Andrew Rogerson's Blog, page 52

What makes a good franchise to buy

If you plan to buy a franchise you want to make sure you are making the best decision. It’s too important to not get right. There are different ways to measure a franchise, its concept, its owner and management. How do you know what is and is not a good franchise?

There are different ways to measure a franchise concept and the franchisor who owns and operates it.. When these measures are broken down and properly considered they provide a valuable guide about buying which franchise is the best option for you. Let’s look at these 6 franchise success factors.

1. Traits or characteristics of the franchise.

How do you decide which gas station to buy your gas? What about which grocery store to buy your groceries? What about the house you bought – how did you decide? In the end you made your decision based on its uniqueness and what is important to you. If all franchises were the same then the final unique characteristic would be price. There are a huge range of franchises to choose in over 35 different industries. Part of my service is to help you narrow down your choices to the one that works for you.

2. Operational excellence.

The primary reason to buy a franchise is to make some money so you can live your lifestyle. As a franchise buyer you bring an operational skill set. Finding a franchise that fits your operational skill set is not only good for you but also good for the franchisor. This includes the management team that run and monitor the performance of the franchise. It also includes their training as well as their written policies and procedures. A good franchise comes with written policies and procedures as they have found what does and doesn’t work. This is part of the reason you are buying a franchise in the first place; that is, you want to know what does and doesn’t work so you are successful.

3. Flexible concept.

Just as there are 50 states in the United States it would be true to say they are not all the same. What works in the South doesn’t work in the Northeast just as it doesn’t work in the Midwest or the Southwest or Northwest. The same applies to franchise concepts. They must be flexible and adapt to the local market so the franchise buyer can succeed.

4. Franchise reputation

One of the best things about being able to buy a franchise is that the franchise buyer gets to talk to other franchisees and understand their performance and how well they are doing. This includes their success or lack of success working within the franchise and learning if the franchise is experiencing success or not. This can include knowing how many active franchises are currently up and running. If the number is low it could be because the franchise is just starting. It could also be because the franchisor does not operate a good franchise and if that’s the case, this is probably not where you want to be.

Read More Search our database to see the different franchises for sale.

5. Financial success

When you pay your money to buy a franchise you do so to make much more than you spent. A key ingredient that influences all franchise buyers is how much they get to keep after they make their investment. Talking with existing franchisees helps you uncover that important information. Additionally, it’s important that the franchise buyer makes sure the gross margins of the franchise support the royalty and marketing fees of the franchisor.

6. Longevity

A good business must have a future. The economy shifts and changes every day. A good franchise concept must be sustainable. Businesses that came and went or continue to evolve that come to mind include the horse and buggy, Kodak film, cupcakes plus the constant change that comes from the technology sector including computers.

The above criteria are important when evaluating each franchise concept. Just as important is the franchise buyer knowing who they are and what they bring and if they combine it with a franchise whether it will be a success.

My role as a franchise consultant is to help a franchise buyer find out what’s important to them and what franchise is the right fit.

If you would like more information about buying a franchise please visit my webpage Buy a franchise or buy a copy of my book: Successfully buy your franchise.

For more immediate help with buying a franchise, send an email to Andrew Rogerson or give me a call on 916 570-2674.

The article What makes a good franchise to buy first appeared on Andrew Rogerson and Rogerson Business Services.

Selling a business must make sense

Selling a business must make sense. Almost without exception, business owners hate paying tax.  Let’s make this real simple.  No one enjoys paying taxes.  However, business owners can go to great lengths to minimize the amount of tax they pay and it can actually cost them money when they decide to sell their business.

The numbers speak for themselves so let’s take a look.

Let’s say the business owner generates an annual income before taxes of $70,000 per year.  To keep this discussion simple, let’s say the tax to be paid is a round number of $13,000 and the tax bracket is 25% on any amount earned after $34,000 (The actual amount is a function of the current applicable tax rates, whether filing as a single or married tax payer, with or without children etc).

If the business owner decides to under report their annual income to save some money and uses the figure $60,000 they generate a tax saving of $4,000.

Read More Here is more information about the steps to sell a business.

However, here is what happens when the business owner sells the business.

When a business sells with a positive cash flow, the selling price is a multiple of the annual income of the business that ranges from 1 to 3 times and averages about 2.2 times.  If the business sells for $60,000 at 2.2 times it will sell for $132,000 whereas if the business sells for $70,000 at 2.2 times it will sell for $154,000.

The business owner is therefore chasing $4,000 in tax savings which will actually cost them $22,000.

In summary, here’s how the numbers look:

Annual Income$60,000$70,000Tax bracket25%25%Tax liability$9,000$13,000Tax saving$4,000$0Sold price of the business$132,000$154,000

It is not always just about the numbers.  The lower the annual income of the business the less attractive it is to a buyer.  In simple terms, buyers want cash flow and potential.  If you are thinking of selling your business, do not damage one of the most important elements to a buyer as the short term savings can come back to hurt you.

Are you thinking about selling your business? Would you like to know the value of your business? If you would like more information please visit my website Business valuation.

For more immediate help please complete the contact form and Andrew Rogerson will contact you or give me a call on 916 570-2674.

The article Selling a business must make sense first appeared on Andrew Rogerson and Rogerson Business Services.

Does the Price of your Business Make Sense

The price of a business that goes onto the market is critical. If the price is wrong the chances of selling go down considerably. The bad news is that only one in 4 businesses actually sell. Having the wrong price on the business for sale is one of the reason 75% of businesses never sell.

When you think that you have determined the appropriate market price for your business, either by using a formal business valuation or by working with an experienced business intermediary, step back and ask: “Would this number make sense in the real world?”

Give the number one last check by using one or more of the following sanity checks.

Business valuation sanity checks

Industry rules of thumb. Rule of thumb based on percentage of revenue or a multiple of earnings can help support the reasonableness of a market asking price. Rules of thumb are sometimes published in trade journals, they can be passed along by word of mouth or obtained from business broker data.

Rules of thumb are never acceptable as sole methods of valuation. These formulas typically are oversimplified, and do not always take into account the unusual strengths or weaknesses of a subject company. Further, rules of thumb typically estimate the selling price for the entire business and may not include inventory, accounts receivable or liabilities. Most rules of thumb are market-driven; that is, they are a result of actual sales.

Read More Here is more information about valuing a business.

Justification of purchase (JOP) test. This sanity check assumes the subject company is sold at its marketed value and financed using conventional terms. If the company’s expected cash flow will cover its hypothetical debt obligations, provide the owner a reasonable salary, cover any expected capital equipment expenditures, and provide a reasonable return on capital invested as a down payment, the test justifies the asking price. When using the JOP test, you will need to make various assumptions about a company’s probable financing terms, including the interest rate, debt-to-value ratio or duration. Commercial lenders may help support financing assumptions.

Sanity checks can be useful tools to support your market value conclusions. But they are merely tools and cannot substitute for a full and well-reasoned valuation report.

For more immediate help please complete the contact form and Andrew Rogerson will contact you or give me a call on 916 570-2674.

The article Does the Price of your Business Make Sense first appeared on Andrew Rogerson and Rogerson Business Services.

3 Types of Debt (And What to do About Them)

The average credit card debt for American households is $15,611, according to a recent Nerd Wallet analysis of Federal Reserve data. That number represents a 2.3 percent increase from October 2013. Households with a mortgage and student loans had an average debt total exceeding $200,000.

Money is typically the primary hurdle people must scale to reach the goals they’ve set for themselves. Whether it’s starting and maintaining your own business or retiring early to a farm in Mexico, sound financial planning is essential to make it happen. Debt can serve as a means to an end, but it may also deter you from your ultimate objective if used improperly.

Mortgage Muddle

Conventional wisdom has always held that buying a home is a good investment no matter what. But nowadays, buying a home should be looked at in much the same way as investing in stock.

Home prices finished 2014 up about 5 percent from a year ago, according to data from Core Logic and the Case-Shiller Home Index. Though that may sound like good news on the surface, the year-over-year increase for 2013 was 12 percent. The Federal Reserve completely ceased its quantitative easing program in November after gradually tapering it throughout the year. Markets, including housing, have leveled out as a result.

University of Pennsylvania finance professor Jeremy Siegel along with Credit Suisse are predicting a major market correction in 2015. Unless you plan on staying in a certain city for at least a decade, buying a home now is ill-advised. Financial conditions today are very similar to 2008 when the markets were artificially inflated by easy credit. The only difference today is that the recovery has been pumped up by nearly $5 trillion in QE since 2009 as opposed to easy credit.

Read More Here is more information about finance/SBA loan to buy a business or franchise.

Now may also be one of the last windows for several years to sell your home and either break even or come out ahead. If nothing else, inquire with a few realtors to find out your home’s value and if selling is right for you. The potential proceeds could finance a new endeavor and prevent the potential of an underwater mortgage in the coming months.

Student Loans

Investing in education is investing in your future. But the relative ease in obtaining student loans makes some borrowers take out more than they need.

The Project on Student Debt said the average college senior in 2013 had $28,400 in outstanding student loans. Some students genuinely needed that much during their college years. Others smartly combined their education with an entrepreneurial spirit and used student loans to simultaneously finance business endeavors.

Regardless of the how much and why, all student debtors should exercise due diligence when repaying their loans. There are several loan forgiveness programs you may qualify for. Teachers who work in low-income school districts are eligible to have up to $17,500 of their federal direct loans forgiven. Those employed in public service may also be eligible for partial forgiveness. The Health Care and Education Reconciliation Act of 2010 allows forgiveness of the remaining balances of student loans after making 20 years of regular payments.

Credit Cards

The good thing about revolving credit accounts is that they provide a sort of emergency fund when you really need it, particularly for small businesses. Unfortunately most Americans abuse credit cards and use them to buy things they cannot afford and don’t necessary need.

Payment history and amounts owed account for 65 percent of FICO scores. Even if you’re making timely payments, a maxed-out card is bad for your score and can be the deciding factor when applying for business loans. Simply put, credit card balances should be paid off as soon as possible to prevent lingering debt and a bad credit rating.

Pay off small balances first before tackling bigger ones. Consider selling future structured settlement payments and using the cash to pay off credit accounts. Sacrificing cable television, morning lattes, and other luxuries will also help get rid of credit card debt quicker.

The old proverb that the borrower is servant to the lender rings true even today. Freeing yourself of bad debt is the gateway to liberty and an essential step to becoming a small business owner.

If you have questions about valuing a business or getting an SBA loan, please complete the contact form and Andrew Rogerson will contact you or give me a call on 916 570-2674.

The article 3 Types of Debt (And What to do About Them) first appeared on Andrew Rogerson and Rogerson Business Services.

Downtown Sacramento Partnership

The Downtown Sacramento Partnership is a private, non-profit organization dedicated to the improvement of Sacramento’s central business district. The Downtown Sacramento Partnership oversees maintenance, safety, and revitalization programs financed by the Downtown Sacramento Management District, a property assessment district established in 1995 and renewed in 2000.

Valerie Mamone-Werder is the Business Recruitment Manager for the Downtown Sacramento Partnership and a guest on my show to talk more about what’s being done to revitalize the downtown City of Sacramento. That interview can be heard here.

Valerie in particular speaks about the Calling all Dreamers competition that was created to encourage and promote small business ventures downtown. She says the winner of the competition is set to receive a $135,000 prize package, that included in-kind support, a year free rent and more.

Valerie also talks about the Partnership’s purpose and origins. She says they were established as a property business improvement district 15 years ago and manage the area from 16th street to Old Sac and from H St. to N St. Valerie says the Partnership was started to help create a clean and safe environment in downtown and now even runs events, such as the Concerts in the Park event, the annual ice skating rink, and the Farmers’ Market.

Valerie explains that her role with the Partnership is to help new businesses that want to come downtown to navigate the business process. She says she also works to help retain businesses that currently exist downtown, which is helped along by the business workshops they run and funding opportunities they provide.

Valerie also talks about the Downtown Sacramento Foundation, which is the sister organization to the Partnership. She says the Calling all Dreamers competition is one of the Foundation’s first initiatives, with their overall directive to elevate some of the Partnership’s current projects and programs.

Valerie also notes SCORE Sacramento’s involvement in the Calling all Dreamers competition. I note my personal familiarity with SCORE, an organization that promotes local entrepreneurship. I am a SCORE Resource Counsellor and find their efforts to help promote entrepreneurship fantastic.

Valerie also outlines the finale process of the Dreaming contest, which includes public involvement and an announcement during Small Business Week. Valerie and I end the discussion on the growth and diversity that has been happening in Old Sac the last few years.

If you would like to hear my conversation with Valerie Mamone-Werder, please click here.

The article Downtown Sacramento Partnership first appeared on Andrew Rogerson and Rogerson Business Services.

Better than New Years Resolutions

Happy New Year and incredible success during 2015.

Now that’s out of the way, let’s get down to action. That’s what life is all about. It’s either talking, planning or taking action with only one that makes a difference and that’s taking action.

My hope for you is that 2015 is your best year ever because you take action and do not sit around and talk and plan…and never take any action.

The good news

Here’s the good news. The US economy is in its best shape since 2008. Here’s to better news. 2015 should be better as gas prices in the last few months have dropped about 48% which will further stimulate the economy. If you are an entrepreneur, the banks are lending, interest rates are still very low and the minimum wage is going up which will further stimulate the economy. All we need in California is more rain and snow to help further stimulate the agriculture and tourism industries.

Better than New Year’s Resolutions

With the US economy doing so well it’s not time to plan a New Year’s Resolution you will discard in a week or two; it’s time for action. It’s time for getting things done.

Here are some suggestions for you.

You can’t change the past

Hopefully you have made some mistakes over the last few years. If you didn’t you were not learning. The past, as we know is history and it provides teachable moments. The present is all about now and moving forward. Get on with it.

Read More Here is more information about the steps to sell a business.

Answer the following 7 questions:

Whether you sell a product or service you are only as good your last customer.

Are you actively listening to what they want?Are you making changes?What problem did you originally set out to solve?Is this the same problem but there are now new tools or ways to solve that problem?Are your customers willing to pay more or less to solve that problem?Is your competition offering cheaper, quicker, easier or better solutions to that problem?Are there new or different problems that you now need to solve?

The primary purpose of being in business is to meet a need. Needs keep changing and the ways to solve those needs also keep changing.

If you have come to a point where you own a business and it’s time for you to do something different, give me a call and let me explore those options with you.

Once again, Happy New Year for 2015 and remember it’s about action, not thinking or talking or making New Year’s Resolutions.

If you would like more information about selling a business, buying a franchise, buying a business or starting a business, please visit my website Business Advice Books.

The article Better than New Years Resolutions first appeared on Andrew Rogerson and Rogerson Business Services.

Massage Heights franchise opportunity

Massage Heights is a market leader in the massage industry and stakes its reputation on the simple idea that their Guests should receive the best experience by offering professional, affordable and convenient therapeutic services to everyone. Equally, they want their Massage Heights Franchise Owners more ways to make more money in a high-quality environment.

The Regional Developer for Massage Heights in Northern California, RJ Cicchetti joins me as my second guest on an episode of 105.5FM and Money 2.0.

RJ says he and his wife Terri Cicchetti own and operate several Massage Heights locations, in addition to his role as Regional Developer for the greater Sacramento area.

He says his job entails helping the franchisor find and secure franchisees, and then subsequently supporting that franchisee through the “growing pains” of opening their own business. RJ discusses what makes a good location – saying the right location meets criteria that gives it a good chance to be profitable and meets any franchisor requirements. RJ says he also offers franchisees help on lease negotiations and consultation on hiring processes.

RJ says the massage industry is in a terrific growing pattern right now. He says ten years ago, there were around 500-550 massage schools. Now there are around 1,700 massage schools. He says 2013 has an expected growth rate of over 20%.

RJ goes on to talk about what makes Massage Heights a good franchisor and company. He says they are good at attracting massage therapists with their work benefits. He says Massage Heights’ customer service is very specific. He says new guests are assessed and matched with a therapist that best fits their needs. As an example he notes that some guests are just after general visits, whereas some are seeking longer-term therapeutic remedy, or enhanced lifestyle.

Read More Search our database of franchises for sale.

RJ also discusses the general process of getting a new Massage Heights franchise owner up and running and what a typical massage membership constitutes in terms of visits, length of visits, and more.  He notes that initial franchisee investment ranges from $225,000-500,00, depending on the location and a few other variables. He says there is a typical 25-30% down payment expectation.

If you would like to hear my conversation with RJ Cicchetti, you are welcome to listen by clicking here.

RJ was my second guest in this episode. The conversation begins 29:10 minutes into the recording.

If you would like more information about buying a franchise please visit my webpage Buy a franchise or buy a copy of my book: Successfully buy your franchise.

For more immediate help with buying a franchise, send an email to Andrew Rogerson or give me a call on 916 570-2674.

The article Massage Heights franchise opportunity first appeared on Andrew Rogerson and Rogerson Business Services.

Get the Best ROI with Customer Service

Some companies consider customer service as a necessary evil, forced because of either a problem in the production system or from the inabilities of the consumer. These companies believe that a perfect world would not need customer care. But smart businesses know that a customer service department is an investment in marketing, brand loyalty, and future sales.

Measuring The Immeasurable

Customer relationship management (CRM) is a customer-focused plan that is developed to engage consumers, enhance consumer data flow, and optimize profitability. Customer service, social media, and mobile buying apps fall under the CRM umbrella, since they improve customer experience. One of the criticisms of CRM is that most companies do not know how to measure its return on investment.

Researchers out of the University of Hertfordshire in the U.K. recommend using a combination of a joint balanced scorecard (JBS) with value driver analysis. The JBS is a way of quantifying intangible assets like brand reputation and consumer loyalty. Every business owner knows in his gut that the properties are of huge importance so the JBS ranks their components in such a way as to make them measurable. From there, value drivers are overlaid so that any customer management activity has a testable significance. Using these parameters, a company has the means to test customer care effectiveness and ROI.

A Department for That

Some businesses need to have a devoted customer service department. For many, this department sets the tone of the organization. According to Temkin rankings, Amazon, Starbucks, and Costco are three large companies that rank in the Top 10 of great customer service. Amazon’s existence depends on having good customer service. For them, measuring ROI is linearly related to its customer’s shopping experience and to net profit. Cyber Monday is a ROI-based measure.

Use a system like Zipwire to make everything about the customer’s shopping experience positive. By integrating a cloud-based system for an omni-channel marketing platform it takes customer service and places it at the center of the consumer to business interaction. The customer care department is the place where consumers interact with your company, making it the interface to your customers purchasing happiness. It places the customer at the center of any retail business.

Read More Here is more information about tax and selling a business.

Customer Care Everywhere

At the proceedings of the Water Environment Federation, author Rob McElroy illustrates the problems with failing to train every employee in customer service. McElroy points out that a hypothetical utility company can spend millions on improving water quality and the customers would not know about it. Conversely, the company could just hit the minimum safety requirements and the customer’s impressions would be the same. He recommends training all of your staff with customer service skills.

Most companies have an established training plan that includes mandatory educational units and quality assurance education. Adding customer service training to the curriculum is a cost effective way of using every employee as a value driver for omni-channel marketing. Instead of making one department responsible for customer happiness, use training to spread the duty. This is what Starbucks did and it put them in the Top 10 best customer service companies.

Are you thinking about selling your business or would you like to know the value of your business? If you would like more information please visit my webpage Business valuation.

The article Get the Best ROI with Customer Service first appeared on Andrew Rogerson and Rogerson Business Services.

Why buy an existing franchise

If you are looking to become an entrepreneur you have three options. Start a business from scratch, buy an existing business or buy the rights to a local franchise or in other words, become a franchisee. A variation of buying an existing business or buying the rights to a local franchise is a blend of the two; buying an existing franchise.

Read More Here is more information about buying a franchise.

Just like everything, there are advantages and disadvantages. Here’s a look at those advantages and disadvantages.

Advantages of buying an existing franchiseOne of the strengths of most franchise models is that if they are running well their performance and success is predictable. If a buyer is able to review the performance of the franchise they are buying as well as compare it to other franchises in the system, this provides a very clear insight about the opportunity they are buying. This doesn’t guarantee the buyer will be successful but it helps provide confidence that if they execute the franchise model they have a great chance of success. This opportunity is also not available to a buyer that wants to acquire an independent business.Training and bringing the buyer up to speed when they own the franchise is so much easier. This is because the buyer can look to the franchisor and their established training model as well as the seller of the franchise who knows their local market.Obtaining third party finance such as an SBA loan may be easier. SBA lenders like successful franchise models that have a history of success. This is part of the world the buyer is entering and if they have the right credit score, history and management experience their chances of having a loan approved are much higher.

Disadvantages of buying an existing franchiseMost buyers do not wish to sell their home and relocate to a new city to buy and run a business. Being able to find a franchise for sale in an industry the buyer likes not far from where they live is very challenging.If the franchise is available, if it’s performing well the buyer may not be able to afford the purchase price. If the franchise is not performing well then the buyer may not be willing to pay the asking price and to then try and turn the franchise around.A lot of franchise models encourage existing franchisees to open more than one location. If the franchise is a mature franchise those locations may have already been sold and built out denying a natural growth opportunity for the buyer.The franchise buyer needs to follow the franchise system and model. It cannot be tweaked or “improved” as that is the decision of the franchisor.The franchise buyer needs to be clear what they are buying including any policies and procedures of the franchisor. For example, the franchise model may dictate large capital expenditures on items such as store upgrades or remodels. This can include large capital expenditures on Fixtures, Furniture or Equipment as the franchisor wants to keep the location fresh and current; all of which takes money from the franchisee. Other examples include new or expanded product lines. Also check how long the franchise agreement is current and if there is any cost to renew it.Successful franchising is about a strong partnership. The franchisor generally collects a lot of industry and market knowledge and uses that information to pass down to the franchisees. A good franchisee should recognize that expertise and be willing to adapt and adopt. If not, being part of a franchise system is not for them.The buying process may be more complicated than an independent business. The franchisor will have to approve the buyer and the franchisee will want to feel comfortable with selling to the buyer.

Read More Search our database of franchises for sale.

A buyer of an existing franchise needs to not only do their due diligence on the franchise they wish to buy but also with the franchisor and the system they are offering. Franchising is the right way to go for the right buyer. I’m a member of the Murphy Business and Financial franchise and like the help and added value I get from working within its system. However before signing into the franchise system and a separate agreement to buy the franchise, make sure it’s crystal clear what you are buying and if there are any upcoming changes to the model. Most franchisors will require a personal guarantee from the buyer so make sure you are comfortable with this requirement.

If you would like more information about buying a franchise please visit my webpage Buy a franchise or buy a copy of my book: Successfully buy your franchise.

For more immediate help with buying a franchise, send an email to Andrew Rogerson or give me a call on 916 570-2674.

The article Why buy an existing franchise first appeared on Andrew Rogerson and Rogerson Business Services.

Are you a motivated buyer?

Andrew Rogerson and Rogerson Business Services.