I don’t like to do it. I really don’t.
I don’t want to tell a client they don’t have enough money to invest in a business, but that’s what happened today. I had to tell a client (or now ex-client) that she didn’t have a high enough net worth to invest in a business. She was very offended that I would tell her that. I would LOVE it if I could help anyone and everyone who wanted to buy a business, but I can’t.
When someone wants to work with me to help them find a franchise match, I start by having them complete a Personal Franchise Assessment. It can take 20 to 30 minutes to complete the profile and it asks a lot of questions relating to personality, likes, dislikes, career background – and the all important financials. Yes, in the end, it all comes down to money. (Please see my article on “The Money Talk – How to Know if You Have Enough to Invest in a Franchise.”)
Believe me when I say this – knowing how much money a client has or doesn’t have for a business is a good thing! Here’s why…
Knowing There Can and Will be Cash Flow Ups and Downs
Did you know one of the top reasons for business failure is undercapitalization? That’s a fancy term for no money and no cash flow to support the business. Here’s a great infographic that explains it.
Franchisors know this. Banks know this. People who have been in business longer than a day know this. It can be difficult for someone who has never had a business to understand that running a business takes more than simple sweat equity. Businesses and lenders don’t care how dedicated and hardworking someone is. Owners need money to get through the early times when the business is not making money.
As a seasoned advisor to my clients (10 years of good advice I might add), I have to let my clients know if they don’t have the funds to get through the tough times – in a start up, a resale business, or a franchise. It doesn’t matter what type of business it is. Cash flow is king and some days it can be up and some days it can be down, but you have ride the bull to win the prize.
Knowing Prevents the Ostrich Syndrome
It’s so easy going around thinking you have money when you really don’t. I’ve seen it time and time again. I have to get a handle on my client’s net worth, for their own sake. I’m saving them from themselves when we can have a reasonable conversation about their net worth and what it means.
Those pesky financial questions are in my Personal Franchise Assessment so I can help my clients with this part. I consider it a gift to them. I take my client’s head out of the sand, for just a little while, so they can have a real and honest look at their financial situation. Sometimes it’s great, and sometimes it’s terrible. But we all need to know, even if we don’t want to hear it. It grounds us and offers a starting point.
Knowing if You Are Wasting Your Time – For Now
No one wants to waste their time. The ex-client I angered today felt like she wasted her time spending 20 minutes completing my Personal Franchise Assessment. I know I saved her time and maybe some heartache by telling her she didn’t have the capital to do any type of business – right now. I happen to think the knowledge gained in FranNet’s science based profile is worth the effort, but that’s just me.
So today my ex-client’s financials don’t look very good, but in a few years, when her debt gets paid off, or when the big bonus arrives, or she gets that corporate buy out, or she has saved enough, or her financial picture changes… that’s when the magic can happen. My ex-client may be in a much better place. Lots of people come back to me later on, and then we can have some fun. I’ll look forward to that.
Today, I’d like to think I did my ex-client a favor. Do you think someday she may even thank me?
I doubt it. I made her really mad.
When is the last time you took a close look at your own personal net worth? I’m offering a free net worth analysis so you can take your head out of the sand too. Complete the secured FranNet Finance form today and I will respond with your results and my personal recommendations for business investing within 24 hours!