Some years ago I met with a chap who was already running his own business but was looking for something else. He explained that he already knew in his own mind what he wanted – it was a business where the product was new and unique, there was no competition, there would be no requirement to do any selling, the investment level would be in the order of £10k and the earnings in the first year would exceed £50k.
Well, franchised businesses like this only exist in a parallel universe as far as I am concerned, but it was interesting to find out why this ‘successful’ business owner wanted to find this mythical business.
It stemmed from the fact that his current business was not too successful after all.
What had started out as a good electrical contracting business had suffered from reduced margins on the product side and stiff competition from other contractors. What this chap had failed to do was to recognise the dynamics of the industry he was in and adjust his business model accordingly. So, he had failed to add value to his service in the eyes of his customers, they didn’t feel he was any different from the competition so he had become a commodity. He started having to protect his own business by dropping his prices to match those of predatory competitors, and ended up doing business at a loss. Instead of nurturing each customer, proactively seeking new solutions for their problems, making himself an invaluable member of their team, he had become someone who simply responded to enquiries, quoted a price and did the job.
Let’s be realistic about the elements of the parallel universe franchise and put some common sense around them
Firstly, new and unique products are always being introduced, but are they any good?
Is there a strong and sustainable market for the product, is there sufficient money being invested into Research and Development to ensure the product can be enhanced in the future?
If there is no competition then why not? It will only be for one of two reasons – either no–one else thinks this is a market to be in, or it is a good market to be in but competition hasn’t appeared yet – but you can guarantee that it will and it will almost definitely enter the market with a better proposition than the first entrant into the market!
Competition is healthy – it means that the market is worthwhile being in; the trick is to make sure you keep your share of the market and hopefully grow it.
When it comes to selling then every business needs not only a way of telling their existing and potential customers about their products and services, but also a way of ‘doing the deal’ – creating the need then satisfying it. If you do the marketing correctly then the selling becomes easier – I can’t imagine a Wii salesman going hungry for a while yet!
Investing £10k and earning £50k? I’m sure there are opportunities to do just that but they will depend on the amount of effort the individual puts into marketing and selling and sheer hard work.
The crux of all this is that business, whether it is franchised or not, is not an easy life – there are no substitutes for hard work, determination and perseverance.
Any good business knows its products and its customers and how to join the two together for mutual benefit, a franchised business just happens to be one where investors can be the business owners. The product, marketing, selling, IT, finance systems are all in place along with training and support –the hard work setting up the infrastructure and the business model has already been done – now its up to the individual to do the hard work to build their business from this advantageous starting point.
Filed under: General News
