It's a sad statistic but approximately 40% of small business will fold within the first 5 years. The remaining 60% aren't guaranteed at that point to stay open but they close or move for various reasons - often to change hands or be sold off. These statistics however show that there's a good chance a business owner may fold if not properly prepared for launching and operating their businesses.
In order to keep your business going until you hit your exit strategy, you need to prepare yourself and understand that the road to success is like a gladiatorial gauntlet paved with painful exercises in stress tolerance and challenges. If you take the time to recognize the responsibility you have as a business owner however then you're more likely to succeed and reach your overall goals.
Why Poorly-Planned Franchises Fail
Poor planning might seem like the easiest claim for a failing business but it's not the number one cause. There are however other factors that can be lumped together with poor planning. The two most common factors that contribute to franchise failure are:
1: The franchise is handled poorly from the point of conception. Sometimes a business is just doomed before someone even makes the choice about what franchise they want to run. This often occurs because the person or partners involved in the business lack the skills or experience needed to operate the business. Whether they didn't invest the time in training or chose not to absorb it, it will kill a business. You can accurately relay the benefits of doing business with you, or sell products when you don't know them. Likewise, you can't train an employee on how to manage a service when you can't perform that service yourself.
2: The owner(s) underestimate just how much capital it will take to start the business and keep it running. It's extremely easy to burn through money trying to set up an establishment. Most businesses run in the red for the first year and barely break even. Undercapitalization can tear down a business or franchise extremely fast.
Being prepared is the first step in avoiding those common pitfalls. Here are a few tips that will lead you toward developing a sound strategy to get that franchise open with far less risk to yourself or your investors and partners.
The Pros and Cons - No matter the franchise choice, you should have a pro and con list going. This will help you weight the challenges and rewards that come from opening a business. Likewise, the comparison chart can help you compare the individual franchise opportunities that interest you. Making the most informed choice that best fits you having you stepping in the right direction for launch.
The Roles you Expect to Play - You will have to personally handle a great deal of the opening work on your own - this is the best way to save on your launch budget. Eventually though you'll have to delegate some of the work. In the meantime, figure out what roles you'll have to play during and after launch. This will help you to ensure that no duty or tasks slips through the cracks. An unchecked issue that's missed can put a big crack in the foundation of a new franchise.
Don't make the same mistake that other business owners make by underestimating your financial and personal investments in a new business. Consider these points and more as you think about launching a new franchise opportunity. During the first 3 years of your business, you'll have a number of sacrifices and you will be the busiest you have ever been in your life - and that's just on a personal level.
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