The Beauty of Cash Flow

The Beauty of Cash Flow
The Beauty of Cash Flow

“There was a time you could pursue a career, save a million dollars, invest it, retire and live comfortably on the interest - not anymore”, says one corporate executive and new franchise owner. Because he still has one foot in the corporate world as he prepares to open his first franchise in the personal care space, I promised to protect his identity. This anonymity allows for a uniquely honest conversation about exploring franchise ownership and why, with a lifetime of financial service experience, he decided to shift a portion of his retirement assets from Wall Street to Main Street.

How Did He Get Here?
“We’re in a challenging financial environment with three current and undeniable factors influencing our investment choices”, he mentioned while taking a break from lease negotiations.
  1. We have a record high stock market.
  2. We have record high real estate values.
  3. We have record low interest rates.

"So where should I invest my retirement savings--the choices didn’t look compelling."

As he approached his mid-50s, he started looking more closely at his income, assets and potential future income sources. No matter how he sliced and diced it, he could not see a path that would allow his family to maintain their current lifestyle throughout retirement. 

Why Business Ownership?
“It was not my plan.” In the last 12 years, he migrated from a corporate giant to small public technology company, assuming more and more senior roles and eventually landing the top job. By all standards, anyone who looked at his career path and financial status would view it as a complete success. “Most people would aspire to achieve what I had already achieved.” But could he make it last?

“It used to be a million bucks in the bank was enough to retire, but when I ran the numbers, there was no way I could see it working.” He began looking for a way to generate cash flow long after his run in the corporate world was over.

Why a Franchise?
Historically a pure corporate type, he admitted to looking down his nose at franchise ownership. There are lots of reasons why franchising makes sense, but the perception that it’s all about greasy fast food and gas stations is often a powerful deterrent. What would his friends think?

His perceptions were not his biggest obstacle. He’s never been (and never will be) an entrepreneur in the true sense. He acknowledged he was never the “idea guy” who arrived at the next greatest gadget or idea and he knew he didn’t have a 30-year runway to grow a business from scratch. “I didn’t have the talent, the time or the interest to reinvent the wheel.”

Relying on his financial background and setting aside his emotions, he began to look at franchising as a mechanism for owning a business that would provide increasing cash flow and an asset with the potential to be worth a multiple of the invested capital. "My analysis suggested this was an opportunity for a "win-win" with the chance to control my own destiny plus generate superior returns well beyond what can be achieved in stocks, bonds or even real estate investing in the current financial environment." “I’ll admit that for me, it was purely a financial decision.”
 
How Did He Find the Perfect Semi-Passive Franchise?
This was a long-term play. He knew he had 5-7 years left in corporate, but he wanted to get started now. He needed to find a semi-passive model and recalled that I had become a franchise consultant after I left financial services. After thumbing through some of my recent franchise opportunity updates, he “just decided to pick up the phone and dive in.”

We walked through the FranNet consultative process which allowed him to compare several different brands in the semi-passive personal care space. He visited multiple locations, talked with existing franchisees and eventually invited his wife to attend a discovery day of the brand that checked all his boxes.

Renowned author Gregory Matusky put it best when he said, “the value of a business is often the most overlooked assessment factor. It is the selling worth of a franchise on the open market.” Whether he decides to sell his business at a multiple of his original investment or to pass it on to his son, he’s building up to an equity event while generating cash flow. That’s beautiful!

How Did He Overcome His Fear of Failure?
He openly admitted his fears and shared them with his wife before making the decision to invest. He remembers his wife saying, “you’ve been successful at everything else you’ve done in business, why would this be any different?” She also offered a perspective he never considered. “There could be an apocalypse and most people will still make personal care a priority!”

What Would He Have Done Differently?
“If I knew then what I know now, I would have started the process 5 years ago!” Perhaps if he had begun sooner, he’d now be enjoying life without the corporate grind, traffic and politics. I hear this all the time from my clients, but as this business owner put it, “it’s never the right time for anything, you just have to believe in yourself and push forward.”

“There was a bit of serendipity at play”, he believes. Looking back there were multiple signs pointing him in the direction he is now taking. He realizes he simply needed to pick up the phone and take that first step.

If you’ve mapped out your road to retirement, but still wondering if it will be enough, let’s set up a time to meet for coffee and explore where franchise ownership might lead you.

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