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Money to Buy a Franchise

If you are looking to buy a franchise or business opportunity to help you get out of your financial stress that comes from a loss of job or other factors caused by the economy, you’re going to want to make sure you first have the money to buy a business. Sounds obvious, but unfortunately, many of our prospective candidates have an unrealistic expectation of how much money it takes to buy a business.

Being undercapitalized is probably the biggest hurdle you’ll have to jump in the process. That is, making sure you have enough money to run your business and live the lifestyle you want.

When reviewing the different franchise options, you’ll need to look at the Total Investment range in the Franchise Disclosure Document (FDD) to see a high-low for the average investment. I recommend taking the higher end of the range as a starting point. If you have funds, or the ability to get financed for the high end amount, then you can safely proceed with further discovery of the franchise. If you don’t, then you probably will be undercapitalized and you could set yourself up for additional financial stress.

To avoid being underfunded, make sure you have your finances under control, both your personal finances and future business financials. You’ll need to know your personal expenses and the amount of income needed, not just to make the bills, but to invest in future expansions. Gather the balances of all your savings accounts and emergency funds; you’ll need to know your cash position.

You’ll also need to have a handle on the future income and expenses of the new business. By contacting existing franchise owners, you can validate the sales and expense figures and complete a proforma statement to forecast potential profits.

To be able to successfully buy a franchise, you’ll need to have a strong handle on your money situation, a franchise consultant can help you determine if your current circumstances will allow you to buy a franchise.

About the author

Rob Bennett

Rob had served in the corporate-world for 18 years filling various technical capacities, from structural design to project engineer. His experience lends to FranFinders strategic planning, systems design and optimization.

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