Did you know that today is Census Day? Yes, I’m aware that it’s also April Fool’s Day although I would propose to you that not many people are in a pranksterish sort of mood at the moment. Most of the usual suspects – Google, for example – have foregone their annual pranks in recognition of the times we’re in. Good job, folks, especially since if last year you had sent around pieces describing how in a year we’re all locked up at home with most businesses either closed or severely affected, you’d be accused of going beyond what’s believable for a joke.
Anyway, have you filled out your census? It is actually the law, you know. More than that, it’s massively important since the census determines how many representatives each state gets in Congress and is used by the federal government to decide how much money to spend on key infrastructure, including roads, hospitals, and schools. You can do it online for the first time. It takes about 5 minutes. If you’ve not completed your form, go ahead and do so. I’ll wait.
The census is one of the smart things the Founders did when the wrote out the rules by which this country was going to be governed. I look at it as a reality check combined with forced planning. When you think about it, having to adjust reality based on facts is critical to any organization, especially one that claims to represent each and every one of us. It’s not just the government that needs to stop, count, and rethink either.
If there is one silver lining to the current pandemic, it’s that it’s allowing many of us to take a deep breath (6 feet from anyone, please), think about where we are in our professional lives and where we want to go. I’ve spoken with many people over the last month who are looking into business ownership. Some of them are doing so because they’ve lost their jobs and don’t want to be in that situation again. Others are evaluating it because they see an opportunity. Personally, while I think divorce lawyers and midwives will do very well when this is all over, those businesses aren’t exactly something you can jump into (nor are they franchised). I also think businesses involving cleaning, home repair, and remodeling will all do even better than they did when things were sailing along smoothly. You CAN jump into those and they ARE franchised.
My point here isn’t to get you interested in a franchise. It is to get you to use the time you’ve been given to conduct your own personal census. Heck, even if you’re working a full day from home, you’re not commuting to the office as you might have done. Use that time to take stock of what you want to be doing and how you’re going to get there if it’s not what you’re doing now. If this virus has shown us anything it’s that the world can change in a flash and the more we can control our own situation, the better off we’ll be. Make sense?
Part of the process in the franchise consulting I do is to acquire leads, just as it is in most sales-related businesses. I do that in a number of ways, once of which is through what are called “portal leads.” These are names, phone numbers, and email addresses, among other things, those interested parties have submitted to get more information about a particular franchise or just to speak with someone about franchises generally.
It probably wouldn’t surprise you to learn that some percentage of these leads are submitted by people surfing around late at night. Maybe they’ve been drinking or maybe they’ve had a bad day and are angry with their current job and are thinking about moving on or taking more control by investing in their own business. These folks don’t answer the phone or respond to emails. There is another tiny percentage of leads that have been submitted by people playing jokes on their friends, generally college students.
I got one of those the other day. The lead was in Norman Oklahoma although the phone number was a Dallas area code. Still, Norman is a college town so it wouldn’t be unusual for people to relocate there. Of course, when I dialed the number, the person who answered was not the person whose information I had. That happens sometimes too – often a typo when the person is typing in their number. The email worked, however.
I hadn’t heard back the next day so I sent another email explaining why I wanted to speak to them. This one came back with a curt reply: “please fuck off.” That’s an exact quote including all lower-case letters. It’s our topic today.
I’m from New York so I’m quite used to rude. My issue is that rude seems to be the new normal. If I was, as this fellow is, a senior at the University Of Oklahoma and was going to be entering the job market with my BBA in Finance and another BBA in Venture Management come May, I wouldn’t be cursing anyone out, especially not someone I don’t know. I appreciate the fact that I may have obtained his information through no fault of his own, but the reply and how he handled it is all on him. I realize that he doesn’t know me but I’m also relatively easy to check out. Maybe a contact with 40 years in business could be useful to him even if he’s not interested in a franchise?
The world moves quickly and at times we’re all under a lot of pressure. It’s taken me four years living away from New York to truly appreciate how far nice will get you. The old me would have tracked this kid down as well as forwarded his comments to the heads of his major departments, inquiring if this is how all OU seniors approach the world. Let’s all remember that privacy is non-existent and people with bad intentions can find you and make your life hell, as sad as that is. Maybe it’s the old hippie in me, but a little more nice in this world would be just fine with me. You?
I used to ride the commuter train to and from work every day. I did that for 25+ years. Usually, you saw the same faces standing in the same places on the platform in the morning. Going home, it was pretty much the same thing.
One morning, there was a commotion at the other end of the car I was riding in. Someone was on the floor and there was a fair amount of yelling. He’d had a heart attack and, we found out later, passed away. The image of that morning sticks with me.
Everyone has had a bad day at work, and when those bad days begin to follow one another closely, one’s thoughts turn to quitting. I know mine sure did, or at least to make a job change. Frankly, those were hard thoughts to have. I had jobs that paid well and a family for which I had to provide. Quitting is hard and making a big change is unnerving, almost as unnerving as seeing someone you rode that train with each day passing away.
Why do I bring this up today? I speak with a lot of people who are facing precisely this conundrum. They’re not happy and they know they need to do something but are afraid of making the leap. Maybe it dawns on them that life is too short to waste being miserable. Maybe they’re just bored and want to do something else. Having been in the same place, I sure don’t blame them. What I try to explain to them is that there is a middle ground. You can run your own business while removing a good chunk of the risk generally associated with doing that by investing in a proven business and following the path that dozens or hundreds of others have blazed for you with the brand. Those are what franchises are.
I talk to a lot of folks who have a knack for entrepreneurship but don’t have the right concept figured out. I help them identify one or two that will let them use their skills. Some folks want to invest in a franchise but they don’t want to quit their job to do so. That’s possible, but even in that least disruptive case, fear kicks in.
Quitting makes you uncomfortable. Fear prevents you from addressing your discomfort by reminding you that the status quo is safe even if it’s an unhappy place. Looking back 40+ business years down the road, I’m sorry I didn’t get off that train earlier. You?
Happy New Year and a new decade to boot! This post was the most-read screed I published in 2019. It’s fitting both to end and to begin the year with it since the topic involves change. This is the time of the year when many people stop and assess their lives which often leads to change. This piece, originally titled “Taking The Beaten Path” has to do with some issues involved in starting your own business. I published it last February and I hope you’ll give it a read and some thought if you’re thinking about starting fresh in 2020.
One of the questions that has come up often in my newish role as a franchise consultant has been why one should look to invest in a franchise to begin with rather than starting a business from scratch. After all, there are generally fairly substantial franchise fees associated with a franchise along with the other expenses one might expect when starting a business plus you usually have on-going royalties. You’ll still have to pay to incorporate, you still often need insurance, licenses, equipment, space, and people. Why incur the extra fees on top of the ordinary expenses? It’s a good question and I have what I think are some good answers. If you’re thinking of starting a business or maybe changing the nature of the business you’re running, here are my thoughts.
First, the biggest advantage of buying into a franchise is that it’s a business in a box. It’s a proven business model, one that comes with built-in support. Almost every franchise I work with has some form of training and on-going mentoring. I think about that in terms of the businesses that have hired me to consult in the past. Much of what I did would have been covered by that sort of support, negating the need for an outside consultant. The franchise will have research and the business results of all the other franchisees. That’s invaluable and beats the heck out of going it alone.
Another consequence of that is you’ll probably experience much faster growth. You won’t be spending time formulating a business plan. Instead, you’ll be getting trained and executing one that has been time-tested. Something as simple as logo design, which can take time and several iterations, is not really a concern. You’ll generally be presented with operations manuals and marketing materials. Your time to market is greatly decreased.
One thing that is much easier is financing your business. Franchises are less risky in lenders’ minds since they’re known brands and proven businesses. While banks aren’t the best source for franchise ending, there are many lenders who specialize in that (I work with 6 of them) and SBA loans are easier to come by as well. Finally, your potential customers will already know who you are. Most franchises have good brand recognition, and even those that don’t have a current local presence can often benefit from being seen as part of a bigger entity.
The Bureau of Labor Statistics says that roughly 1 in 5 of all businesses in the U.S. close after the first two years of operation and a little over a third shut their doors after four years. You can beat those odds by taking the beaten path and investing the franchise fee to gain the above benefits. In my mind, and why I added this to my consulting portfolio, that investment yields as good or better returns than blazing your own new trail. What do you think?
One question that often comes up as I’m discussing franchise opportunities with people is that of what businesses are “hot.” It’s interesting that “hot” comes up at least as often as “profitable”. I can answer the questions for them (and usually do), but I also add a couple of other thoughts. That’s our topic for today.
For those of you that are curious, what’s currently “hot” in the world of franchises falls into a few broad categories. Within the food sector, breakfast places, juice bars, Mexican food, and healthy bowls are doing well. Restoration services – businesses that clean up after accidents or disasters are hot as well. Some of the other categories that are in demand are childcare, pet services, fitness businesses, and some “alternative” health businesses (cryotherapy, etc.), and beauty/grooming. As an aside, I represent businesses in every one of these categories – let me know if you want to learn more!
I’ll review those categories with interested candidates but then I caution them and I’d like to do the same here. Many of the businesses in those categories are “sexy” but several are not particularly profitable. When you’re thinking about making a huge life change, which is what many of the folks I speak with are doing, you need to take a step back and look at the big picture. It’s not about what’s hot because what’s hot today may be gone tomorrow. Think about businesses that were all the rage a couple of years ago. Yogurt stores (yes, I have some of those too) seem to be fading away. Most of the “daily deal” sites have consolidated or gone away. Same with many of the subscription box services. The tanning bed business has transitioned into a spray-tan business.
My point to them, and to you, is that focusing on what’s hot isn’t a great criterion as you’re looking at new opportunities. Instead, ask yourself what makes you happy. What can you see yourself doing every day that will have you excited about getting out of bed? The odds are that there is a franchise that will allow you to do that. Some folks are equally concerned (or more concerned) with making money. Many of the businesses that do that aren’t “sexy.” They’re things like home repair or remodeling businesses or they’re businesses that might require a higher level of capital like a senior care business where you might need to “float” a payroll until cash flow grows.
Businesses ebb and flow. Categories run hot and cold, but what makes you happy probably doesn’t. Add profitability to the mix and you’re on the right track, whether it’s hot or not.
When you have over 500 different brands that you represent, the reality is that you can’t know each and every one of them to the same degree. As I’ve been speaking to people interested in changing their lives for the better, I’ve come to have a list of “go-to” brands in each of the major categories. How these brands got on this list is, I think, instructive for every business.
I was actually speaking about this topic to a development director at one of the brands who reached out. Her first question was about the commission structure. We consultants get paid by the franchisors based on people signing franchise agreements and not by the candidates. I gather that for some consultants that how much of a commission they can make influences their choice of which brands to put forward. Point number one: while it’s obvious that the brands are my customers since they pay me, it’s impossible to work in a situation where the candidate’s interests diverge from the brand’s. In my mind, therefore, the commission is a non-factor. I can’t expect to earn anything in a situation where I hand off an unqualified candidate to a brand. My point is that in any sales situation, every stakeholder’s interests must be considered and subordinating what’s right for one party to a potential higher commission isn’t going to work.
One thing that influences my choice of brands a lot is the amount and quality of information the brand provides. You would not believe how little information I have about some of these franchises, several of which are businesses I don’t quite understand. In some cases, all I have is bare-bones information about costs and royalties and a link to the consumer website – not even a “want a franchise?” page which I have to find on my own. Where some brands give us presentations, folders, one-sheets, and research, others give us nothing. You can guess which brands get pitched. Point number two: don’t send your troops into battle without arming them properly.
The next thing I consider is responsiveness. In many cases, getting the candidate engaged enough to want to speak to a franchisor is a time-consuming effort. Once they are ready to go, I want someone at the franchisor who will be as proactive as I have been to get the candidate this far. Once I’ve made an introduction, I expect the brand to reach out within a day, hopefully within an hour or two. Point number three: if you’re not going to work as hard on making a sale as others engaged in the process, you need to know that there are other businesses out there who will. Be responsive. Return phone calls and emails in a timely manner.
Finally, I also consider communication. Some brands tell me every time they have an interaction with my candidate. Others have been radio-silent. You can guess which type I prefer. It’s very hard to over-communicate in any business.
Those are things I consider when choosing partners. Anything I’ve missed that you think is critical?
I went to one of the warehouse club stores yesterday to make some bulk purchases. If you’ve ever been in one of them – Costco, BJ’s, Sam’s Club, etc. – you know that one feature of walking around the place is that there are usually free samples. You can taste the latest and greatest in meats, cheeses, and frozen things to cook while you’re too busy to make something yourself. That got me thinking about the fact that you really don’t see a lot of sampling elsewhere.
I’m a fan of the free trial. It gets customers walking through your door and using your product. What I don’t particularly like are those “free” trials that require you to fork over your credit card. Free means without strings, right? In particular, if you’re a business that is built around what I think is the gold standard – recurring revenues – you ought to be spending a good chunk of your marketing dollars on free trials.
It’s relatively simple math, right? What’s the lifetime value of a customer? What does it cost you to offer up a free trial – a visit, a free month, whatever? What is the conversion rate of those freebies – how many of the trials become regular customers? Recurring revenues are predictable and generally pretty stable. I bet you’ve signed up for subscriptions of some sort and forgotten you’ve done so or don’t use them as often as you thought you would. For a business, that’s a customer without costs, and that’s a nice margin!
When I talk to people who are looking at franchise opportunities and who don’t have a particular brand or industry in mind, I usually talk to them about the businesses with recurring revenue models. Things like cleaning services. Not a sexy business, but very profitable and that, in part, is because of the recurring revenues. Same thing with spa businesses or some hair salons that feature memberships. Are those businesses that can offer a free trial? Maybe if you’re an out-of-the-box thinker. Giving a converted customer the ability to give away a free trial to a friend is another great way to expand your base at very little cost.
Here is the thing about free trials leading to recurring revenues. As with any business, you have to maintain a high level of customer service. After all, when someone’s credit card is getting dinged each month and your business appears on their statement, it’s an opportunity for them to reconsider. If they walk away, no amount of free sampling will get them back most of the time. Everyone loves something for nothing. The opposite – nothing for something – is very much NOT true!