Turn Your Experience Into A Business
Daniel Cloete from Westpac discusses how to use your management experience to good effect in choosing a franchise
Covid-19 was a game-changer for many people. Corporates restructured, whole industries shut down, digital technology fast-forwarded five years and ‘pivoting’ became the in-word of the year. Sadly, it meant many talented and experienced managers faced an enforced – and unexpected – change of direction.
At the same time, the enforced lockdown of April 2020 revealed an image of a different world: a world without commuting, of working from home, of being around family more, and of controlling your own schedule to a greater degree than many people had ever experienced. As the statistics from the Franchise New Zealand website show, it led to increased interest in owning your own business.
Is it really a good time to start or buy a business? Well, the economy is doing better than predicted; while some industries have been badly hit, others are doing well; the high value of property means that many people have more equity available than they might have expected; and interest rates are at a record low. Choose wisely, do proper due diligence and use your talents to run the business well, and now could be a good time to make the move – and even to make a fresh start in the regions where the lifestyle is better, the traffic lighter and the property prices more affordable.
Good managers are experienced and capable people who can do well in a structured business model like a franchise. Not everyone is suited for going into business, but many of the skills people have acquired in their previous careers can be converted to good use in tried and tested franchise businesses, where such experience can prove invaluable.
Franchising offers a range of opportunities to suit the management abilities and financial means of most people. As well as different levels of investment, they also suit different lifestyle requirements, so it’s worth looking at some key considerations.
Funding options:- Franchises offer several well-known advantages: proven business model, joint purchasing power, branding, training and support, and so on. For new entrants requiring finance, though, one of the most important benefits is that as part of a well-known and successful brand, you may be able to get funding against the business and cash flow for a large part of the investment.
Franchisor businesses:- Over the past few years, there’s been a big increase in the number of franchise brands in the market. Some have been developed from existing successful businesses, some have been taken over by new owners, and some have been introduced from overseas under master licence agreements. Owning and managing a whole franchise network requires a significant skill set and, usually, substantial financial backing. Sometimes, it’s important to have experience in a specific sector. If successful, a franchise can grow into a very large business in short order.
Large franchises and multi-unit operation:- Some franchises are larger than others. For something like Mitre 10 MEGA, Pak’n’Save or New World, the investment can be substantial. The same applies for multi-unit operations in franchise systems like McDonald’s and Subway. In general, most such franchisees start with smaller or single outlets within the same group and grow the business over time. If you have the desire and ability to build such an operation, this is a realistic option, but it’s also worth noting that some great opportunities also exist as current owners retire. Franchisors will be keen to talk to experienced people who will bring new energy to the brand.
Investment-type franchises:- There is probably no such thing as a franchise business that can run successfully without the direct involvement of its owners. Having said that, some recurring income models may need less day-to-day input from the owner once fully established. Those types of franchise are often more capital intensive; examples would include equipment hire businesses or cabin rental, laundromats or serviced apartments.
Service franchises:- The skill-set you have developed as a professional – whether contractor, builder, marketing manager or accountant – would allow you to join a number of franchise systems while still having the brand, marketing and training benefits you would normally find in the corporate environment. This could be a lot less risky than trying to go it alone as a consultant in your old industry, no matter how experienced you are. In many cases, a relatively low up-front investment is required with the potential of high returns.
Interest/hobby franchises:- If you have a particular hobby outside the office, such as photography, renovation, gardening or drones, could you turn this into your business by joining a franchise? I know of a number of bankers and accountants who took up franchises in their specific field of interest and were much more fulfilled as a result.
The funding advantage
Franchisors generally welcome applications from potential franchisees with a corporate background. They have developed skills, valuable experience and often have the necessary access to capital in the form of super or redundancy pay-outs, or equity in property.
In turn, a specialist franchise banker will welcome such people and be able to support their investment in proven franchise systems with lending, transactional and personal banking solutions which are tailored for the specific industry and brand.
Combining customers who have experience and substance with a proven franchise system also means that a bank which understands the key performance indicators of the brand would be much more likely to provide additional funding. This not only means you require less equity, but could also enable you to afford a much larger business than when setting up an independent in the same industry – something that may require 100 percent security. It’s therefore worth talking to a specialist franchise banker and accountant about the possibilities.
People who come from corporate backgrounds often make good franchisees. They know how to work with established systems, have experience which is relevant and transferrable, and they like structures that are proven. A good franchise system provides the support structures lacking in independent small businesses, such as management information systems. This is also helpful because banks like getting timely, good quality financial information, making getting funding a lot easier.
A word of warning for those changing careers after restructuring or resettlement, though. We sometimes find that when people have had a large pay-out, for whatever reason, they tend to spend it on the first good idea that comes around – whether it isthe right fit for them or not. If you like the industry and the business concept, then, take your time to research it thoroughly. Get information from the franchise itself, do proper due diligence and talk to other franchisees.
Finally, be prepared to pay for advisors like specialist franchise accountants and lawyers that know the sector. Approach it like the professional you are if you want to make sure you are investing in a successful, profitable concept.
About the Author
Daniel Cloete is the National Franchising Manager for Westpac. For more information, contact your local Westpac Franchise and Business Banking Specialist on 0800 177 007 or email: firstname.lastname@example.org
The information contained in this article is intended as a guide only and is not intended as an exhaustive list of matters to be considered. Persons entering into franchise agreements should seek their own professional legal, accounting and other advice.