Buying an Existing Business vs. New Franchise

Buying an existing small business (SMB) sounds very appealing.

Picture this:

You found a boring, recession-resistant business owned by the same guy for 20+ years who's retiring. He uses a fax machine, no digital advertising & hasn't raised prices in 5+ years. He's got loyal customers and tenured employees.

Sign me up!

The truth is every Harvard/Wharton MBA grad is searching day & night for this opportunity. Some people spend 12-24 months trying to find the perfect business to buy. A few people win the lottery.

The lucky winner raises equity from investors/family & takes on huge SBA debt. Once finalized they are now the proud owners of a business they probably know nothing about.

The seller who promised a "smooth transition" took off to Florida & won't return your calls. You learn 25% of this business comes from his golfing buddies.

The seller's wife was the only person in the company who knew how everything worked. Johnny, the key employee, just told you he's retiring next month.

Yikes.

On the other hand, the seller may be very helpful, the customers are happy with the upgrades and all the employees are singing kumbayah.

The majority of people don't make it to this stage. They give up on the search because they are tired of sitting on the bench & want to get in the game.

Three reasons why franchising provides a great alternative to buying an existing small business:

#1 Speed to Scale

A franchise should turn "decades into days".

They take someone with no industry experience and turn them into an expert within days. They do this through online & hands-on training. They have guides, checklists & cheat sheets.

They've perfected their process over the years making it turn-key for new franchisees.

The best franchises offer ongoing coaching & support. Just like a child, your needs change as the business matures.

This dramatically speeds up the learning curve vs. starting from scratch. The quicker you learn how to operate, the quicker you can scale.

#2 Unlimited Options

There are over 3,000 franchises in the USA. Unfortunately, not all franchises are equal. Some are amazing while others are trash.

There is a franchise in almost every service-based industry.

Home services, auto, pets, senior care, personal care, child education, fitness, health, alternative wellness, business services, entertainment, retail, technology, food, beverage & more!

There's an option for everyone's budget: from $50k to $1M per unit. The SBA loves franchising which makes it easy to get funding.

Note: A "unit" refers to a single franchise license. For a brick-and-mortar business, it's a single location. For a territory business, it's a uniform geographic area defined by population or other metrics.

It's very time-consuming to comb through all these franchises by yourself. Most brands require you to fill out an application & set up a call just to see if territory is available in your market.

Last year I launched a franchise consulting company to help make this process easier. Our team has invested hundreds of hours in finding fast-growing, innovative brands, with great leadership teams.

We dramatically speed up the search process plus provide valuable resources to help with due diligence. We often help clients negotiate a better deal than they would on their own.

There is zero cost or obligation. Click here to book your first discovery call.

#3 Development + Acquisition + Vertical

When you are ready there are three ways to grow:

1) Development - you open new units from scratch

You commit upfront by purchasing a multi-unit development agreement. This gives you the option (not the obligation) to open 3, 5, 10, 15+ units.

You can purchase additional development rights anytime, as long as they are available. However, the fastest-growing brands often sell out the best markets quickly.

2) Acquisition - buy existing units from other franchisees

Franchisees want to sell to other franchisees. I wrote about this in more detail a few weeks ago. It's much quicker & easier to sell to an existing franchisee vs. an outsider.

This creates an excellent buying opportunity for people in growth mode. Acquisitions don't only exist in legacy brands. There are franchisees in emerging brands who also want to sell for various reasons.

3) Vertical - expand into a new vertical industry

A common model: online marketing drives leads to a call center, which books appointments for the mobile sales reps, hires 1099 contractors, and orders materials on demand.

Let's say you start with paint (like me) and get this process down. You then get into roofing, blinds, flooring, windows, or closets which all target the same customer base, running the identical business model.

This is a muscle you build over time.

Take Action Now

Get off the bench and get in the game.

I'm going to make 2024 the best year ever. Operating franchises has changed my life and many of my friends. I would love to help you make 2024 the best year ever.

Take the first step today by booking a free discovery call.

Cheers!

Brian