Something that I seem to come up against all the time is people coming out of corporate employment and want to be their own boss but still earn their corporate salary.

 

So, is that even possible? the answer is yes of course it is. However, you are going to need to have pretty deep pockets to earn a big salary from day one.  Let’s say you earn 100k now and you want to earn that by starting your own business, the best way to start is by buying an existing one. This then gives you a head start by already having customers and cash flow from day one.

 

Now that doesn’t have to be a franchise, it can be a stand-alone business, however we all know the benefits of buying a franchise!! especially when you are coming out of a corporate environment. So what better way to buy a business than to buy a franchise resale. Not just an existing business with customers and cash flow from day one but the support, knowledge & expertise of a franchisor who knows how to grow a business quickly.

 

A big myth that I’d like to dispel here and now is that franchise Resales are failing businesses, it’s not true, like any business franchises can and do fail, but there are so many other reasons for selling any business including a franchise.

 

So back to my main point; if you want a business that will earn you 100k, then you really need to be looking at the purchase price and the profit margin. There is no easy answer to this, it’s not easy to say what the profit margins should be because different sectors and even businesses in the same sector will vary because the overheads and the costs of sales will vary.

 

So actually, you might need to invest 800k in a business to earn 100k. You need to do your due diligence on the business to find out what it’s making.   On the point of due diligence, it’s worth pointing our here that people tend to wake up in the mornings and decide to sell their business with very little preparation. The accounts might look bad, because they have employed a good accountant to keep their tax liability down.  So, you might only need a business that is £300k. Are you catching my drift?

 

We all know a business is worth what someone is prepared to pay for it. So, you want to earn your 100k? you have come out of the corporate world with a nice pay off or have some savings and you have £30k cash to spend.  What do you do? A bank could lend up to 70% depending on the Brand and your individual credit rating. So, with 30k cash, the bank will lend you 70k, you have to take into account working capital and any extra fees a franchisor will charge on top of the business selling price. So based on what I have said about profit margins that means you will have an income of around 25-33k in your first year. So ask yourself, do I need to earn £100k in the beginning or will a lower income suffice to begin with if it gives you a better work life balance? of course this is a guesstimate and not based on anything in particular, but I hope it’s given you some quick food for thought when you are looking at the earnings aspect of buying a business.

Michael