When planning your next business venture, there are several things you need to consider before making an investment. While on the surface a franchise or company may look like a smart investment, a deep dive into the organization should be necessary before you fully commit your hard-earned money.
So what do you need to look for in your next business investment? It’s more than just high revenues and low expenses. Instead, it’s about all the things that will set you up for success for years to come.
The first thing you need to understand when evaluating a new franchise or investment is the company’s market opportunity or potential. If the marketplace is saturated, it will be hard to be competitive and turn a profit. However, if the market is currently untapped or underserved, that leaves you with a ton of room to grow and the potential to become very, very successful in the industry.
A quick way to calculate the market size is to do a “bottom-up” calculation and take the number of potential customers multiplied by the average annual selling price to each customer. You’ll still need to run through a list of companies that operate in the market and how competitive they are, but it’s a nice way to gauge your potential if you were to invest.
This is especially true when considering a franchised or licensed business model. What kind of support does the company headquarters offer its investors? Are they completely hands-off, do they micromanage the process, or are they somewhere in between? Can you call someone for help or are you virtually on your own? This all plays into how difficult the investment will be to manage and puts a value on your time. A company that offers strong support to its investors, as we do at Mobile Outfitters, is often the right choice.
A franchised or licensed business that is easily adaptable will prove to be the most fruitful. A good question to ask yourself when evaluating if the investment is right for you is, “Will this company be able to handle changes in the market and in technology?” For example, at Mobile Outfitters we developed RapidCut to help us adapt to changes in the smart device market. With RapidCut we can quickly create products for new devices as soon as they become available, which is really attractive to both consumers and kiosk investors. If the answer to the question above is no, you need to move on.
Strong Company Track Record
There are certainly cases where newly established companies, or “startups,” are absolutely worthy of investment. However in most cases when it comes to franchised and licensed businesses it is important to join forces with a company that has a strong and impressive track record. It proves that the company understands the market and is strong enough to endure changes over time.
Of course, you still need to consider the cost of investing in a new business. But always consider cost alongside potential return. A high upfront cost could be worth it for some ventures, while lower upfront costs can also prove incredibly valuable over time. Know what you’re willing to invest upfront and see what investment will provide the highest return for your budget.
Profit is arguably the single best indicator of whether or not your investment will be successful. To calculate profit margin, divide your total expected revenue, fewer expenses, by your expected revenue. Then multiply that number by 100, which will give you a percentage. For example, if the investment has a profit margin of 20%, for every dollar of the total revenue you earn, 20% of that dollar (20 cents) is net income. The higher the margin, the more successful the business.
We’ve developed a kiosk profit calculator to help you gauge the profitability of opening a Mobile Outfitters kiosk or owning an entire territory of kiosks. The calculator lets you input your expenses, average sale amount, and the number of kiosks, among other items. Use our kiosk profit calculator today to see if becoming part of our outfit is the right investment for you!