For most of my clients, life is in transition. Some are closing in on retirement. Some have topped out in their current careers or companies but want to keep growing professionally. Others have been displaced by a younger generation of executives, or expect displacement to happen soon. Still others are ready to work for their own bottom line, instead of a company’s. Franchising makes an ideal next act for these situations, but success depends on finding the right franchise fit. How do you find the right fit? It depends on a variety of factors, one of which is financial horizon.
The Right Franchise for a Short Financial Horizon
Some of my clients have a short financial horizon. They intend to live off the income from their franchise right away. This is most often true of my younger clients who haven’t yet saved enough for retirement. However, I also have short-horizon older clients who don’t want to spend down their nest eggs right away.
If you need a franchise that will pay an income quickly, look for an option with relatively low startup costs, low risk, and a shorter time to profitability. (The Franchise Disclosure Document should provide related details.) Just keep in mind that you’ll still need a way to pay your bills until you reach profitability. Also, don’t expect to fully replace an executive salary right away.
Franchise types with relatively low risk, low startup costs, and faster time to profitability usually include:
- Single-unit franchises
- Home-based franchises
- Regional or local franchise brands
- Franchises in low-regulation industries and those with no specialized certification requirements
- Franchises that provide essential services
- Recurring revenue/repeat customer franchise models
The Right Franchise for a Medium Financial Horizon
Some of my clients have a medium financial horizon. They intend to live off their franchise income, but they can wait several years to do it. Or they intend to use their franchise income to supplement retirement savings. This kind of horizon sometimes comes from having substantial savings. Sometimes, it comes from planning to operate a franchise as a side hustle for the first several years.
If this is your situation, you can afford to consider franchises with larger startup costs, higher risk, and/or a longer time to profitability. Any of the franchise types that work for a short horizon will probably also work for you. Some additional options to consider:
- Multi-unit franchises with no development responsibilities
- Brick-and-mortar, service-based franchises that don’t require specialized real estate or heavy equipment
- Smaller national brands
- Franchises that provide luxury services
The Right Franchise for a Long Financial Horizon
Finally, some of my clients have a long financial horizon. They don’t need to draw on their franchise income for 7-10 years, or they see franchising primarily as a wealth-building tool. Clients in this situation usually have ample retirement savings and don’t intend to live off their franchise income. Instead, they view franchising as a way to keep themselves busy in retirement, accomplish a particular lifestyle goal (e.g., the purchase of a second home), or support their financial legacy.
When you have a long horizon, you have the greatest flexibility in choosing a franchise. As long as you have the available funds, you can afford to make a heavy up-front investment in return for a larger payoff down the line. Options available to you include:
- Area development
- Large national brands
- Brick-and-mortar franchises, including those that require specialized facilities or heavy equipment (e.g., food service or auto repair)
- Franchises that provide specialized services, including those that require certification or regulatory compliance (e.g., home health care or tutoring)
Transitions can be tough. It’s almost never easy to go from one stage of life to another, even if you plan the transition and view it as a positive event. Hopefully, this week’s post has helped you see that franchising can be a useful answer to life’s transitions, regardless of your financial horizon.
As a former corporate executive who transitioned to small-business leadership, then franchise ownership, then consulting, I can relate. I’d love to help you work through the best solution to your own transition–book a call with me today to start the process!
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