As told to PesoMatters
In 2019, I bought a retail franchise with several friends. At that time, I had a bit of money to spare and no heavy financial obligations. Save for the occasional credit card expenses, I was free to spend my money where I wanted. The idea of having something to call my own was thrilling, and to be fair, the franchisor’s plans were very exciting. It didn’t take me long to sign up.
Suffice to say, things didn’t work out. The business lasted only six months, and it operated at a loss. We didn’t even break even. It could have been worse, though, so I’m still grateful for the way things turned out. However, there are definitely more than a few things I’d do differently if I had the chance to go back in time.
If you’re thinking of starting your own business, you might find these tips useful:
Consider the real worst-case scenario.
When you start a business, one of the first things people will tell you is to be prepared for failure. That much I accepted, that much I understood. In fact, from the beginning, I knew that I could live with losing my entire initial investment. Unfortunately, I mistook that for the worst-case scenario. I wasn’t prepared for the challenges of managing the employees, the kiosk, and even the franchisor. Worst of all, I didn’t expect the amount of money the business would siphon from me month after month after month. We were operating at a loss—our sales were hardly enough to pay our employees—so we had to constantly supplement the business. Had I considered this from the start, I might not have jumped into the business so quickly.
Learn the ins and outs of the business yourself.
My friends and I had specific tasks we were responsible for, but none of us had a real background in retail. We had to learn a lot of things as we went along. Case in point: Our existing system for monitoring our inventory was functional, but it wasn’t the most airtight. Within the first month, we had items that couldn’t be accounted for. We didn’t want to think ill of our employees, and we tried to give them the benefit of the doubt, but we couldn’t disregard what was happening under our noses either. My friends and I were able to improve the system, putting a stop to the discrepancies, but other problems soon cropped up. If I could go back in time, I would have done more research into the effort that went into the day-to-day operations. We could have interviewed franchisees or kiosk owners whom, we realized late in the game, are usually willing to share their own experiences with newbies like us.
Be more critical of your partners.
Some people don’t recommend going into business with friends, but in my case, working with them was a plus. However, partners can also refer to suppliers. My friends and I were franchisees, so our kiosk, our stocks, and even the program we used for managing our sales came from our franchisor. We initially counted this as a benefit. After all, they’ve been in the retail business for a long time. Unfortunately, very little of their expertise helped us. The kiosk was of poor quality. Before the first month was over, it looked like it had been put through its paces. Some of the products were not as nice as we thought they might be, and the exciting plans we had been shown at the very beginning before we signed didn’t push through. Not all franchisors are made equal. If we could do things all over again, we would probably work with somebody else.
Recognize when you’re in over your head.
Frankly, many of the poor decisions I made were because I didn’t really understand what I was getting into. I thought I did, and I thought I could handle the challenges that came with starting a business, but my experience showed me that what I didn’t know could fill a whole book. And while this entire thing hasn’t put me off starting a business, it has taught me the importance of making more critical assessments. Perhaps I wasn’t really equipped to start a business to begin with. After all, I couldn’t devote as much time or as many resources to help make it more successful. I also didn’t possess the level of maturity to make sure I was accountable for every decision made. Expecting things to pan out just because I was dealing with a franchise clearly showed how blindly optimistic I was. This was my money—I should have been more invested in how I was spending it.