Buying A Franchise Business
Joel Libava
3 min read
It all starts with your personal financial snapshot. That’s right. Taking stock of where you stand financially is the the first thing you need to do.
Before you go to Google or Bing and type in “franchise opportunities.”
(This post may contain affiliate links. Please read my disclosure policy).
Why?
So you’ll know ahead of time what franchises you can afford.
I’ll explain.
You Want To Own A Pizza Franchise
Let’s say you’ve heard about Mod Pizza, which is a pretty hot food franchise.
So you read up on it, and learn that it’s on the high-end of the investment scale for a franchise. But no worries, because you have money. You’re sure it will work out for you if you find that it’s a good company and a good fit. So you contact the company, and they set up a call with you.
Generally speaking, your call with the franchise development representative goes well. So far, you like what you hear. The next step?
Ellen (the franchise rep) wants you to send her information about your personal finances. Whoops. You don’t have it. At least not in an organized way.
Would you like to know how to create a good snapshot of your finances for the franchisors you contact?
The Easy Way To Create A Personal Financial Snapshot
The franchise rep doesn’t want anything fancy.
She just needs to know how much money you have and how much debt you have. In essence, a snapshot of your finances.
And the easiest way to get it is to put together a net worth statement. That’s really what she wants. But how?
Just use my free net worth calculator.
But first, you’ll need to spend some time getting your numbers together.
What Numbers Will You Need To Have?
Specifically, you’ll need to have:
- Recent mutual fund/investment statements
- 401(k) and/or IRA statements
- Savings account/money market figures
- Household items/jewelry valuations (approximate)
- Credit card statements
- Mortgage information
- Auto loan information
- Miscellaneous loan statements
- Other financial obligations
Then, once you have those things in front of you, all you need to do is enter them in the net worth calculator and click “Calculate.”
Next, print out a couple of copies, send one of them to franchise headquarters and keep one on file.
That’s it. You now have your personal financial snapshot.
What If The Franchise Opportunity I’m Interested In Is Beyond My Budget?
If, for example, you learn that the Mod Pizza franchise opportunity is too expensive for you, at least you know where you stand, money-wise.
Which allows you to find a few franchises you can afford.
And once you do, just contact their headquarters and start the process. See if one of them fits.
Note: right around the time you send your financial information to headquarters, your franchise rep will run a credit check on you. So you’ll need to know where you stand there too. Do you know? Have you looked over your recent credit report?
Ever see those “Free Credit Report” ads?
In my experience, the free report you receive doesn’t provide the most important thing. Your actual credit score. Not unless you pay for an “Upgrade.” So much for free.
So I ask you again, do you know where you stand, credit-wise?
Look! Get 20% off your TransUnion credit report at myFICO
FAQ’s
Why is it important to create a personal financial snapshot before considering franchise opportunities?
Creating a personal financial snapshot gives you an understanding of your financial position, including your assets and liabilities. This is crucial, as it allows you to determine what franchises you can afford before you start your search.
What is a net worth statement and why does the franchise representative need it?
A net worth statement provides a comprehensive view of your financial status. It lists your assets (what you own) and your liabilities (what you owe) to calculate your net worth (assets minus liabilities). The franchise representative needs this information to ensure you have sufficient financial resources to purchase and operate the franchise.
What financial documents do I need to gather to create my personal financial snapshot?
You’ll need various financial documents including: recent mutual fund/investment statements, 401(k) and/or IRA statements, savings account/money market figures, approximate valuations of household items/jewelry, credit card statements, mortgage information, auto loan information, miscellaneous loan statements, and any other financial obligations.
How can I calculate my net worth?
After gathering all of your financial information, simply enter your asset and liability information into a net worth calculator and click “Calculate.” Your net worth is your total assets minus your total liabilities.
What should I do if I find out that a specific franchise opportunity is too expensive for me?
If a specific franchise opportunity doesn’t work out, you can use your personal financial snapshot to help identify other franchises that you can afford. It’s important to research and contact the headquarters of various franchises to find one that fits your interests, skills, and financial capabilities.
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