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Building Wealth

Wealth

I was recently reading through my LinkedIn feeds and I came across a post that really struck me as being the answer to the question I am asked by so many clients.  How do I build lasting wealth?  The post spoke about Shaquille O’Neal, who was recently awarded his doctorate in education by the way, and a statement he once made.   “It’s not about how much money you make.  The question is are you educated enough to keep it.”

Everyone, who has ever watched the game of basketball, knows about the incredible career Shaq had in the NBA.  However, not everyone, including me, knows about how accomplished he is in his post career business investments.  Not to steal the message of the post, but Shaq has made investments in over 200 franchises and 150 car washes along with several other establishments like Las Vegas night clubs.  Obviously, we cannot all make the money Shaq has in our lifetime, but we can employ a similar strategy when it comes to building long term wealth.

It is a commonly accepted practice to set aside some of our income each year for retirement.  Most will trust this nest egg to the money manager that oversees our 401K, and this is of course a solid strategy.  Another way of appropriating these funds, is to invest it into a home that will become an asset to be cashed in when we exit the workforce.  Imagine if we were to venture outside of the normally accepted investment paths and invest in something that will generate ongoing revenue and build wealth that can then again be reinvested.

A business, with a solid return on investment (ROI), is a machine that will generate cash as it grows.  If that cash is reinvested in other businesses or the same business, for growth purposes, you will be on your way to building long term wealth and stepping off the hamster wheel of Corporate America.  A business, even a small home-based business will generate cash while building an asset that can be cashed out in the future.  We have all heard a story or two of a college student that took the money they would have spent on education and invested it in a business instead.  If you haven’t you should check out a blog by Retire@21.com (https://retireat21.com/blog/the-most-successful-college-dropouts-in-history).  Business is not for everyone for sure.  It requires you take a risk and perhaps not spend as many hours watching your favorite Netflix series, but if you are even a little successful your life can change forever.

Traditional investment strategies like, 401Ks, IRAs and Real Estate, offer solid solutions to planning for retirement and should not be overlooked.  Adding a business, that will generate ongoing cash flow to these more conventional investment strategies can truly build long term wealth for you and your family.  Even it you only added one small home-based business to the mix the results could be dramatically different.

Most people think business ownership, while a good idea, is out of their reach.  According to an article by businessnewsdaily.com/  – “According to the U.S. Small Business Administration, most microbusinesses cost around $3,000 to start, while most home-based franchises cost $2,000 to $5,000.”  Start small and think long term when planning for your future.  Explore what is possible and take a chance on yourself for your futures sake.

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Franchising is not only for the wealthy!

Franchising

I was speaking with some friends and family this weekend about franchising and some of the opportunities that are available in the market today.  I was struck by the reaction of the people in the room.  They almost immediately dismissed the idea of looking at a franchise because they thought it was out of their reach financially.  When people think about franchises, they think about the large empire brands like McDonald’s and Buffalo Wild Wings, where you need substantial assets to even have a conversation, if you could get them on the phone.

According to FRANdata.com, there have been 1,749 new franchise brands introduced to the US since 2012.  These franchises represent 29 different industries and 188 business sectors.  The next time you think about franchise opportunities know that it reaches far beyond McDonald’s, and in fact far beyond the restaurant and food industry.  So, who are these new franchises and where did they come from?

Franchising has become rapidly accepted as a path to national expansion.  86% of the new brands introduced since 2012 are successful business owners who believe they can grow faster with the help of a team of franchisees who are responsible for their individual territories.  That is what franchising is all about after all.  It is a successful business owner who needs talented and dedicated people willing to believe in and grow his company.

According to the International Franchise Association (IFA), almost 4% of all small businesses in the U.S. are franchises.  It is an industry that generates $2.1 trillion and employs 18 million Americans.  Most people invest in a franchise because it is a proven business model that provides a greater assurance of success in a shorter period of time.  Many of the clients I work with have already proven they can be successful at growing a business while working at their corporate job as a division manager or sales leader.  A franchise offers the same type of structure while affording the franchisee a greater return on their time and investment.

The fact is that there are many franchise opportunities out there that will allow you to invest in your future without risking your entire life savings.  To compile their list of top-rated franchises each year, Franchise Business Review surveys thousands of franchisees, from hundreds of leading franchise brands, to gauge franchisee satisfaction and performance.  The Franchise Business Review provided a list of the Top 100 Low-Cost Franchises of 2020, where the cash required to invest ranged from a low of $5,000 to a high of $125,000, with most requiring less than $50,000 to get started.  So, the next time you are thinking about venturing out on your own, remember there are opportunities out there for everyone brave enough to take a chance on themselves.

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Franchise Trends

While 2020 has been absolutely devastating for some franchise sectors, it is not all bad news.  As the world transforms itself in preparation for the post pandemic new normal many business sectors have seen significant growth.  Home Services, Elder Care and Cleaning Services have all seen significant growth in 2020 with excellent forecasts for 2021.

When looking for a franchise you should consider what the pandemic has done to change the way people look at life on a go forward basis.  A significant number of workers will never transition back to the corporate office, instead opting to maintain their virtual/ home office environments.  The elderly population has now become resistant to centers of care that put them at higher risk for the spread of infections in the future, again opting to receive care at home.

When looking for a business opportunity to take the place of your ex-corporate job, be sure to research these trends to ensure the franchise you select has a bright forecast for the future.  Ask the Franchisor the hard questions.

  • How was their business impacted by the pandemic?
  • What do future trends look like for the business, post pandemic?
  • What kind of support did they give their franchisees that were negatively impacted?
  • How many franchisees left the business in 2020 and why?

When you are considering buying a franchise you need to understand the stability and integrity of your potential franchisor partner.  Those franchises that are successful long term stand with their franchisees through the good times and the bad.

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Seeking A New Opportunity

Millions of Americans have been laid off, furloughed, or otherwise misplaced from the career path they were on before the pandemic turned the economy upside down.  LinkedIn is filled with people searching for that next great opportunity.

There are a couple of paths you can take when you find yourself in this situation.  You can brush up your resume and actively search for the perfect new job, or you can use this time to start that business you have always been looking to start.  As a SCORE mentor I have seen a marked increase in the number of people feeling courageous enough to finally pull the trigger on business ownership.  To some it sounds too risky, but history shows that economic down turns have yielded some successful startups.  Hewlett-Packard, Microsoft, Mailchimp, and Uber were all started during a recession.

When you take a minute to think about it, if you are talented enough to run a multimillion-dollar division for your employer, why wouldn’t you be successful in your own business?  The government has stepped in to help with SBA financing plans that will help to defer the initial cashflow issues, and interest rates remain at all-time lows.  So, you have to ask yourself – is now the right time for you to explore business ownership?

Obviously, there are many things to be considered when looking for a new business opportunity.  Things like market size, market access, cash flow management, and many others all need to be considered before diving in.  The most important thing however, is far easier to consider yet most often gets overlooked.  Without it even the most successful ventures are sure to fail over time.

The factor to remember above all others lives inside and can only be evaluated by the new business owner.  As they say, beauty is in the eyes of the beholder.  Only you can determine if you will have a passion for the work and will be able to stay with it long enough to make the venture a success.

If you are working with a broker to help you locate a business, be honest about what you are passionate about.  Don’t let the potential ROI push you into doing something you are going to really hate doing every day.  As the saying goes – “love what you do, and you will never work a day in your life”.  Here is to having the courage to find out what we love to do and living the dream!

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Workflow, Process and Performance

We hear so much today about performance management.  The Human Resources community has developed entire performance management systems to track the growth and development of our staff and yet there are still serious business performance issues within the organization.  Often I am confronted with this fact when brought into a client engagement.

The scenario goes something like this – I know I have a well-trained and dedicated team of employees and I believe my leadership team is engaged in their growth and development, but I can’t seem to put out the daily fires that distract us from our core mission – WHY?  Obviously there is no one simple answer to this question.

The basic principles are always the same however. How are you monitoring the success of your business?  Are you using Key Performance Indicators (KPIs)? Are these KPIs aligned with the key processes that impact the success of your business?  Is there a better way to move product and/or information through your organization?

Having just watched the winter Olympics I can’t help but to think about how the success of the athletes are measured so carefully throughout an event.  They know ahead of time what their performance needs to be to get them to each transition point (KPI).  30 seconds to turn one, 45 seconds to turn two ……. Imagine if you monitored your business that way and better yet, your employees understood what it meant if they didn’t make it to each checkpoint on time.

Good workflow is the foundation of your organization.  The processes that deliver your product or service to your customer at or above the commitment levels set at the time of the sale will either stop the daily fires or fuel them.  In most cases people, when properly managed, are not the issue.

Organizations lose sight of the importance of workflow management because as they grow this gets left up to the day to day managers and in most cases people don’t like change.  If I had a dollar for every time I have heard the expression we have always done it this way I would never have to work again.  I have yet to find an organization in which everything stays the same – at least not a successful one!

Good work flow management that incorporates well developed processes leads to better overall performance every time.  KPIs are an important part of this process as well.  The only way I know to monitor the effectiveness of our workflow is through properly monitored KPIs.  These monitoring points should be measuring operational performance not just financial performance.  An organization can be profitable while losing market share due to poor performance.  Operational KPIs will allow for better management of staffing levels and result in a stronger line level appreciation for corporate profitability.

Your business, like everything else should always be improving the level of service it delivers to its customers.  Better products and better service will always deliver happier customers. If you find yourself asking how to put the fires out and increase service delivery – go back to the foundation of the organization and review the workflow that your daily operation is based on.  This will put the fires out and might even lead to high financial performance as well.

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