Buying an existing franchise business can give you the same independence as starting a business, but it will also come with significant benefits. If you choose the right franchise business, it will come with an existing customer base, a strong brand, and a steady or growing income. If you are looking to buy a franchise business, there are a few things you will need to consider.
So, how do you choose which business is right for you? Paul Dodgshon, Sales Director and regional partner at Business Partnership, wants to share his useful guidance, along with five essential points to consider when buying a franchise business:
1. What is your goal?
Being clear about your reasons for becoming a business owner will not only help you to find a business that achieves your goals, but it will also clarify whether it is the right fit for you in terms of experience and interest.
2. Is the business doing well?
Experienced buyers can sometimes rescue a business that needs investment or restructuring, but in most cases, it is best to buy a business that is doing well.
3. Why is the business for sale?
Owners who are selling up to retire, move away, take on a new challenge, or hand the business over to someone better placed to help it grow, will be happy to tell you about their reasons.
4. What cashflow is needed?
Buying a business needs the cash to make the initial purchase, as well as the cash to see you through the normal cashflow of the business. Spend all your cash on the purchase and you have nothing to support the business whilst you wait for your customers to pay up.
5. Will there be any extra costs?
Make sure you know how much you’ll need to spend to keep the business running. You don’t want to encounter any unexpected costs, such as needing to replace old equipment or write off obsolete stock after you’ve invested in a business.
One of the main advantages is that you won’t have to do everything from scratch. The business will already be up and running, so you can build on existing branding and systems rather than having to set everything up. If the business is in a good position when you buy, you’ll generate profit.
You need to check the business has a healthy customer base. This will mean you should start getting an income immediately to feed cashflow. You can also continue relationships with suppliers, employees, and other key people, which will allow you to focus on running the business rather than having to establish new contacts.
Forecasts are more predictable when the business has been running for a while. You’ll have a better idea of your future income and cash flow, which can make planning and applying for financing a lot easier. You will be able to build on what the previous owner did. Although you can rebrand and change the business, you will need to consider if this will alienate existing customers or be damaging to the brand you’ve bought. So, take your time when introducing changes and communicate them well.
The best way to decide what franchise to buy will depend on your hopes for the business, whether there are any suitable businesses for sale, and which option appeals more for you. If you want to run a business without struggling through the difficult start-up years, it’s best to buy an existing franchise business.
The COVID-19 pandemic has been a huge challenge for many sectors and the continuing uncertainty could be particularly damaging for new businesses. Investing in a franchise business that has a stable income could be a better opinion at this time.
