Remember, selecting a business model should be a second or third consideration when starting a business. Franchising goes through the same business cycle of recovery (growth), prosperity (income goals reached), recession (slowing of profits), and depression (hanging in there) as every type of business does as does and as does the entire economy. Determining where we are in the “business cycle” is the first and most important analysis one can make when to start a business.
The Business Cycle
After the housing crash of 2008, it would be hard to argue that the contraction in wealth would not have a negative domino effect on all businesses. It might be accurate to consider the period of 2008-2015 a five-year depression, the adverse effects of which were mitigated by the Federal Reserve flooding the money supply. Granted, this money never quite found its way to those seeking to finance a new business, but the money was clearly used to support the stock market and save our nation’s and the world’s pension and retirement accounts.
The stage may now be set for economic recovery and it may be a good time to look to start a business, especially if the restrictions on business credit are eased. Keep trying to get a bank loan and when you actually can, it could signal getting in on the ground floor of economic recovery, expansion, and prosperity. Easing bank credit could be the sign you need that the time is right to start a business.
Anticipating a Need
We’ve all heard the term “find a need and fill it” as the rallying cry of entrepreneurship. That may be true, but often, identifying a need is a very difficult thing to do. People often say there is no “this type or that type” of business in town and make the mistake that just because the business doesn’t exist, that they should open one. More often than not, the reason that the business doesn’t exist is because there is no need for the product or service. That explains why there are no “surfing shops” in Nebraska for instance.
You may want to look at the businesses in your community that are already successful and making money and ask yourself how you can do it better rather than trying to reinvent the wheel. It might be a good idea to find the most successful business in your town and open a franchised version of it right across the street!
The Franchise Model
Franchising is the number one small business model in America and employs more people than any other form of business. Forbes magazine recently reported that franchising accounts for over 70% of new employment. (http://www.forbes.com/sites/steveolenski/2015/12/17/new-franchise-models-boost-employment-figures/#4a7ea65b3d03)
Franchising can help you to get started in a business as most of them have already worked out most of the bugs in getting up and running. Remember, however, that franchising should be considered as one of the many options that you may have to start or expand a business enterprise.
Experienced international and American franchise lawyer Mario Herman, can help you decide if now is the time to open a business, what type of business would be a good fit in your community, where it should be located and whether or not the franchise model is the right fit for you. Give us a call today.