Ryan is an attorney and valuation specialist residing in Chicago. He chronicles his thoughts and research on FranchisePundit.com. You may reach him by email ryanknoll@gmail.com or mobile telephone 312-212-3423.
Entrepreneur magazine seems to always figure out new ways to publish the same “tips” on starting a business or buying a franchise. Nevertheless, the most recent “How to make a lot of money as a franchisee” is worth a quick scan.
This item is most important in my opinion if you are looking at franchising primarily to increase your net worth (as compared to a ‘lifestyle’ business):
4. Reinvesting to achieve your absolute goal. If you find an opportunity that fits well for you and has a great return on investment, and you’ve got your first unit up and making a lot of money, you can reach your absolute number goal by acquiring additional units. This can either be done through further out-of-pocket investment or through the reinvestment of the profits you’re making into growing the business. I have a good friend who owns more than 40 haircutting franchises. The return on investment in each unit is great, but the absolute dollars in any one unit don’t meet his overall total income goal. He found that by adding additional units over time through the reinvestment of profits, he could realize a total income far in excess of what his absolute goals were when he started the business. In the example mentioned in the first point, if you want to make $100,000 per year, make four of the $5,000 investments and you’re there.
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Am I missing something here or is it a typo?
40 units should yeild a much better income than $100,000, I would hope.
The last line Mark says “if you want to make $100,000 per year, make four of the $5,000 investments and you’re there.”
What does that mean?
Does he mean 4 units at $25,000 net each = $100,000 net income?
Ryan;
I have never really understood the logic behind multi-units, unless as a hedge against a bad selection of territory.
Generally, therefore, hedging lowers return by decreasing risk.
Are you saying something different than this?