Franch-Eyes

Key Number 2:  Capitalization – The Winning Formula

Between financing and fear, 99% of “being in your own business dreams” don’t happen.  The reason this is true is lack of understanding.  Proper financing is the heart of all successful business business ventures.  Inadequate financing is the cause of broken dreams, bankruptcy and financial ruin.  Why?

The simple truth is the vast majority of people do not utilize experts in the field.  There is no substitute for knowledge and experience in any business.  With the proper people on your side you can be assured of having the monies needed to not only be successful, but also to plan for the “unexpected”.  No one can accurately predict the future every time.  Therefore there must be plan for all eventualities.  Planning for problems is intelligent behavior.  Proper financial planning is a formula for success.  One of the most efficient methods to finance a business is to use your 401K for your own benefit.

Most people don’t realize they can use their 401K monies without taxes or penalties when buying a business.  That means a portion of your business is paid for by the government!!  Think about that.  The money you have in your 401K is pre-tax dollars.  Uncle Sam and the State you live in have not yet taxed this money.  (When you have $1000 in your 401K, you really may have as little as $600, depending on your tax rate and which State you live in) So by using that money without taxes or penalty you have effectively gotten up to 40% of your investment covered by the government!  And you can use those monies to pay yourself a salary while you get the business off the ground.  To top it off, you have no payments!!  Beyond that, you do not have to pay back the money until you sell your business.  There is no better funding than this.  Avoiding debt early in the creation of a business means break even happens as fast as possible.  No debt payments to hamper your cash flow.

NOTE:  Many people who lose their job end up looking for work for a year or even longer.  If you look for a job for too long, you can end up spending your 401K on living expenses…as well as taxes and penalties.  Be prepared to take action before there is not enough money to work with.  The opportunity costs of not being employed have to be part of the thought process when deciding how to earn an income.  If your monthly living expenses are $5000 and you look for work for 6 months…you have $30,000 less to work with than if you had started looking for a business right away.  Most people have time to look for a job and research a business in parallel.  This approach gives you options that might not be there if you wait too long.

The best way to purchase a franchise is to engage with a Franchise Broker.  If you align yourself with a franchise/business broker from the FBA, you will have financial experts at your disposal.  Experts in helping people pursue their dreams.  People who are business owners themselves.  People who have seen the best and the worst.  People who care about your success and are trained to cover the bases.  Most brokers do not charge the client since the Franchisor typically pays the broker fee.

So keep it simple and use the experts.  They will make sure the money is there for investment, working capital and living expenses.  Proper financial planning will mitigate the risk of financial failure, the most common reason for business failure.  For more information contact Chris Allen at 847-526-1828 or email at Chris@franchise-eyes.com

First in a Series: Eight Keys to Be The Last One Fired

Security

Maybe the greatest thing about owning your own business is the lifestyle that comes with independence.  The security of being in control is awesome.  You have control of your time, money, family and everything that goes with being the owner.  If security is important to you, check out this list!

Business Ownership vs. Being an Employee

1. You are the last one fired vs. you are the first one fired
2.  You see problems and have the authority (and time) to act vs. you have no time to react
3. Multiple incomes (salary, tax savings, growth equity) vs. one salary taxed to the max
4. Unlimited earnings vs. limited earnings (you make someone else rich)
5. Lifestyle – you are in charge of your time vs. they control the “when” in your life
6. Passive ownership vs. employee (you make someone else rich again)
7. You make the rules vs. they make the rules
8. You make the dress code vs. they make the dress code
9. Pride of ownership
10. You choose your clients vs. they choose your clients
11. Sphere of influence as owner vs. sphere of influence as a worker bee
12. Create wealth for your family vs. create wealth for someone else’s family
13. You help the economy by creating jobs

Owning a business is not for everyone.  But owning a business is not as risky as most people think.  There are solid ways to mitigate the risk associated with the dramatic change of owning your own business.  To Learn More about The Eight Keys Being the Last One Fired (own your own business!) Go to www.franchise-eyes.com.