How to Make Your Income Goals a Reality
One of your questions before owning a franchise will be, how much will you earn as a franchisee? There’s no simple answer to this, though figuring out the solution will be key to how you evaluate franchise opportunities.
The truth is that there are franchisees whose franchise businesses have made them millionaires. Other franchisees make all the mistakes they shouldn’t and are lucky to come out of their business even.
Our advice is to ignore research that shows average franchise earnings of as much as $200,000 per year. Instead, focus on your salary expectations and how to ensure you hit them.
Why average franchisee salary numbers mean nothing to you
The trouble with average salary numbers is that the data collected includes all earnings of a huge number of franchisees. These may be new franchisees, owners of multiple units, and franchisees who have been in the business for years. It includes franchises in poor locations, star performers, and poor performers. All this data can fluctuate year to year, too.
The data doesn’t consider your business acumen, suitability as a franchisee, your commitment, how you work, the way you manage and motivate your employees, your ability to sell, and a whole range of other factors that affect potential earnings.
Don’t confuse profit with income
As a franchisee, you run a business in line with the franchisor’s business model. You use the franchisor’s trademarks, their supply chains, and benefit from their support. In return, you pay commissions and fees to the franchisor.
As a franchisee, you are a business owner. You’ll have a profit and loss column. There is no guarantee of success, though operating your business to a formula that is tried and tested by the franchisor should help you develop your business profitably.
When you assess how much you could make as a franchisee, it’s important to understand the difference between business profit and your income as the franchisee. The profit your business makes is not your franchisee salary.
Before you pay yourself an income, your profit must cover costs such as debt repayment and taxes. You’ll need to consider money needed to reinvest in your business. Those profits could be rolling in, but your income could be substantially lower.
How to maximize your franchisee income
Now we’ve covered the caveats, let’s look at the big advantage you have in producing income from your franchise. You own it. This means that you have huge potential to boost your earnings. You’re not limited to what your boss decides you are worth.
Here are three ways that you can boost your income as a franchisee.
1. Work smarter
Make the most of the support and training offered to you, and ensure you employ the practices and procedures that have helped the franchisor and their current franchisees become successful.
At the start of your franchisee journey, you’ll probably need to put in a few extra hours to benefit from the initial support and training offered by the franchisor. Your time commitment will pay dividends because it will help you work smarter – and you’ll learn that you don’t have to work every hour of every day to be more profitable.
2. Make sure you buy a compatible franchise
To ensure your business is as profitable as possible, buy wisely! The closer the business matches your personality, competencies, and skills, the more likely it is to make a great profit. (Which is why we recommend you take a franchise aptitude test.)
Your knowledge, experience, and skills will help you to build a business strategy that accelerates your revenues, profits, and income.
3. Mind your overheads
Overheads affect your profits. Yes, we know this sounds obvious, but it’s worth making sure that you keep a lid on your overheads. Be cost conscious, from day one.
When you buy a franchise, you’ll have immediate overheads that include the franchisor’s initial fees, the costs of premises, supplies, equipment, etc. Ongoing overheads include:
- Franchisor commissions/royalties
- Interest on business loans
You’ll need to balance your costs against your revenues, ensuring that your revenue covers your overheads. The tighter your grip on your costs, the more profit you are likely to make.
When you compose your business plan, make certain that you include every cost you will incur. You’ll need to be realistic. Work through your projections with your accountant, and use the financials detailed in the Franchise Disclosure Document (FDD) to guide you.
Finally, be conservative – overestimate your costs and underestimate your revenue. Erring on the side of financial caution will help to ensure that you are prepared for any unforeseen circumstances, and benefit fully when things work out better than planned.
While it can be fun reading about average salaries of franchise owners, it can also be misleading. What you can earn depends upon buying the right franchise, structuring the deal effectively, and managing your franchise competently.
What are your business and income goals? Buy the best franchise for you, and they could become reality. Take the first step today, and contact New Ground Consulting to arrange a free, no-obligation consultation to discuss your options as a franchisee.