How long does it take me to get to a decent income?
One of the biggest challenges people have when considering which business to buy, is figuring out how long it will take them to get to the point where they’re earning a decent income. In order to get a reasonable perspective on this important question, you will first want to take into account the three phases that a new business experiences – “launch”, “build”, and “full stride”
“launch” is the first and most difficult phase – this is the period from when you sign your franchise agreement to the time when your business hits breakeven (breakeven is the point where the revenues of the business are sufficient to cover all expenses. Most businesses take at least 6 to 9 months to get to breakeven, after the business is open to the public, so you really want to have a thorough understanding on what is typical for the franchise or business you are considering buying.
“Build” is the period from when you achieve breakeven to the point where you are achieving the “full stride” phase. The “full stride” is the point where you are consistently able to earn the level of income you want to maintain for the foreseeable future – in other words your ideal lifestyle income.
The “Build” phase is typically 9 to 18 months. Early in this phase there will be little additional cash available to draw, but as you progress through this phase, you will be able to incrementally increase the amount that you start paying yourself.
Getting to the “full stride” phase is the ultimate goal, as this is likely one of the reasons why you want to buy a business in the first place – to get to the point of earning a decent income while having full control and autonomy of your long-term career!
Success in each phase will be a direct reflection of how well you run the business, so it is important to understand the following:
What are the core activities that are required to drive success in the business (business generation, networking, hiring, marketing, etc.)
On a scale of 1 to 10, how well-suited are you to performing these activities
For example, if you have a strong sales background where you are comfortable going out and engaging the market (cold calling, networking, etc.) AND you buy a business where key activities in the launch and build phase are cold calling and networking, then you will likely enjoy a faster break even than the average franchisee. If on the other hand you don’t have a lot of sales experience in you, AND you buy the same business, you will likely experience a longer period to break even and a longer time in the build phase.
The bottom line is that as part of your research, you have to talk to enough existing franchisees so that you can thoroughly understand what’s involved in launching and running the business, because only then can you truly assess how well you are likely to perform in that business, and THAT is what’s going to determine how long it takes you to get to earning a decent income!