When you start your own independent (non-franchised) business, your mistakes will be more costly than you imagined. In fact, your mistakes will probably put you out of business.
I’m not writing this to scare you away from starting a business without a franchisor; I’m writing it because it’s factual . . . and scary.
Do indie businesses survive?
Have you looked at the statistics? How many independent start-up businesses survive in the USA? Rather than take my word for it do some research, or better yet, just ask a local business banker!
Of course, the more entrepreneurial you are, the more likely you are to say that you can avoid the mistakes, and maybe you can. However, the statistics say otherwise. Most independent startups fail.
Why mistakes occur
Many people think certain businesses are easy to start and operate. Let’s take pizza for example. Many people can make a “good” pizza? My Italian grandmother made the greatest pizza in the world, so it’s no surprise that many of my cousins can make great pizzas, too.
In fact, when people tasted my cousin Mary’s pizza, they told her that she needed to go into business. And she did! Mary and her entrepreneurial husband (also an Italian) opened a couple of pizza shops, and in a matter of years were dead broke.
How could that be? They made a “great” pizza.
Can you sell what you make?
I’ll tell you how. They knew how to make pizza; they didn’t know how to market and sell pizza. Franchising’s saving grace is that it knows how to distribute (sell) products and services.
It is simple to open a pizza shop. You get a good location, buy the equipment, bring in the supplies, get a recipe, put up a sign, do some marketing and . . . voila! . . . you’ve got a thriving business.
No, you don’t. You’ve got a money-sucking business, unless you avoid the mistakes.
What do customers want?
Mary’s first mistake was believing that consumers want a “great” or even “good” pizza. They don’t. Just look at what they buy everyday!
Mary thought she could build her business by advertising in the newspaper. Wrong. The pizza franchises would have saved her from that mistake.
Mary also thought she could build her business without delivery. Wrong. The pizza franchises would have saved her from that mistake, too.
Too many mistakes
There were numerous other mistakes . . . Mary didn’t know how many slices of pepperoni to place on a large pizza and still keep it profitable . . . and the pizza franchises would have saved her from that mistake as well.
After so many mistakes, Mary and her husband lost their business and much more.
It’s easy to make these mistakes . . . Mary and her husband had no idea they were making them. They would have done anything to avoid them . . . except buy a franchise. Because a franchise would not have allowed Mary to sell her “great” pizza.
Should you buy a franchise?
Look, you need to make some tough decisions before you start a business. What’s important to you? Your way? Or a franchisor’s way? Keep in mind that the franchisor may not sell what you consider to be a “great” or even “good” product – if that’s important, find another franchisor, or avoid franchising.
Of this you can be sure: If you buy a reputable franchise (and they’re not all reputable) the franchisor’s training will save you from making too many costly mistakes. You’re still going to make mistakes, but in a franchise, the mistakes probably won’t put you out of business. Ask your banker how many of his or her franchisee clients fail? It’s one of the reasons why bankers love franchising.
In fact, even though they won’t tell you, the bankers know you are going to make mistakes when you start an independent business, and even though you’ve accounted for mistakes in your business plan and cash flow estimates, the bankers know better. Your mistakes are going to cost more than you think.