In the rapidly evolving world of business, innovative investment strategies are key. This was the focus of one CFB at our 15th Annual Conference.
Brokers and Franchisors were introduced to the topic “Franchising as an Investment Strategy” led by panelists, T.J. Corey, Rick McCullough, Erin Gilliam, and Bill Eastin – these experts were the panelists for this discussion who provided a wealth of insights.
Their discussion, coupled with the positive feedback from the CFB, highlighted franchising’s potential. As a result, we aim to give a high-level reminder of some pivotal numbers and points for potential franchisees considering this avenue.
This article serves as a good starting place to begin the conversation of franchising as an investment.
Freedom and Financial Benefits of Franchising
Franchising offers unique freedoms to business owners, one particular freedom being substantial tax advantages.
Understanding and making the most of these tax deductions is crucial for maximizing profits. However, small business owners often struggle to track deductions throughout the year, missing out on significant savings. From restaurant expenses to purchasing vehicles to operating costs, every deduction counts.
But beyond just financial gains, franchising affords the freedom to set one’s schedule, be one’s own boss, and take control of one’s career. These perks, coupled with savvy tax strategies, make franchising an attractive path for aspiring business owners. This is a valuable reminder.
Unfortunate Wealth Building Truths: A Closer Look
During the CFB, we looked at a powerpoint that showed some particularly striking numbers, shedding light on various paths to wealth accumulation.
Tom Corley’s 5-year study of millionaires revealed four main categories:
- Saver-Investors: On average, it took them 32 years to become millionaires.
- Big Company Climbers: Their journey to millionaire status averaged 22 years.
- Virtuosos: They reached this milestone in about 21 years.
- Entrepreneurs: Remarkably, they averaged just 12 years to achieve millionaire status.
This last point about entrepreneurs is particularly significant. It stands in stark contrast to the other avenues of wealth building.
When you factor in the additional detail that franchising offers a thought-through, proven model for entrepreneurs to live out their dreams and pursue their passions, it becomes an even more compelling choice.
Wealth Accumulation Through Life Stages
Franchising directly relates to the wealth accumulation path, especially in the later stages of this structured journey. Here’s how franchising fits into each stage:
Initial Stage – Lifestyle: In the early stages of wealth accumulation, the focus is on establishing good financial habits like spending less than you earn. This stage lays the groundwork for future investment opportunities, including franchising.
Emergency Fund and College Savings: As financial stability is established through savings for emergencies and future expenses like college, individuals begin to build a safety net. This financial security is crucial for taking on entrepreneurial ventures like franchising, which, while lucrative, requires upfront capital and financial resilience.
Retirement Savings: Regular contributions to retirement accounts are a form of disciplined saving. Franchise owners, especially, can benefit from the advantageous retirement plans available to business owners (like SEP IRAs), allowing them to grow their retirement savings more substantially compared to traditional employment.
Taxable Savings Accounts: As individuals build wealth through savings accounts outside of retirement funds, they accumulate capital that can be invested in higher-yield opportunities. Franchising, being a capital-intensive investment, often requires such accessible funds for initial investment.
Accumulating Assets: This is the stage where franchising plays a pivotal role. Investing in a franchise is a form of asset accumulation, offering potential for significant wealth growth. Franchises provide a unique blend of entrepreneurship and a proven business model, which can lead to substantial returns on investment. This stage is about leveraging accumulated capital (from savings, investments, and assets) to invest in business ventures like franchising that can accelerate wealth growth.
In sum, franchising fits into the wealth accumulation path as a high-potential investment in the later stages, where the capital and financial savvy gained in earlier stages are utilized to embark on a potentially lucrative entrepreneurial journey. The structured nature of franchising, with its established systems and brand recognition, offers a more secure investment compared to starting a business from scratch, aligning well with the wealth growth objectives of these stages.
Additional Key Takeaways
Here are some additional key takeaways to help start the conversation about franchising as a pathway to financial success:
Franchising as a Wealth Accumulation Strategy: Franchising offers a structured and proven approach to wealth building, which is a stark contrast to the less predictable paths of traditional employment.
Insights from Wealth Building Studies: Entrepreneurs, particularly those who choose franchising, often reach financial milestones significantly faster than their counterparts in corporate roles.
Understanding Investment Returns: The Rule of 78s is a simple way to gauge how quickly investments can grow. For instance, with a 6% return – typical for stocks and bonds – money doubles in 13 years. However, a 15% return doubles the investment in just 5 years, illustrating the potential of higher-yield investments like franchising.
Advantages of Business Ownership: Franchisees can take advantage of SEP plans, which allow for greater contributions to retirement savings compared to traditional 401ks, thus amplifying their long-term financial growth.
Balancing Risks and Rewards in Business Ownership: Franchising provides a unique mix of entrepreneurial risk and reward, backed by the security of a tested business model.
Entrepreneurship for Freedom and Flexibility: Beyond financial benefits, franchising offers the freedom to shape one’s business strategy and operations, aligning with personal and professional goals.
Embracing Franchising with Expert Broker Insight
Franchising, as a key investment strategy, provides a structured and supportive route to prosperity. With the wisdom and guidance of FBA brokers, this journey becomes a tailored pursuit of financial, personal, and professional success.
Learn more and get started in franchising today.
Find the best franchise opportunity for you: https://www.franchiseba.com/find-franchises/