Many people think of owning their own business as the opportunity to become their own boss. To be able to dictate the terms of many of life’s key factors – the amount of free time, a better work-life balance, and perhaps most of all—income and earning potential. Yet it can be said that even this view is a bit narrow to describe all of the benefits of business ownership. It’s time to consider the comprehensive value of what business owners are buying into. A business you can buy is a business you can sell. It’s an investment. And just like any other investment vehicle, it has the potential to increase in value over time.
Now, a new study confirms just how much that factor matters for those who own a franchised business.
The authors of the research team from the Rinker School of Business at Palm Beach Atlantic University, looked into the comparison of value for business resales over the past decade. They did so by logging the original purchase price of both franchised businesses and non-franchised businesses. Using many variables in their peer-reviewed study, they then compared the selling price of over 2,000 small business resales. And guess what they found? The data’s conclusions revealed that owners of franchise-based businesses wound up selling at 1.5 times higher than businesses that were not franchises. The key finding reveals what many of us in the franchising industry have known for years. In the world of small business owners, branded franchises retain and exceed the value of their non-franchised counterparts.
While the conclusion isn’t surprising to those who work in the franchising industry, those unfamiliar with the concept are rightfully curious as to why they command a higher sales price. To demonstrate the reasoning behind this conclusion, you’ll have to imagine the purchaser’s point of view.
If you wanted to buy an existing business, what factors might make it an attractive sales proposition? If the business came with a blueprint – a proven business model for you to follow – would that be a plus? Would you appreciate the seller being able to easily provide you with an accurate sales and revenue forecast? Would you appreciate buying into a business that was already established in your community, fully built-out and ready to go? Not just the furnishings, but also the staff, vendors, suppliers, and – most importantly – existing customers? A successful franchise owner who is ready to hand over the reins of operation to a potential buyer should be able to share this perspective and more. Giving you a complete picture of the business opportunity, what you’re buying, and how to run it successfully. And all according to the franchise’s brand, whose help extends to training, ongoing support, and continual oversight.
And now that you have the proof that demonstrates the enhanced value of a franchise, perhaps one day when you’re ready to sell the business to a new owner, you too can expect to command a higher price. The completed business valuation study, “Determinants Impacting Resale Premium Disparity When Selling a Small Business: A Predictive Non-Linear Approach”, will eventually be published in its entirety in the Journal of Business and Economic Studies.
If you like what you’ve read and would like to hear more about the business model and potential of franchise ownership, allow FranNet of DFW and Oklahoma to be your guide. We can provide advice, knowledge, and guidance – all at no-cost and no-obligation to you. If you’re ready to explore the many benefits of becoming your own boss, we can help you discover a whole new career path. Each year, we help dozens of North Texans (and Oklahomans!) find franchised businesses that match up with their lifestyle, income, and work-life balance goals.
We’d love to add your name to our client roster, so let us know what your lifestyle and income goals look like for 2022!