Is it better to buy an existing staffing franchise or start new?

As usual, there are advantages and disadvantages to either scenario, and it depends a lot on your budget. Whether you are highly experienced in the industry, or are new to staffing, a franchise can be a great way to succeed in this booming industry. The industry has been growing steadily for years and the future looks bright, so lots of people are looking for entry points into the business. 

Whether resale or new, there are two substantial benefits to being in a franchised staffing business. The first is that you have an efficient operating system, including a detailed sales and marketing strategy. Also, besides knowing how to recruit and interview candidates, it is critical to have the ability to assess them effectively, so having a deep inventory of the appropriate skill evaluations is vital. The second advantage is that you don’t need an enormous credit line or a factoring agency to manage your cash float. Most staffing companies pay their employees weekly, but often do not collect on their invoices until the end of the month. A month of payroll, can be a lot of money, so a franchise partner who provides this financial bridge for you is a significant advantage.

If you have a large enough budget you can buy a healthy staffing franchise, but you can also start one for about 150k on average. That means the franchise fee is typically about 40k and you need access to up to another 110k for working capital. That is a very low price point to be able to start one of the most profitable franchise models available today. To put that into perspective, the average unit in the top staffing franchise does twice the average unit volume of a McDonald’s franchise, and at fraction of the investment.

It can be attractive to step into an existing operation, but it isn’t always the best entry point. Often businesses on the resale market will have issues, and the revenue that they are producing, could be closely tied to the seller, leaving those accounts vulnerable. Additionally, most franchise investors are shopping in the 100k to 300k investment range which doesn’t allow you to buy a very good staffing resale. So why spend more to buy an underperforming unit? 

Sometimes you can find a resale unit below the startup costs. This can be a great deal if there are some clients and employees in place, but often it is more cost effective to start a new location. The demand for temporary workers is very robust and the companies that are the biggest users, utilize many vendors just to have enough. This makes it simple to get in front of users, especially when you are the new kid in town. The same is true for recruitment, the job seekers are also looking to see what your agency has to offer. A new supplier in the market raises curiosity and it is best when you control your local brand image from the start. National branding means little to staffing consumers, but you are very much building a local brand that matters. 

If you are interested in owning a staffing agency and you can find a resale that fits your budget, great. However, if you are spending between 150k and 300k, you should really consider starting a new office. It can be quick to reach breakeven in the staffing business, so you can be penetrating the market in no time, without breaking the bank. 

Have a question about business opportunities? Send it to dbrunell@dearbornwest.com. Dan Brunell is President of Dearborn West, LLC, an international business opportunity brokerage headquartered in Temecula, CA. He can be reached at 951.587.6929 or on the web at www.dearbornwest.com.

Comment

Dan Brunell

Dan Brunell is the CEO of Dearborn West, LLC, an independent boutique consulting firm that specializes in entrepreneurial talent acquisition and training. Dan has fostered recruiting relationships with over 300 franchise systems throughout North America, created and delivered customized training and coaching programs for global consulting network, and established the best practices and ethical guidelines for this emerging industry space.

Business in a Box

Pro-growth policies in the US have pushed the the stock market to record highs and the prospects for a continued, robust economy are very good. This boom is fostering the creation of millions of businesses providing jobs in abundance.. 

Many of these new businesses are started from franchises, distributorships or licensed business opportunities. These ready made business models are providing a fast track for people to start their own companies while minimizing risk. They also provide prospective owners with an array of choices not to be found on the resale market. I understand the allure of buying an existing business, but you should always look at starting a new one from a turn key model as well. If you approach finding your ideal business by limiting yourself to only existing businesses available in your local market, you are removing 99% of your potential options before you start.

Most people go into business for themselves because they want to have more control over their lives. Making a living on your own terms is one of the greatest virtues of business ownership, so it's important to choose a business that allows for the kind of work week that fits nicely into your lifestyle. Whether you want a flexible schedule, freedom to operate, or a higher income, business ownership will continue to be an increasingly attractive option and tried and true business models will continue to be a safe bet.

Have a question about business opportunities? Send it to dbrunell@dearbornwest.com. Dan Brunell is President of Dearborn West, LLC, an international business opportunity brokerage headquartered in Temecula, CA. He can be reached at 951.587.6929 or on the web at www.dearbornwest.com.

Don't Buy a Franchise

That is, if you have an ironclad business model, you don’t need a franchise. The problem is that business models are formed via an expensive and time consuming process of trail and error in the unforgiving, real world marketplace. People buy franchises and licensed business opportunities in order to mitigate their risks when starting a business. Having a fully formed method for making money is what makes buying a proven model, one of the safest ways to become a business owner. 

B-school professors like to say that the number one reason businesses fail is that they are under capitalized. The real reason they fail is because they lack a sufficient method for getting their product or service into the hands of enough paying customers. This causes the business to run out of operating capital before they can generate enough revenue to cover monthly expenses.

Distribution is the key to any business and it starts with finding customers. Many brilliant business concepts have fallen by the wayside, for lack of an effective sales and marketing strategy. Ralph Waldo Emerson is often credited as saying “Build a better mousetrap and the world will beat a path to your door.” This is simply not true and any entrepreneur can attest to that. Acquiring new customers can be the most difficult, costly and time consuming activity for business owners. Franchises have already perfected the sales and marketing component of the business, which makes initial growth much easier. 

Best selling author and futurist, John Naisbitt has called franchising “the most successful marketing concept ever”. In a franchise, you not only have an established product,  but a field tested distribution strategy and an experienced business partner guiding you. Of course, there are other benefits in a franchised business model, but the goal of any business is to create profit and that is a lot easier when your sales are robust.

Have a question about business opportunities? Send it to dbrunell@dearbornwest.com. Dan Brunell is President of Dearborn West, LLC, an international business opportunity brokerage headquartered in Temecula, CA. He can be reached at (951) 587-6929 or on the web at www.dearbornwest.com.

 

Comment

Dan Brunell

Dan Brunell is the CEO of Dearborn West, LLC, an independent boutique consulting firm that specializes in entrepreneurial talent acquisition and training. Dan has fostered recruiting relationships with over 300 franchise systems throughout North America, created and delivered customized training and coaching programs for global consulting network, and established the best practices and ethical guidelines for this emerging industry space.