? A small franchise business will allow you to work with Landlord’s and vendors. You can make a few mistakes - i.e. get taken to the cleaners - and not have your company go down in flames. Also, you can learn a thing or two from your franchisor and how they negotiate their “national” deals that you will piggy back off of. Take these skills learned in the trenches with you as you start to talk to lawyers, venture capitalists and potential partners. Although the negotiations are at a higher level and use larger numbers, the tactics and styles of negotiations you learned in your small franchise business will help!
- You can develop relationships with accountants and lawyers (both worthwhile investments of money when given to the right professionals) in advance of your big money raise for company XYZ. My bet is that you will hire and fire a few different accountants and lawyers for different reasons as you wade thru your franchise business. Why not have this process done and your team of professional service providers ready and tested for when the time comes to really utilize their skills? Nothing is worse than spending a bunch of time and money on lawyers and accountants and then being less then pleased with their work product. Let their interview take place on a smaller scale and using smaller dollar amounts.
- When you decide to move on to another company, maybe your super-startup, you will inevitably learn how to sell a business or at least learn how to turn over the management of it to someone else. While you will need the skills of your accountants and lawyers in this area (as well as your negotiation skills), the process of selling a business - any business - is one that can only be learned by doing. You can also learn a lot about buying a business as well (even though you are the seller) because the process has an innate transparency in that at the end of it, you know exactly what the buyer and seller were thinking and doing. If you don’t sell your franchise and instead keep it open as you move on, you learn a lot as well. Namely, how to pick great people, how to delegate and how to incentivize others to perform at the level you are accustomed to doing yourself.
Perhaps the most important thing you can take from franchise ownership is simply the title of “owner”. If you are a new entrepreneur and want to be your own boss then this is the chance to try it out. While investors and VC types want the huge home runs, you really only need a solid double your first time out. Don’t get caught trying to swing for the fences the first time out. The chance that you can hit a major league fastball after having skipped the minor leagues is slim. Keep in mind that often time’s people who are investing or backing a business will push you to go for the fence early. They are out very little if you fail, but they get a huge return if you don’t. They are playing the numbers - many will fail, a select few won’t. It’s the few that pay off all of their other failures. If you want to do what is best for YOU and not THEM then get some experience - real experience - in a franchise business before you run out and try and do a start-up. My bet is you will learn a lot, make some money and put yourself in a position to succeed when you move onto your Entrepreneur of the Year award acceptance speech.
