3 ways to rate a handyman or home improvement franchise

Handyman franchise, home improvement franchise or business opportunity, what's the risk and the chance of success. Choosing a franchise or business opportunity comes down to getting all the information so that you can make an educated decision. IFA President and CEO Steve Caldeira shares great information on the value of working with a franchise. Here is a way to rate any franchise or business opportunity.

Summary

An article in the 70's I read about how entrepreneurs investing in any franchise or business opportunity should first rate the risk associated with it always stuck in my mind. The system was simple. Consider awarding 1-5 points for each of 3 elements in any business model; how quick you get paid, size of inventory needed, and dependence on location.Then compare the various businesses you are interested in against one another to see how they stack up.The author realised that there were certain common reasons for small business failures and focusing on businesses that scored well with this rating system would help reduce the risk. Although there are lots of other things in business that could impact your success over time this is a great place to start when initially considering your chances of success. By considering these 3 elements at the beginning you could reduce your risk of failure over the long term. Let's consider why cash generation, size of inventory needed, and dependence on location can be so important.

Franchising information to rate your franchise

1. Is the franchise or business opportunity you are considering a cash business?

Consider a cash business as a business where you get paid when you complete the service or deliver the product as opposed to a business where you have to wait for your money. Cash is king when starting a new business. Maintaining a steady cash flow is critical to enable growth of any business. I've experienced both sides of the coin and believe me when I say getting paid quickly for the product or service your offering goes a long way to helping you get through the ups and downs of business that invariably come along. Having a strong control on your receivables is therefore paramount to your success and one of the main reasons for business failure is obviously running out of cash. A good franchise will help you prepare a proforma including cash flow projections that will help you financially plan your business growth. 

2. How much inventory do you need to carry in the franchise or business opportunity?

Refer back to the first point if you need to think about this. Inventory is cash that's tied up, cash you can't use. Inventory is classed as an asset on a balance sheet but when starting a small business remember the number one asset is cash. Even when I owned a printing franchise which you would assume would carry lots of inventory I worked on minimizing it. We ordered the paper needed for the next day the night before and had it dropped off first thing in the morning. Sure we had some inventory in that business but with the proper controls we definately maintained it at a minimum. I remember visiting another franchisee. He had reams and reams of paper on the shelves. Interestingly enough when the economy suffered a downturn and his cash flow became tight he had to close his doors. I'd much rather save cash than paper for a rainy day.

3. Is the franchise or business opportunity dependent on a location?

Location, location, location, that sure is true for retail and restaurants. There is no doubt that any franchise or business opportunity dependent on a location for success does carry certain risks. I've seen businesses fail through no fault of their own when traffic is re-routed or competition opens across the street. What does the owner do if they are tied to a lease? Be wary of the expensive rents associated with certain types of business. No one wants to be working just for their landlord. Look around and consider the strip malls that were exciting when they started only to become yesterday’s news when a new development goes up.

With my experience now as I look back over the years I would have to say that I agree with this rating system as a first step to measure risk. It's not to say that you can't have a good, indeed even a great, franchise or business opportunity that doesn't score well with any of these elements but a franchise or business opportunity that scores well with this rating system invariably carries less risk over the long term. 

The good news is our House Doctors franchise scores very high on this rating system.


1. Is it a cash business?
The House Doctors franchisees invariably get paid by the homeowner when their technicians complete the jobs.

2. How much inventory do you need to carry?
The House Doctors franchise needs to carry very little in the way of materials and inventory and therefore does not need to tie up cash.

3. Is the business dependent on a location?
The House Doctors franchise is not dependent on a brick and mortar location. Many franchisees start from home and even when they grow only need a small commercial office/warehouse in their territory.


House Doctors handyman & home improvement franchise scores very high on franchising rating system. If you feel you have the necessary skills to manage one of our franchises please visit our franchise development web site for further information.


What is your experience? Do you feel that these 3 elements of a business model are important enough to rate? Are there any other elements that measure the risk? Please share your thoughts in the comments section below.