Twenty Thoughts on Creating New Business Success - For Pioneering Entrepreneurs

Several months back I had a client ask me how it was that I had come to the conclusion that I was suited for this multi-faceted profession that I have concocted for myself. I told them I wish I had created a more point-to-point process or that someone had been able to show it to me. Along the way however the ability to help others evaluate self and their life decisions has become my passion.  As a Life Purpose Coach and Small Business Consultant I get to help people understand their lives more thoroughly and hopefully bring them more peace and, well, purpose.

Their second question had to do with business. They had an idea. They wanted to explore it with me in an ordered fashion and asked me what they might ask themselves before they presented it to me. With a lot of thought and reading I came up with these things. I hope you find them useful to you as well.

1.What is your value proposition? What makes what you have useful? For Americans you must state it in an easily grasped way in 2 sentences or less. If you can’t do that it is not valuable enough to attempt to sell. Period.

2.Do you easily know what your market is and is that market viable? Seinfeld’s Kramer was convinced that the Mansierre (a bra for men) was his ticket to riches. Not that he did any research to confirm that there was a viable market, let alone one large enough to attract investment capital. Never assume you can create demand where it hasn't already been expressed. Don't hawk the next Mansierre.

3.Can you differentiate your product or service from others like or similar to it? It’s true that Starbucks made people believe they wanted $4 caffeinated concoctions, and Louis Vuitton lulled people into shelling out $1,500 for denim handbags. But marketing alone won't cut it. If you want to win in business, you need to deliver tangible value where other companies don't. Examples: rock-bottom prices (Wal-Mart); ingenious product design (Apple); extreme convenience (FedEx). Find your edge and hammer on it.

4.Does your product or service scale? At the production level, the difference between success and failure is scalability. The difference between modest wealth and obscene riches is "breath and depth of scale." Scalable propositions can produce the next widget at a fraction of the cost. Think software: Once Microsoft shelled out to develop the code for its Windows operating system, the incremental cost of printing each additional copy was next to nothing. Even more so, the cost of downloading it was even a fraction of that! What models don't scale? Think service businesses, (unless it is the business model itself that you are selling) where the need for human resources grows with revenue and the consumables all but remain flat.

5.How committed are you to the success of your proposition? You have a family and two kids. Are you ready to burn 100 hours a week for the next two years to get your start-up off the ground? Fair warning: If you want to run the show, get ready to give everything…and then some.

6.Can you drive your success through your current strengths? As companies, Google writes powerful search algorithms; Steinway works wonders with wood; Cisco sniffs out promising new technologies and buys them. Figure out what you're good at and stick to. Learn to understand, use your mind and all available tools to deeply discern your skills, talents, gifts and passions in order to create a way to develop your life success.  It is imperative that you invest as much time and more capital (I suspect) in this one component than virtually any other if you have not already done so.  There is no success without this step when you are building your life propositions.  This might be an obvious concept, perhaps, but plenty of zealous entrepreneurs lose their way…especially when the world seems so full of possibilities and all that they have and are can go off in so many directions.

7.What are the distractions and weaknesses that I possess and must overcome to drive my value proposition? Now, what you do well is imperative. The honesty to admit and the time it takes to understand what you are not suited to do is as well absolutely necessary to embrace. Example: Apple (at this point anyway) doesn't make the cameras in its iPhone; it buys them from somebody else. Countless online merchants farm out the design of their websites and back-office payment systems. Wasting resources just to be mediocre is suicide: Stick to what you know and find trusted partners to handle the rest. Remember, inasmuch as you can avoid, do not be pennywise and pound-foolish.

8.What is the value your potential market is willing to pay? Why will people pay twice as much for Clorox as they will for generic bleach? Who knows, but nailing the upper limits of what customers will pay, be it for an iPhone or a bottle of bleach, is one of the biggest levers in any business model. Consultants get paid handsomely to help companies arrive at the right price. For more affordable advice, check out. There are plenty of resources from professionals online willing to provide the help you need in order to decide not just what they will pay but how they will pay and how you might position your pricing and methods to maximize your sales/revenues.

9.What is the strength of the market you are aiming at? A better way to say this is how might you diversify your sales and improve your distribution to minimize the markets hold on you? All to often a business distribution process plays directly into the hands of the customer; allowing them to control the value proposition and pricing. Occasionally we have seen this played out in a big way such as the-.99-cent value menus at fast food restaurants where franchisees make minimal profits and often lose money on every transaction. (And no, they don’t make it up in volume!)

10.How much power does your raw materials suppliers have? While we are looking at all of the players in your stage let’s take a look at your suppliers also. Or, how much financial sway does your employee base hold over you? The fewer number of suppliers and partners in your business proposition, the more sway they have. Creating amazing teakwood backs for acoustic guitars; one of a kind pieces may sound even romantic to those of us who play find instruments but if there is only one supplier of your wood it is going to be a costly proposition. Can you charge what you pay and make it up? The true answer: You're going to pay through the proverbial nose and your margins will be reduced. (On the flipside, beware getting hooked on hungry, low-cost providers who don't keep an eye on quality.)

11.What are your best methods of product/service distribution? Dell Computer bypassed retailers and sold directly to customers. The supposed secret was the build quality. Because it was supposed to be better they could do this with limited tech support. General Motors and Coca Cola rely on distributors to move their cars and cans. Clothing companies like Hugo Boss work both internal and external distribution channels. And Apple keeps adding more of its own airy and fashionable mall spots complete with live product tutorials and a plethora of geeky customer-service agents. Whatever sales method you choose, make sure it aligns with your overall business strategy. In the case of Apple, or products that also have a sense of their own culture match the distribution experience to the company view understood by your market.

12.What are the most effective marketing methods I can use to create awareness of my value proposition? Getting the word out about your company and without going broke is no mean feat. In the mid '90s, America Online (AOL) spent so much money flooding the planet with free trial software that it tried to mask the bleeding by capitalizing those expenses on its balance sheet. (Regulators later nixed that accounting treatment, wiping out millions in accounting profits.)  Again, I say turn to the experts in your field or fields similar to yours and get a sense of their take before launching an expensive but perhaps thin or ill-positioned marketing strategy or campaign.

13.What is the threat of competition? Where will it come from? What will it look like? Is there room for two in the marketspace? In America today everyone thinks the slightest change makes a niché and therefore is justified. Every small-town retailer lived in fear of the day Wal-Mart set their sites on their little burg. Think through what you are creating. Think deeply about it as well. If not a direct competitor is a possible replacement technology possible. Construct barriers to entry. How you might do that is too expansive to list but often they are things like high quality, long term leases or raw materials agreements and other times it is patents, copyrights and registrations. You may even use the approvals of associations and organizations with which you have a symbiotic relationship. In this case think ATT and Apple in regard to the iPhone.

14.How do you protect your intellectual property? I am a franchise consultant. Franchise organizations partner with individuals and companies and right tight agreements in order to infiltrate markets and manage relationships. They also represent not only a method of distribution (Franchising is not a business model. It is a method of distribution of products and services) they also represent a method of open protection of systems, products, marks, brands and business development.

15.How much start up capital will it require? Any early-stage investor or small business consultant will tell you that most businesses fail because they were undercapitalized. Again, I think that is too thin. It has become a cliché. Often the money is thin because the marketing was sloppy. The target was not truly understood. The developers were not prepared to go to market. While there are no absolute rules here, "you probably want to double your initial estimate," says Jim Pack, chief executive of Curve Dental, an Orem, Utah, and maker of dental office software. I’m not sure why Jim says that but if you were new to market (i.e. you are not a franchisee going into business but truly an innovator; an entrepreneur) I would take old Jimbo’s advice. Having done this a few times myself it sounds about right.

16.How will you finance the Business? You have a few choices, including Aunt Sally, credit cards (dangerous), angel investors, venture capital (if you're really onto something big), bank loans (good luck finding them) and the most expensive route, equity. Beware, though: Selling shares to the public comes with a host of headaches, including dilution of ownership, loss of control and regulatory hurdles. Bottom line: Bootstrap (pay for it as you build the dream) the business if you can. Finally, always remember to match the timing of cash inflows from your assets and the outflows to cover liabilities. A mismatch can sting. Having to pay interest on money that is sitting – not good. Obviously, not having it when you need it represents its own challenges.

17.How much cash do I personally need to survive my start-up? For those who slept through the previous note (or ignored it): Again, mind your cash. This goes for your personal monies as well. Plenty of entrepreneurs boast hockey-stick-shaped financial projections (err…yes right now we are waaaaay down here but because of some act of incredible brilliance on our part tomorrow we’ll be billionaires!) but turn out their pockets before the good times have a chance to kick in. (Remember all those busted dot-com companies from the tech boom?) Hold back on the Aeron chairs and mongo Mac computers (I love mongo Macs) until more cash is flowing in than out and then add plenty of extra cushion.

18. Create Financial Projections based on the best practices for your kind of business and be conservative in your revenue production. You can't lead if you don't have a destination. Two critical milestones: 1) the point where more cash is coming into the business than going out in a given period (i.e. breakeven), and 2) the point at which you finally recuperate your cumulative initial investment (including an adjustment for the time value of money – this is Return on Investment or ROI). Financial projections should be reasonable. Paint too rosy a picture and seasoned investors will run; more to the point, you might run out of cash without the investors you need.

19. How will you keep the “Team” happy? Too often we have seen young businesses struggle because important cogs in the initial success bolt. Have a plan in place to keep the help happy. More to the point understand your help. Assess them. There are some great tools so you might understand each individual and how they view their value. You’ll be surprised though money is important, it isn’t the only thing. How they view your understanding of them is just as important. Do they get a sense of your caring and concern for them? I’m just sayin’…

20.And in the end what do you want it to look like? Looking to flip your business to the first guerrilla (big player) that comes along? MySpace did just that. While Facebook hasn't. Different end games require different strategies. Always be mindful of yours. Although on day one you don’t need to have this pinned down I would suggest you evaluate yourself as you go through your business development. It will help you save money along the way and maximize your future under any circumstance.

John is a 28-year professional in the franchise industry. He has been a franchisee, a franchise executive and an advocate/consultant to the public and to dozens of franchise companies. He is the founder and managing partner of Wilson Associates and can be reached at docfranchise@gmail.com. Or direct office 480.838.1641

Franchise Sales People Stop Being The Problem

A very well meaning Director of Franchise Sales and a counterpart on the Internet attempting to draw advertising and leads for them just wrote about their "risk resistant" business.

Rubbish (And, if you want a great recession resistant company get back to me...it has something to do with Rubbish!)

I think we are all using the same vocabulary (we all use the word "risk") but different dictionaries. (I love the concept talked about, Spring Green, for the right market and the right candidate...but not just any candidate with the hope of "risk-resistantance".)

Look, if you are employed in America today you are at risk. Period. The risk is greater in your current job situation than it is in business ownership; generally speaking.

There are factors that temper that statement however. For instance, I am a firm believer that there are business types for personality types. Further, I also am a firm believer that certain people simply need certain aptitudes and have certain personal drivers that would ignite their desire to succeed. They fall flat in one type of business and they are amazing in others. Other factors such as how much investment am I willing to risk and will my wife let me also come into play. (Or, if she will let does she really understand she SHOULD let me?)

People continually define risk when they mean ambiguity. A job provides a false sense of security because we still hold onto the notion that if we know a thing well enough it means we can maintain what we are comfortable doing that relates to the thing...as in, "I know this job inside and out and ergo I will continue to be compensated to do it."

Everything in our society screams otherwise but some misplaced sense of control of ones career appears to be written into our DNA. It's a bad script.

It has been demonstrated, more so over the last decade, that your competency may be the least significant reason you have security in your employment. Their are other forces at work and you have no control over them within your organization. The current state of the economy may be to blame or they may have been their for years and you just were not aware.

You stay employed, your increased risk is a virtual certainty.

"Frantrepreneurs" on the other hand live with a very keen sense of the fundamental risks they will face. They understand them and they realize they have greater control relating to them. They just have more ambiguity in relation to how they operate their enterprise and how they decide to handle their challenges. They know the risks (market conditions - financial conditions - human resource scenarios) but must enforce a disciplined code of creative action and a greater sense of intellectual community in order to respond to their more finite inventory of risks.

Sorry for the long diatribe. I think it's time that professionals in our arena recognize the real battles we are fighting and that potential franchise prospects and candidates realize their next job is a much more fearful place than owning a franchise.

The saddest part of this stage however is that so very few should ever move from employee to business owner...but that is another topic.

John is a 26-year professional in the franchise industry. He has been a franchisee, a franchise executive and an advocate/consultant to the public and to dozens of franchise companies. He is the founder and managing partner of Wilson Associates. If you are looking for support and a proven consultant with expertise he can be reached at docfranchise@gmail.com.

Creating Customer Who Love You

Often new business owners get so stuck on the elements that get the doors open and the GO (Grand Opening) marketing off the ground they forget the most important thing...

well...

Let me put it differently...they don't forget the customer they just forget how to set the table to create a relationship with them. The simplest way to create customers for awhile (we will get to customers for life later) is to make sure you appear to love what they love and care for what they care for...both within the doors of your business and outside of those doors.

To that end I would suggest four things to do in your strategic investment, your business, regardless of whether you are a franchise or other small business entity. If you are a franchise however you will really win because franchises are notorious for believing they are immune from these things.

Here they are:

So here are 4 things that entrepreneurs need to do more of right now!

[a] Give - as in determine how you can give in the area you distribute your goods and services. Often it means something as simple as providing knowledge and at least some of your time. This giving should start with your first line of customer your employees, (who may be worried about the company, their own jobs). They may be unclear how best to contribute.

Share your training with peers in your trade organizations, with customers and prospects - use blogs, newsletters or local opportunities to speak. You will realize that you are valued just for these actions. Giving is not only psychically fulfilling but is an investment in your own future that makes just plain good business. And on any given day, giving need not take more time than a longish lunch break!

[b] Reach out - This goes hand-in-hand with giving. Determine how you will get out in front of your prospects and customers on at least an ever other day basis. This means you—not just your marketing or sales person or team. Your clients and customers value the relationship if for nothing more than to say they know you personally. The silver lining in a downturn is that customers have time to talk. So reach out. You can start by calling on all those folks you haven't connected with in the last year. And remember you are not selling. You are connecting.

[c] Listen - having reached out, it is important to listen. You would be surprised at the insights that arise when we truly listen to our customers. Often customer themselves gain clarity when they talk and so many of our own assumptions get uncovered and prove to be baseless. I cannot tell you the number of customers whose business cards I printed never made the connection we also printed brochures, forms and stationary until we spoke, and I listened and then shared we could handle those tasks also. Having said that remember this also, listening requires both preparation and the ability to ask clarifying questions. As you learn to do both better you will retain higher and higher percentages of your customers.

[d] Simplify - this is a great time to simplify everything about your business and the positions within them. Simplify your products, your collateral, your sales pitch, your internal systems, your website - all of those things that have your signature on them. Make it easier for people to find you, to understand what it is you do, why you do it better and why buying from you and using your products is going to simplify your customers' own life and work. Simple is not easy - simple is hard! So the sooner you start the better.

In a downturn it's easy to batten down the hatches and focus on the numbers - which is important, but we are never going to dig ourselves out of a hole, let alone grow or thrive with just a defensive game. So it is important to stay the course with Giving, Reaching out, Listening & Simplifying (GRLS). While this sounds like a lot of work, it is the stuff that those who survive and thrive do to differentiate themselves from the rest! GRLS require passion, planning and perseverance but also create profits - but after all aren't these the very reasons you got into business in the first place?

John is a 26-year professional in the franchise industry. He has been a franchisee, a franchise executive and an advocate/consultant to the public and to dozens of franchise companies. He is the founder and managing partner of Wilson Associates. If you are looking for support and a proven consultant with expertise he can be reached at docfranchise@gmail.com.

10 Qualities of High Performance Small Biz Owners

1. Internally - Personally and Self-Motivated
Everyone knows that you need motivation and drive to be successful in life. However, when you are running a small business, you will need to be able to not only motivate yourself, but motivate your employees as well. The best small business people realize you are often your highest and best resource. They've embraced and deal with it daily and keep themselves and their team thinking "We can!"

2. Goal Oriented
Successful business owners are always goal oriented - they know what they want to achieve and they have a sense of how long it will take them to get there. Moreover, they have learned that visionaries think critically and create the path...the baby steps and short-term goals to get to the biggies.

3. Personal Management & Prioritization Skills
When you own a small business, time equals money. If you want your business to be a success you will need to understand the concept of "first things first" and,
What do I need to do next in order to ensure the ongoing success of my enterprise?" Having said that, do not take take personal management to mean time management nor either to mean they control time or have priorities you and I would embrace. To the contrary many great small biz whizzes simply have one set of priorities that are wholly self-serving.

4. Fiscal Capability and Allocation Skills
In addition to managing their personal and business priorities, as a small business owner, you also need to be able to properly manage your monetary resources. The best have a timing sense about spending and holding. Oh by the way, if your passion is operations then you better get a great numbers person you can dance with...who will speak so you will be motivated when change is needed!

5. They Take Personal, Physical Care of Themselves
Too many small business owners often forget to take care of their health when things get busy. Poor nutrition can lead to a lack of energy and being susceptible to colds and the flu and being put on the sidelines in an untimely manner.

6. Nimble for The Times They are ALWAYS A'Changin'
Having the ability to adapt to changing market conditions is critical and a habit shared by the small biz whiz community. Products and services are quickly part of the fading landscape of the desires of a fickle market. You must be prepped to read the market and understand where it is planning to go.

7. Step Outside of Their Comfort Zone REGULARLY
Successful business owners need to be confident in taking risks. You have to take risks to reap rewards. This means controlled failure and the best of the best get that.

8. Communication Skills
Being able to communicate well with others is a must. In addition to communicating with your staff and customers, you also need to be able to network with other business owners.

9. An Unusually Wide Range of Interests
In addition to being able to communicate with others, you also need to be able to listen. But beyond that the very best are able to take the analogy of success and failure from a wide range of subject matter and apply it to their situation. The ability to associate truth, market conditions, opportunities and see beyond the narrow scope of ones own workspace is rare and unique and leads to an endless world of business possibilities. No one is ever-right 100% of the time, and there are times that even the most successful business owner will need to heed the advice of others and see things from a completely different perspective.

10. Work Right Not Just More!
If one of the reasons you are going into business is to work less - think again. Similarly, if you think you have to work longer, harder and more often then you are missing the point. The point is to focus attention, time and energy where you maximize your opportunity and create the largest possible audience for your goods and services. Make no mistake the best small business owners are committed to their business and frequently work 60 or even 80-hour weeks. But the key isn't the hours. The key is a concerted effort to do what the business needs you to do and train others to do the rest with the same fervor, intensity and pride you take in your work.

If you are challenged in your current small business give me a call and we can discuss your situation. I would be honored to be of service.

John is a 26-year professional in the franchise industry. He has been a franchisee, a franchise executive and an advocate/consultant to the public and to dozens of franchise companies. He is the founder and managing partner of Wilson Associates and can be reached at dr_franchise@consultant.com

Um, Really? These Are the Investigation Do's and Don'ts?

I just got through reading a ditty from a self-proclaimed franchise expert on the non-official rules and regs you should use to determine what is the right franchise business for you.

Here is the article in its entirety. I did add a few comments in BOLD in the Do NOT section:

Buying a franchise is not a simple process; but, it can be made easier if you follow some basic rules. Here are some things to keep in mind when investigating a franchise opportunity:

DO:
1. Take your time and educate yourself; it can take several months to find the right business. Commit to the process.

2. Know your financial situation (Assets, Liabilities, Net Worth)

3. Consult with a lawyer, accountant and/or franchise consultant

4. Carefully read and understand the FDD and Franchise Agreement

5. Create a Cash Flow statement and a business plan

6. Talk to existing franchisees

7. Compare franchises within the same industry segment

8. Take time to understand all the franchise financing options

9. Negotiate with the franchisor (fees, territory, marketing support, etc.)

10. Go to the Discovery Day

11. Be prepared to make a decision and take charge of you future

Do NOT:
1. Feel like you have to make a rush decision - Yes, you should feel urgency! Read below to know why

2. Load up on loans/debt to buy a business - Duh

3. Ignore the advice of professional advisors - This statement is so general as to be dangerous. Experts one and all, including Uncle Clem, all have an opinion. Have one good expert and an excellent small biz account (see below)

4. Trust everything the franchise sales person tells you - The depths of these statements boggle the mind. Look, if you can't trust the franchise development person then do NOT become a franchisee in the system - PERIOD!

5. Base your decision on the earnings of best performing franchisees Well gee Cosmo...of course you do not base your decision on one component of an entire process. But, let me ask you, isn't it nice to know what the best case scenario is? I mean, you already know intuitively the worst; you could fail and lose your investment (Get drunk, wreck the Maserati, get home and the dog had died and your wife has left you and the kids think you stink).

6. Bypass financial questions during investigation processThis is the best of reasons for a franchise consultant so you know how to craft these questions in order to get answers in an area that the Federal Trade Commission crucifies franchises for saying too much.

7. Cut the due diligence process short

8. Assume that the system will run itself, or that you won't have to be an entrepreneur I think you need to be entrepreneurial (or a FRANtrepreneur) but NOT an entrepreneur. You are not alone out there - besides the franchise company there are other franchisees you will get to know who are right there with you. The amount of time and effort should be understood from discussions with franchisees and a thorough study of their business model.

9. Underestimate the value of a franchise network, support and training The first truly insightful point made - franchises are a family all with the same challenges are opportunity. Don't be lame and sit on the sidelines and pretend you are different. Get in, get involved - get to know your fraternity.

10. Fall into Paralysis by Analysis mode

11. Be disappointed if, in the end, you discover that franchising is not for you.

You will quickly realize that buying a franchise is a deliberate process. If you want to become a business owner, franchising will definitely put some options on your table.

However, stick to the process, gather the information and be prepared to make a decision. In fact, be prepared for anything that can prevent you from making a decision.

Andre Chernih is a franchise expert, editor and manager of the web site http://Franchise-Opportunities-Search.com a collaborative compilation of info, articles, opinions and recommendations created to help aspiring business owners learn about franchising and find the right franchise opportunity.

The article has a certain amount of earthy acuity. Much of it is replicated in 100 books on small business ownership and virtually every word can be discovered in articles about franchising on Entrepreneur Magazine archives over the last three years.

I have my own list. I have limited it to what you should do. Doing less than this and you risk ending up never owning a business (because you never feel comfortable enough to be decisive enough to make the decision) or you end up where you should never have been in the first place, misfit in a poor choice (and most likely not manning up to the fact you are a big 'ol giant screw up for having chosen to sign up!) Here is the Wilson list.

1. Take a professional personal assessment evaluations to determine if you are made of the stuff that successful small business owners possess. The DISC, McQuaig Assessment or Meyers-Briggs Personality Tool...any and all of them will do the trick provided you have someone capable helping you understand them. I can tell you that those with strong leadership skills and high levels of sociability are the best material. Those who have learned they have weaknesses in one of those areas can work to and achieve the needed skills. You can't expect success without one or the other.

2. Having discovered you are a candidate to be a business owner generally, look in the mirror, go through all the iterations as to why this is a good or bad idea and decide you are moving forward; a job is not an option this is your decision.

3. Get every person who, in your moments of greatest clarity and honesty you know, beyond a doubt influences you to recognize you have made this decision.

4. Those that are significant others should be a part of the decision-making process to buy into your decision on the front end. They should do everything you do to prepare for this adventure.

5. Armed with an understanding of your personal make-up, evaluate you and all other stakeholder preferences to determine your personal drivers, those that are primary and those that are secondary in this decision. And no, these success drivers are not the same for everyone. Some people are driven by their passions. Some find security (and even enjoyment) working from their competencies and still others need constant change. Some people are energized by human contact and still others are drained in an environment where they have constant human contact. Will it be the industry that entices you or the earnings potential? Will you be motivated by a new concept that provides huge growth potential or the safety of a tried and true brand? Are you a security freak or an adventurer and what about your partner or wife?

6. Armed with determination, personal knowledge and a set of criteria your right fit business must meet, you must next assess your financial situation. You may be perfect for a whole range of opportunities from a psycho-socio perspective but which ones fit both A) Your Wallet and B) Your level of financial risk?

7. Now find a competent personal franchise consultant. If you do not know one call me, I know the right ones.

8. Once the franchise options are in front of you, it will take you 3-6 weeks to make a decision. If it takes you longer you are not, at present, franchisee material. Period! It may not be your fault but you weren't serious. You are not prepared. I say this because within 3-4 weeks (and sometimes life gets in the way and extends it beyond a week or two) you will know 85% of the decision-making information you should be using in order to make an pseudo-objective (I mean you have to want to do it and that is subjective) decision. The other 15% is fluid information. Hey! Remember, this isn't death and taxes. Risks do exist.

9. At week 2 you will know "the one." Get with an accountant, build a cash flow chart.

10. Consult with 4 or 5 successful franchisees and 2 or 3 failures or those who are struggling. Again, your consultant as well as the first franchisee you talk to, will be able to direct you. Ask them all the same series of questions. Have your consultant help you craft this list. Go back and ask the successful franchisee's their take on those that are challenged. Then look in the mirror again and ask yourself. Can I overcome the challenges of this business? Am I more like the successes or the failures - be honest for crying out loud - this is a big decision.

11. Don't expect to be able to negotiate changes to the franchise agreement. Most stand-up franchises will take a "here I stand" even-handed approach to the business. Territory and perhaps marketing support are two areas where they may be special assistance. This is an area a good consultant can provide you with guidance. Just remember, if you are dealing with the top 1000 franchises in the USA they have too much at stake to have new members of the choir singing off key. Their job was to create the circumstances for your success; these include the terms of your franchise agreement.

12. Go Through the End Process with the final franchise choice (make sure they are as excited about you as you are nervous yet excited about your decision).

10 Small Biz Mistakes that Lead to Failure

When I started to pen this thought piece I did so in considering small business in general. I’m going to keep that theme in part but I am also going to add to each challenge point, 1 through 10, at least a simple reason why franchising can provide some level of solution and security from the aforementioned mistake.

These mistakes are not the top 10, the only 10, the best 10 the researched and validated 10 or anything else of a kind. They represent the ones I have had to deal with most in my life, with my friends whom are mostly small business men and women and my clients who are mostly small business developers called franchisers. They do represent over two thousand business owners and I would guess this is a good top 10 list (I am probably right 7 or 8 out of 10 anyway) but I am not going to “shine you on” by telling you they are the result of my “extensive research.” They do represent what I feel. I’m pretty good at this stuff though but some of you have your favorites. Feel free to add them to the mix.

I hope you find this useful… - John

1. Insufficient Working Capital

The most common reason why new businesses shut down is that the owner get his business up and running but completely misses that he will need some start-up capital (and often this is not a small amount) to fun his business until it becomes self-sufficient and can pay its own way.

Cash flow is critical to a startup business. You could be profitable and still have to close your doors because your customers are taking too long to pay you or, you are generating revenues but your bills are coming in on the front end more quickly than full payment is being generated to you. Liquidity is king in a startup venture. Know what your business needs to survive start-up.


Franchise Solution: Most franchises and certainly the top 500 in the United States, require that you have sufficient start-up capital available when you open your doors for business. You don’t have to wonder. You will have it or you will not be granted a franchise license.

2. Winners Stick-to-it Attitude

Starting a business is all about survival. How do you stay around one more day so that you can learn more about your market and close new customers?

At the beginning stages of a business this may mean doing work that might not be completely what you want to do but it helps pay the bills. You need to do whatever it takes to survive and get through until the business can fully support yourself.

Franchise Solution: A franchise company has gone through these iterations and virtually all of them have operating units that have gone through the myriad of challenges that face a new business. You have both the company and a fraternity of franchisees to rely on to help you stay the course and recognize the next action you need to take to open the door tomorrow.

3. Death of Your Vision

There is a sort of mystic fog that exists to those who make it past the anxiety of changing their work path and become business owners. They make the decision to become entrepreneurs, they start the business, they work and slave and get the permits and licenses and build whatever needs to be built (websites, walls, displays, computer networks, etc.) and even begin to make customer contact. But then something happens. The result is energy level drops, activity levels fall to dangerous levels and if they don’t completely check out they at least do so mentally.

They quit.

Building a business is all about momentum. If you had 24 hours to spend on a business they would be put to far better use by spending one hour a day than for 24 hours straight.

It takes time to develop a new company and for people to react to what you provide. Keep your momentum building. Even if your business is only a part time initiative for you at the moment, make sure that every day you are making progress of some sort to move your company forward.

Franchise Solution: A franchise company helps provide you with a business plan and marketing strategy for your first quarter, 6 months, and year and beyond. You have an activity chart. You can evaluate what you are doing against a very specific set of actions and responses.

Further, operational support is there on a regular basis to ensure you are keeping an eye on key indicators. They let you know what is lacking. Is there an area where additional training or marketing needs to be added? A franchise company has a vested interest in your success and one way they demonstrate this is to let you know you are slipping and need to pick up the pace!

4. I am a Rock – I am an Island

Business ownership is not an exercise in self-sufficiency. It is not you being “bossless” or mentorless. Nobody is perfect or has the skills to do everything themselves. You need to understand what it is that you bring to the table and what you need to surround yourself with. You need to resource against your weaknesses. If, for example, you are very strong at statistical analysis but don’t have strong customer service skills then you need to find a strong frontline employee who enjoys client contact.

I want you to understand you need to learn and be willing to do anything to keep going. However, you won’t create high levels of success by forcing yourself to do things that you don’t enjoy and in which you lack core competencies. Know where you stand and what value you can offer. Take a Meyers-Briggs or DISC evaluation if you never have. When you surround yourself with others that complement your skills, you will have more fun and demonstrate to your stakeholders you recognize what is needed to create a world-class business unit.

Franchise Solution: I won’t draw this one out because if you have studied franchising you’ve seen this in type before: Franchising is about being in business for yourself but not by yourself. People, in part typically become franchisees because they realize their inadequacies (and they want to blame someone else when they fail! – No, just kidding). You get into a franchise system to take advantage of the collective

5. Are You Sure You Want to Hire Uncle Rupert?

Never hire from convenience or nepotism. Focus on tasks the CEO should accomplish. Think of yourself that way. Think what will best serve your customer in the long run. Why are you doing work huddled in the back office when you should be out meeting clients, generating PR buzz, and increasing the reach of your networking efforts?

Franchise Solution: A franchise plan will focus on the varying skill set iterations of their successful franchisees and how they interact with the business in advance of your engaging in the business to determine if you fit that model. This may affect working capital needs as well but they will be able to provide you a more precise human resource needs assessment than you might generate as a lone entrepreneur.

6. It’s About the Big Bucks

There are many who tell you to follow a passion. Many of us to be fair do not have passions affiliated with work. You need to enjoy the work. You need to gain great satisfaction from a job well done. But creating money as a goal or as your driving force is like the tender of an apple orchard who constantly picks apples because they are what he sells in order to create a living but who never tends to the soil or the trees themselves.

Ensure you select a business where you gain personal satisfaction by the process; by servicing the client and their needs and by your ability as “CEO” in developing your people, your team.

Franchise Solution: The great franchises have a process to determine if what they do as a business matches your expectations, personal drivers, abilities and investment capabilities. Your honesty in divulging what it is you hope to accomplish and their honesty in presenting their business case ensures to a very high level, that you get into the business that meets both the companies and your criteria.

7. I think I can…er, maybe not

Goal one, yes job one is for the entrepreneur to make it to the end of their first year. Many of them do not. And, we’ve covered some of this already. Many start a business on an impulse and got excited about a perceived opportunity but didn’t do the proper research. These entrepreneurs become disillusioned. Without a backup strategy or the ability to change course or raise additional capital they fold in a matter of months.

The second year can be just as challenging and the goal is that a business really begins to come into its own and hit the stride through 36 months of continual operations. Think of year one as your freshman year in high school; it was exciting and frightening You’re high on energy and ready to take on the world. In year two, your sophomore season, you have learned the lay of the land but may or may not have had the kind of impact (especially financially) you desire. The startup excitement has faded but you are move even. If not, you are part of the second wave of failures. You’ll need to work your way through the downturn and know that the money is coming if you keep at it.

Franchise Solution: A franchise company will have continued to press you right through years one and two in areas of improvement. You will have gained mentors within the family of franchisees. In many cases you will find a colleague in another unit and you will challenge one another. In addition, ongoing or advanced training, webinar events and perhaps a national convention will be in the cards; all of which will provide you with the momentum to carry forward.

8. And Great Was The Fall…

The best way to make a lot of money quickly is to find a customer who has a problem and is willing to pay you to solve it - and then you go out and build the solution. Entrepreneurs who build a business on a customer or on a sliver market component (i.e. the lunch crowd in an industrial park that is controlled by just one company…oh, say, Motorola!) often find themselves calling the printer and instructing him what to put on the “Business Closing for Good!” signs.

Make sure you have a plan if you plan on being a niche business. But this isn’t the only challenge that fits into this category.

The companies with the highest failure rates are restaurants because they are usually built around an owner’s personal tastes. Meanwhile, the entrepreneurs with the lowest failure rates are medical professionals, lawyers and accountants because they are based around a service that we all need (whether we like it or not!) Talk to potential customers, see what they are interested in, identify who has money and what their pains are and then create your product/service.

Franchise Solution: A franchise business model, virtually by definition is replicable in significant marketplaces. They focus on a series of capabilities that fit into a general category that the general populous or the whole of a niche has need of what they provide. It’s simple enough to investigate to determine the components that lead to their success and what it is you would want to avoid. As a matter of course the franchise company will understand the pitfalls and provide navigation around the slippery slopes. That is, provided you are teachable. The key to disaster avoidance is sensitivity to those who’ve traveled the path previously.
Franchising is nothing if it does not help you pilot past the shoals and the reefs of disaster.

9. I’ll Just Read About it…

The Internet has created a generation of nimrods. Pseudo-geeks who believe that if they can just Google it they can learn the entire story; the ins and the outs, the ups and downs and all the juicy insider tidbits.

A great way to get a business going is to find out what other people have done to achieve success and implement those strategies into your own company. This has to be more than just reading about it. We all need to find mentors who have knowledge of our industry and who will give you time out of their day to provide instruction and guidance.

You could set up a formal board of advisers and compensate people for their time but if you’re a startup you can play on the fact that most entrepreneurs are willing to help out a fellow business owner as a way to give back. If you show genuine appreciation and approach the right people, the advice you get will help make or break your company.

Franchise Solution: Uh…this is self-evident. However, let me just say it. A franchise company IS a mentor. They provide the organized development of your business. They start at what you need to do on day one and take you through what you will do when you elect to exit the business. You will receive training, a business system, a marketing strategy, a back end or back office administrative system to analyze data, create reports and evaluate progress and in all sincerity that is usually just the beginning.

10. What the World Needs Now…(er…Come Together…Um, I am NOT a Rock nor an Island?)

My experience is that the person who will not seek out help will also not seek out how to create other important relationships. As it relates to your stakeholders this would mean your involvement in the community that embraces your customers and potential customers.

Connecting with other young entrepreneurs and finding out what they are up to (and how you can help generate countless opportunities) is a great tie-in to your community. Discovering and involving yourself in the areas of service that your clients have interest and passion should truly be a no-brainer. You will get new business opportunities, partners, investment, media attention, ideas for productive tools to use, advice for your company, and many other resources that otherwise would take you years of trial and error to figure out (if you ever do at all).

Franchise Solution: Most every significant franchise I have ever had the pleasure of serving (roughly most the top 200 and another 100 or so in the top 1000) has a strategy these days that recognizes the value of the community the franchisee serves as an integral part of their marketing. Even in franchises where the franchisee works on the business and not in it or is involved part-time, they are taught to focus their efforts on visibility within their service market.

LOCATION LOCATION LOCATION? Not So Much...

Franchise location, when considering retail and location driven franchise businesses are always a hot topic. Many papers written on the subject drive the subject as if it is the major component of success in the concept. Recently a Wall Street Journal article suggested the homogenizing of American business simply relegated where a business located to a secondary value. The reason? You can now go virtually anywhere and get anything. That would be accurate for most everything we want in our day-to-day lives.

Regardless of what you might have heard to the contrary (or spoken) the same principle holds true in franchising. Industry research suggests that brand positioning, operational and consumer perception factors play a more significant role than location in explaining franchisee success.

Why is location less significant in explaining franchisee success?

Part of the reason is that as our economy has shifted from manufacturing to services, the uniqueness of location has waned. Fifty years ago, most of our gross national product was based upon the manufacturing and agricultural sectors, transportation costs were high, and there were vast regional differences in products and services.

There was a time that if you wanted sourdough bread with your lobster, you had to travel to one of two places in the continental USA, San Francisco and/or Boston. What about today? Now you can enjoy that combination nearly anywhere. In the new economy, services, ideas, and knowledge can be easily transported and replicated, and many regional and local differences no longer exist.

Franchisees and franchisors have certainly benefited from the shift to a service economy with strong distribution channels. The proliferation of services also means that location plays a smaller role in franchisee success. Nearly all products and services can be purchased anywhere.

What is the Practical Application for Prospective Franchise Buyers?

If I were buying a location-based franchise today I would be skeptical of the franchisor whose major selling point is the location of one particular unit or even the organizations ability to select the “home run” sites for future development. If they focus on location we all know how a location can change overnight.

As you search you should focus on operational excellent, the integrity of the franchisor, the uniqueness of the product or service offering and their positioning within their market space and the culture and synergy of the franchisee community. Location has some impact on franchisee success, but fortunately, the impact is significantly less than what most people believe.

Knowing that location has limited impact on franchisee success will save you countless hours of frustration and allow you to focus on those things that really drive success.

What are those things? How about:

1. Your ability to learn and apply management principles appropriate to the system
2. The relationships you develop with the business stakeholders
3. Your involvement in the wider community in which you operate your business

Surprisingly, very few people figure out that franchising success is driven not by the location of the franchise unit, but by the behavior of the franchisee. As part of the ongoing consulting of my company we were working to resell marginal franchisees out of a particular system in Phoenix. Every one of them that wanted out in part blamed location and the company for allowing them to be in their mutually agreed on site. Oddly enough, years later, the new franchisees who were handpicked to take over these "distressed" units are moving right along as a group and growing their business; many of whom were owners previously and took over these “loser stores.”

NOT A LOSER STORE

The franchisees that followed in their footsteps-in the same location—are some of the most successful franchisees in the system, with strong sales growth, low employee turnover and above-average margins. If it were really a "loser location," the argument goes then nobody would be able to turn it around.

THE KICKER

Disillusioned franchisees that believe that their site is the significant driver of success can easily avoid responsibility for the growth and development of their units and instead blame things they cannot control. Stupidity never ran rampant so easily and misery was never able to find more friends. I would advise you to follow three steps to be a successful franchisee.

First, act like a CEO. Regardless of whether or not you are comfortable with the title, if you’re a franchisee, then people who work with you, work for you and purchase from you believe that you’re the CEO.

To be successful as a franchisee you have to develop an executive mindset, one that meshes leadership and learning as the cornerstone. I have personally interviewed executives at some of the best-managed companies in America, and I consistently find that successful senior executives share at least three characteristics in common:

• A scope of personalities, perspectives and reading materials that stretches them outside of their career and market box.
• Strong interpersonal skills that drive them to understand others and create trust.
• A business acumen that drives them to understand all aspects of business success.

Second, develop your social assets. This refers to the relationships you have with others.

Franchisees with the highest levels of social capital have the highest sales. Period.

Success is driven not by the location but by the behavior of the franchisee.

So why doesn’t everyone develop high levels of social capital? Well, it’s tough to find the time to interact with others when you’re running your own business. Also, once you become an expert in something, it’s easy to believe that you won’t learn anything from anyone else and learning is a HUGE part of developing your personal relational assets.

But the most successful franchisees find the time to interact with others, and they develop relationships with at least the four critical constituencies: franchisors, other franchisees, customers and employees.

I have heard numerous unsuccessful franchisees complain, "The franchisor doesn’t understand my local market or know who my customers are." Ok, so teach them about your local market, and while you’re at it, learn something about your franchisor’s business and challenges.

BOOST INTERACTION

Similarly, if you have only limited interactions with the other franchisees in the system, you won’t be able to get support, help and advice from the people who might be able to help you most. By developing strong ties with other franchisees, by sharing your ideas and strategies, you’ll help build a stronger system.

Many unsuccessful franchisees elevate customers to royalty status with common slogans like, "The customer is king!" Customers are important, and you would do well to have strong enough relationships with some of them so that you can learn how your services and products can be improved. There is more to the subject than this glib slogan.

Employees are equally important to your success, and the high-performing franchisees realize this is where you start in the value chain. Employees should be, in your mind as the CEO and business owner, your first level customers. You need to invest in your employees. The best treat their employees well, create clear objectives so they personally can measure their success, provide them with growth opportunities and hold them accountable to high standards they have seen the franchise owner model.

It doesn’t take a genius to know that employee morale has a direct (and positive) influence on customer satisfaction. High customer satisfaction levels impact your future business, can lead to referrals to other potential customers and increase opportunities for additional revenues through otherwise missed opportunities.

It is equally important to have fruitful relationships with employees, since employee development is not a cost of business but an investment in the future growth of your business.

Investing in your social capital and developing relationships with franchisors, franchisees, customers and employees will help elevate your business to one of the very best in any system and, in the long run, boost your bottom line.

Finally, invest in your community. The most successful franchisees in my experience invested in the communities represented by their business scope as well as direct investment into their businesses.

This form of investments means involvement in activities and associations that are not solely self-serving. You certainly may already have certain volunteer, non-profit or community associated activities such as any number of disease oriented causes, food banks, holiday fund and material drives. Your local church may also be very community oriented. The key is to find the soft spots your marketplace has developed and dive in. It doesn’t really matter what you do as long as you make an investment in your customer bases view of “community.”

The franchise trademark alone will not lead to high performance. (We will discuss this soon!) Just as wrong is to believe that location is the most significant factor in franchisee success. The range of franchisee performance in every system varies, and I have yet to hear a franchisor say, 'So-and-so is our highest revenue franchisee because of their location."

A mentor of mine once said, “If we took every franchisee in our 300 unit system and moved them one store number to the right (store owner No. 1 now owns store No. 2 and two owns 3, and so on) we would simply move the results of our revenues geographically not increase them financially.” I believe she was right. The evidence supports that thinking.

Barring acts of God or the governing body of the area you are located, your ability to perform as a franchisee is virtually independent of location. Invest in yourself, your relationships and your community, and then you will be a high performer.

John is a 26-year professional in the franchise industry. Previously he has been a franchisee, a franchise executive and an advocate/consultant to the public. He currently works with and has worked for dozens of franchise companies. He is the founder and managing partner of Wilson Associates and can be reached at dr_franchise@consultant.com

Should I Use A Franchise Consultant to Find a Business

The Value of a Consultant to a Potential Franchise Buyer

In 1980 when I first became a franchisee there were no professional intermediaries to provide guidance to someone entering the world of franchising.

How I wish there had been. Three franchise’s later I would still highly value the service! Not only value them but also recommend them to individuals virtually on a daily basis.

But Why

My work is primarily with franchise companies. Once these franchisers, these companies have developed their concept; put it into a format; created the systems and tracking devices to determine success and positioned themselves in the market their real challenge begins.

Their greatest challenge is finding qualified potential candidates; someone who makes sense for the particular needs of franchise format business. I can tell you this with near certainty if you could line up 100 founders of established and growing franchise systems, any 100 franchise Presidents and CEO’s on any given day, 90 of them would regale you with tale after tale of poorly chosen or nearly disastrous franchisee selections. Many of those choices are my franchise buddies I am sad to say.

From the standpoint of the franchise company they (most often) could only wish to have had a professional providing guidance to their franchisees prior to the person having come onboard as a new franchisee with the company. I can attest to the value personally and from experience.
But what is the value to you; the potential franchise buyer? What does such a service provide?

Settling for Almost

There are many advantages to getting help from a professional who knows the inside workings of an industry or issue. Just having someone who can help interpret the terminology associated with a topic that is new to you can be a tremendous aid. Most people wouldn’t go to court without a lawyer or purchase a home without a realtor. A franchise consultant through the use of sophisticated evaluation tools can assist you to identify franchises most closely aligned with your investment level, skillset, goals, passions and expectations. Again, from personal experience you could spend months (and I’ve known some who searched for years!) evaluating a myriad of opportunities. You could be diligent in your efforts and still miss the best opportunity.

Many make the mistake of thinking the Internet provides solution. Not true. The Internet is a valuable tool for research, but it is limited. If you do not know where to look or if you rely on search engines to produce the results, you will only find the companies that have paid to be listed high in the search rankings. High visibility on the Internet does not correspond to the relative value of a business opportunity nor does it tell you anything about how you match up. Then too there are whole sites given to the detractors of a concept. Honestly, nothing prevents them from running amuck. Due to the immense amount of data that is available on the Internet, it tends to create more questions than answers and it can be a frustrating experience.

There are over 8,000-registered franchise brands and marks (about 3200 of which have more than 5 operating units) and more than twice as many “Business Opportunities” or “Biz Ops” available in the USA. A consultant can help you understand the difference between the types of opportunities so you can determine which format is right for you. Whether it is a franchise or Biz Op, there are many terrific choices and invariably there are many that are otherwise good businesses but a poor choice for you! A competent consultant can help you focus on businesses that have met certain quality standards and help you avoid making a potentially big mistake.

Consultants are rarely limited to a certain company or companies (at least the good ones) and can obtain the sell rights at no additional expense to you. The key is if it meets your profile as well as you matching their qualifications (this is a business relationship and decisions are determined mutually). It is possible that your consultant has pre-evaluated concepts as well that cover a spectrum. The key advantage is that the agreements they do have are with solid, up and coming or established concepts that will meet the requirements of a variety of franchise buyers.

Thinking From Both Sides of the Table

As I previously mentioned, the great challenge for franchise companies is uncovering candidates who will be a good fit for their particular business model. As you can imagine, franchisers get thousands of requests yearly for their information packets, but most of these come from people who are not qualified or not particularly motivated to actually become a part of their organization or any organization. Franchises generally cannot support the amount of staff necessary to do an effective job of bringing in new franchisees. This is why the value of a consultant-referred candidate is so significant. The company is being introduced to a pre-screened individual who meets more than just the financial requirements, is informed about the opportunity and is truly interested in franchise business ownership.

The broker not only is an immense professional, educated resource for the buying public but also to franchise companies. Their professionalism saves the franchiser a great deal of time and money. This allows the consultant to minimally charge or perhaps not charge the candidate a fee at all. The franchise company pays a fee to the consultant if the candidate joins their system as a franchisee. This creates a winning scenario for all parties involved.

In the final analysis, the choice and the responsibility for researching the opportunity are the individuals; they are yours. But as you weigh up business ownership I would recommend you do not leave this stone unturned. I deeply and seriously even request you take advantage of it.
Getting help from a competent consultant is one of the best decisions you can make in your pursuit. They become a neutral, knowledgeable resource you can employ and since the seller (franchise company) pays the fee, the service is free to you.

So, the question becomes: Why would you not use a franchise consultant?

John is a 26-year professional in the franchise industry. He has been a franchisee, a franchise executive and an advocate/consultant to the public and to dozens of franchise companies. He is the founder and managing partner of Wilson Associates and can be reached at dr_franchise@consultant.com