Do want your own business or do you just want a job? And what’s the difference between being an employee and a franchise owner?
Most franchisees approach business ownership in the same ways that they approach traditional employment- with a salary mentality. They tend look at the first year cash flow of the target franchise hoping to immediately replace their salary. Potential franchisees quickly discover that it is really hard to find a business in which you can reliably clear $100k in the first year of operation. So, if you are broke and need income today or need immediate gratification, business ownership probably isn’t for you.
But if you want to build wealth, check this out….
Entrepreneur- Startup Investment $150,000
- Year 1-$200,000 Gross, 10% Net, $20k Owner Benefits
- Year 2-$350,000 Gross, 15% Net, $52,5k Owner Benefits
- Year 3-$450,000 Gross, 20% Net, $90k Owner Benefits
Employee- Startup Investment $0
- Year 1-$100,000 salary
- Year 2-$105,000 salary
- Year 3-$108,000 salary
Within three years you have increased your revenue and your margins. You have made almost as much as at your job and in terms of buying power, you have created much more. Owning a business has tax benefits that would easily outweigh the $18k difference from Entrepreneur to Employee. And you now have an asset worth approximately $250,000 – almost twice what you originally put into the business.
What about all the great benefits that you were offered as an employee, such as 401k matching, medical, dental, etc. As a business owner you can decide on a much more favorable 401k plan and there are affordable ones, even for very small companies. You can also find very affordable health care plans either for just major medical or, if need be, group plans.
The payoff in owning your own business happens about 10 years down the line. You now have a business you love and you’re working for yourself. You have opened over three locations and have two more opening soon. You’re business has a positive cash flow of over $200,000 a year and is worth almost a million dollars if you were to sell it. You’ve just accomplished the American Dream.