Monthly Archive for March, 2017

Four things you must know before buying a franchise

Over the years, I’ve met many people who want desperately to own a business, but 1) just don’t know what it should be; or 2) lack the entrepreneurial vision and/or desire to start a business from scratch.

Enter one of the great inventions America has given to the world: the franchise.

Purchasing and operating a franchise is entrepreneurial coloring inside of the lines.If you don’t have a problem playing in a sandbox someone else built, a franchise may be just the ticket for you.

The franchise universe is broad and diverse, with arguably thousands of options, which is both good and bad news - so many choices begets lots of intimidation. But fortunately, the fundamentals you apply to conduct franchise acquisition research, regardless of the one you choose, are basically the same.In his excellent book, Franchising and Licensing, my friend Andrew Sherman identifies a number of key components in any relationship between a franchisor (the developer of the franchise), and a franchisee (the purchaser of the franchise). From Andrew’s list I’ve chosen what I think should be the first four to help you narrow your search, followed by my thoughts.

1. A Proven Prototype
When you lay money down for a franchise, the model must be proven to work, because you’ll have to replicate the product over and over. Indeed, the prime expectation of any customer seeking out a franchise product is that it’s a known quantity. McDonald’s may not have the best hamburger in the world, but whether you’re in Moscow or Moline, it’s supposed to taste just like the one you had in Meridian.

2. A Strong Management Team
When you buy a franchise, not only will you need to seek periodic advice and instructions from the franchisor’s staff, but you want to have confidence in that support. There should be virtually nothing you can ask that they haven’t experienced and anticipated. Here’s a tip: If you aren’t getting overwhelmed with support and answers when considering a particular franchise, don’t expect much more once they have your money. I’d move on.

3. Comprehensive Training Program
In order to make that “hamburger” look and taste just like the last one you delivered, you must be able to learn how to do it yourself and teach your people how. That training MUST come from the franchisor. They will demand that you follow their rules, so you have a right to demand the best training.

4. Sufficient Capitalization
Franchisors are just like all other businesses in that they must have the capital to: a) Grow - you want your franchisor to expand their footprint; b) Innovate - to continue to offer relevant products and services every year; and c) weather the inevitable marketplace storms. When they ask about your financial condition, tell them “I’ll show you mine, if you’ll show me yours.”

Before you buy a franchise, you must talk with two people: 1) Someone who’s operating a franchise like the one you’re considering - ask what it’s like doing business with your franchisor prospect; 2) Someone who’s failed with a franchise - ask what happened and what they wish they knew before they started.

Remember that while owning a franchise is operating a business based on someone else’s idea, it’s still running a business. Other than being a single parent, there is no harder job. If you don’t love working, if you don’t value sweat equity, if you don’t appreciate deferred gratification, if you don’t have a lot of energy, if you like to sleep late, or if you’re a whiner, don’t buy a franchise - or start any business. And if you aren’t good at coloring inside the lines, like me, don’t buy a franchise.

Finally, in addition to Andrew Sherman’s book mentioned earlier, I also recommend one by another friend, Joel Libava, Become a Franchise Owner.

Write this on a rock … Franchising isn’t for everyone, but it might be for you.

Eight questions and four fallacies about business growth

Giant sequoia redwood trees grow very tall. Bradford pear trees, not so much. It’s all in the genes.

But there’s no genetic code for a business. While a Bradford pear can’t decide to compete with a redwood, a business can become whatever its owner makes it. And that last fact creates two questions we go to sleep asking ourselves and wake up trying to answer:

1. Should I grow my business?
2. How big should I grow my business?

In his book, Warp Speed Growth, my friend and Brain Trust member, Peter Meyer, lists four fallacies of growth which every business owner should consider. Here they are, each followed by my comments.

Fallacy 1. You can grow out of organizational problems.

In a state of denial or ignorance, small business owners sometimes think getting bigger will fix management and organizational shortcomings. If a tree is bent, fertilizing it won’t make it grow straighter – only faster in the wrong direction. If you have organizational challenges, don’t grow until they’re resolved.

Fallacy 2. Growth equals profitability.

Yes, increased sales volume can help you improve vendor discounts and therefore, gross margins. But that doesn’t mean your organization can manage the extra activity well enough to convert discounts to the bottom line. One of the rudest awakenings an owner can have is when projected sales growth is achieved, but profit is no better, or perhaps worse, than a period of lower sales. Remember Blasingame’s Growth Razor: “It’s not what you make, it’s what you keep.”

Fallacy 3. Profitability improves when every customer is yours.

Being the market leader is overrated. Peter cites research showing only 29% of market leaders were also profit leaders. Not only are you not going to sell every customer, you don’t want every customer. Many customers, and some customer profiles, aren’t profitable. Remember, you don’t spend sales.

Fallacy 4. If you grow, customers will benefit.

Peter says focusing on growth is focusing on yourself. Every minute your company focuses on itself is a minute diverted away from focusing on the customer. One of the classic examples of a company’s self-absorbed focus on growth is when it uses the term “fastest growing” in marketing material, as if this benefited customers. What makes you think customers don’t like the size that you are? What makes you think they’ll like your next size?

Don’t get me wrong: I’m the last person to say growth is bad, or that you should be happy with the current size of your company. I’m a capitalist, and capitalists LOVE growth. But I do encourage you to make sure that when you grow, it’s because you’ve thought about why and how. Here are six growth reality checks, each followed by a slap-in-the-face question to ask yourself.

• The marketplace is pretty full already. Is there a real opportunity to grow?

• Growth requires capital. How will I fund the growth I am planning?

• The rewards of growth are typically delayed. Can my organization wait that long for the payoff?

• Growth takes a company into unfamiliar operational territory. Do I have the staff and systems to blaze that trail without creating a casualty list?

• Being a business owner should be a source of happiness. Will I be happy with a larger business?

• Every business has corporate values, good or not so much. If our values are good, can we scale them? If they aren’t, why would we scale them?

Ask the growth questions and answer them as Polonius instructed Laetres in Shakespeare’s Hamlet: “This above all, to thine own self be true.”

Write this on a rock … Just because you can grow your business doesn’t mean you should.

How to connect with global prospects – and get paid

In case you haven’t heard, the seven billionth Earthling was born recently.

For the global marketplace, seven billion prospects is exciting. But 96% of those folks live outside the U.S.

Once, small business growth meant expanding across town or the next county over. But new technologies and demographic shifts have made expanding outside America’s four walls increasingly compelling. It’s also produced three elemental global business questions: Who are my prospects, how do I connect with them, and how do I get paid? Let’s focus on the “Who” first, with these global stats from National Geographic, plus my editorializing.

  • Nineteen percent of Earthlings are Chinese, 17% are Indian and 4% are American. By 2030, the first two will invert.
  • In a historical shift, just over half of Earthlings are now urbanites. Remember, city folk use different stuff than their country cousins.
  • Globally 40% of us work in services, 38% in agriculture and 22% in industry. This means different things to different industries, but it means something to all businesses.
  • English is the international language of business, but is the first language of only 5% of global prospects. When doing business outside the U.S., be culturally sensitive and patient with the translation process.
  • Breaking news: 82% of your global prospects are literate. If you can read and write you can improve your life, which explains the growth of the middle class in emerging markets. A growing global middle class means millions of new, affluent consumers each year.
  • Computers are luxuries for most Earthlings, but mobile networks are exploding across the globe. Soon billions who never owned a computer or used the Internet will do both with a smart phone. What does your mobile strategy look like?
  • For American small businesses, export opportunities abound in our own hemisphere without crossing an ocean, especially Canada, Mexico, Panama, Columbia and Chile, where trade agreements are in place. But keep an eye on the Trump trade tactics, part of which may manifest in tax reform.

The good news is there are two government agencies standing by to answer questions about your export strategy. Each one provides digital information, human assistance and global networks designed to help a small business maximize its opportunity to create and execute a successful export strategy.

U.S. Commercial Services

The, “How do I connect with global prospect?” question can be answered by this agency, and it should be your first stop for education on finding and converting global prospects into customers. It’s a virtual one-stop shop for developing and executing your export strategy: a great website (; a toll-free number (800-872-8723) answered by a real person; over 100 offices around the U.S., plus dozens more around the globe you can walk right into and ask for help; and their book, “A Basic Guide to Exporting,” which includes an excellent tutorial and several case studies. It’s all free except for the book and any direct expenses they incur on your behalf.

Export-Import Bank

This is where you get the “How do I get paid?” answer. Part of the U.S. government, Ex-Im Bank ( will assist with the financial elements of your export sale. They’ll coordinate with the banks on both sides of the transaction to transfer funds, provide loan guarantees, and even pre-delivery working capital for you and post-delivery financing for your customer.

For generations, big firms owned the franchise on global business. But shifts in technology and demographics are making the global marketplace more compelling and feasible for small businesses. And for all the government agencies that gets in our way, these two will actually help you.

Write this on a rock … The global marketplace – and 7 billion prospects – are waiting for you.

Four new marketplace truths every small business must know

What is our value proposition?

For 10,000 years, during a period I call the Age of the Seller, answering this question was the focus of every business as it went to market. Indeed, customers refined their search for products and services down to the semi-finalist sellers based almost entirely on components of the classic competitive value proposition: price, product, availability, service, etc.

But then something happened.

The Age of the Seller was subducted by The Age of the Customer. In this new era, where value is now presumed, the prime differentiator is no longer competitiveness, but rather relevance. Today the question every business must focus on when they go to market is: What is our relevance proposition?

So does this mean sellers no longer have to be competitive? Not at all—no one will pay you more than they should. But consider four new marketplace truths:

  1. With value now presumed, customers expect to find what they want, at a price they’re willing to pay, from dozens of sellers.
  2. They don’t care if they do business on Main Street or cyber-street.
  3. Prospects are self-qualifying themselves and pre-qualifying a business based on relevance to them before a competitive position has even been established.
  4. Prospects are doing all of this before you even know they exist.

That last point is perhaps the most breathtakingly disruptive development in the shift to the new Age. As this shift plays out, two types of sellers—Hidebound and Visionary—currently exist in parallel universes, but not for long. Which one are you?

Hidebound Sellers
These companies are so invested and entrenched in the old order of control that they deny the reality in front of them. They can be identified by the following markers:

Misplaced frustration: As performance goals get harder to accomplish, frustration makes those who deny the new realities think their pain is caused by a failure to execute.

• Bad strategies: It’s said that armies prepare for the next war by training for the last one. So it is with Hidebound Sellers. While Age of the Customer pressure makes them think they’re being attacked, they persist in using Age of the Seller countermeasures.

• Destructive pressure: Convinced of execution failure, pressure brought to bear by management results in an employee casualty list and a shrinking customer list.

• Equity erosion: Defiance in the face of overwhelming evidence sustains the deniers until they run out of Customers with old expectations, and their equity and access to credit are depleted.

Visionary Sellers
These sellers are adjusting their plans to conform to the new reality of customers having more control. Visionary Sellers are identified by these markers:

• Acceptance: They accept that customers have new expectations about control and make adjustments to this reality.

• Modern sales force: They hire and train their sales force to serve increasingly informed and empowered customers.

• Technology adoption: They offer technology options that allow customers to find, connect, and do business using their expectations and preferences.

• Relevance over competitiveness: They recognize that while being competitive is still important, it’s been replaced in customer priority by the new coin of the realm: relevance.

• Special sauce: They combine and deliver high touch customization with high tech capability.

In The Age of the Customer, Hidebound Sellers are dinosaurs waiting for extinction. Visionary Sellers are finding success by orienting operations and strategies around a more informed and empowered customer seeking relevance first.

Write this on a rock … What’s the verdict? Are you Hidebound or Visionary?

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