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If you are making a decision about getting involved with a franchise as a business it is reasonable to ask how much money you can hope to make from it. You will be investing your own money and possibly also borrowing from a bank, as well as putting a lot of time into the venture, so knowing what your return on the investment is likely to be is important.
A franchise is an ideal way to effectively become self-employed and run your own business. It ensures that you have the safety net of a well-established business model and the franchise company will also help you through the initial stages and then later when you want to grow and expand your business.
When you're looking at the potential earnings from the franchise examine your numbers carefully to ensure that they are current and match reality, taking into account factors such as the current economic downturn, your specific location and demand for the service or product. Also, ensure that the franchise is suitable in relation to the hours that you are prepared to put into the business or else you will never achieve the projected income from it.
As this will be your own business, you are likely to only make a decent return from the franchise if you are prepared to put enough time into the endeavour. If you can only dedicate ten hours to the franchise each week, choose something with low start-up costs that will provide you with a small income. On the other hand, if you have plenty of time to dedicate to the business, look for a franchise on a much larger scale. Even though franchises are tried and tested ways of making money and come with a team of advisors, you still need to put in lots of research, hard work, effort and time to ensure success.
You will need to create your own financial forecasts as part of a business plan for your franchise, although the franchise company may be able to help compile some of these figures. Working out your financial numbers through basic accounting will give you an estimated picture of your earnings potential. Consider hiring an independent accountant to take a look through your projections to give you a clearer, unbiased idea of the possible profits for the business.
Make sure that you do some research before signing up to a franchise to ensure it suits you, your location and your potential customers. As well as looking back at the history of the franchise, you need to factor in the start-up costs, including the purchase price of equipment and how much it might cost to rent premises. Look at the profit-and-loss accounts of the franchise for similar locations and customer demographics to get an estimate of potential earnings.
You will probably need to borrow money to fund the start-up of the franchise. Make sure that you do not overstretch your finances before you start by borrowing too much compared to the potential profits. Also investigate whether the income you are likely to achieve matches your expectations and will allow you to have the kind of lifestyle you are accustomed to.