As a franchise broker and consultant, this is something I hear from my clients all the time. There seems to be a prevailing thought that the more a business costs to get into, the more potential it has to make money. It may surprise you to learn that this is simply not true. The truth is there is absolutely no correlation between the cost of the business and the profit potential of the business!
Let me explain—a retail business, located in a high-visibility storefront in your neighborhood strip center, could be a very successful business producing a strong net income for the owner. A residential cleaning/maid service business could also be very successful producing a very similar net income for the owner. But, the start-up costs for these two types of businesses are very different. The retail business will most likely cost more to get into…and maybe significantly more. Build-out, inventory, furniture, fixtures, equipment, signage—not to mention a big monthly rent for that high-visibility location. These just add up to a larger number. With the cleaning company, the cost is much different. Rent for a small office location, off the beaten path with little or no visibility, is much less than an A+ retail space. In this service model you go to the customer—the customer doesn’t ever come to you so there’s no need for an expensive, high-visibility location. And there’s less, if any, build-out, equipment, and inventory. The start-up costs are just lower because of the difference in the business model. Yet both businesses can be grown to produce strong revenues and strong net income numbers.
The moral of this story is when you are looking to buy a business you should put your focus on the attributes of the business that best suit you—not simply on the money. Just about any business can make money, but if you aren’t excited and motivated to build it every day then you probably won’t! Industry, the number and type of employees, the hours, the business location, your daily role and responsibilities—what’s most important to you? Figure out what you like and what you don’t like, what your strengths are and what skills need improvement, and find the business that best fits you so you can have your best chance for success.