Most articles we publish are about growing wealth while you are young and working. But what about once you’ve hit the “big leagues” and have a couple of million dollars in your portfolio? Today we have a guest post by Meg Schmitz, a FranChoice Consultant who helps individuals get into franchising. This might be an option as a way to generate income in retirement with a portion of your portfolio. – SmallIvy
Retirement in 2019 looks very different than it did fifteen years ago. Today, people are retiring earlier and living longer, therefore requiring more robust savings and diversified income strategies than ever before. Many find that life after 50 is a time to harness energy and interests that may have been dormant or unused during their career. I should know, I am that 55 year-old who pursues diversification, and boy do I love watching my investments grow!
I work with similarly experienced and successful business people via my consulting business. Yes, I see some choosing to invest in real estate or diversify their investments through the stock market. A short-sighted stock market investment strategy only cheats the investor, while staying the course long-term is where real wealth is generated.
There are loads of baby boomers who are choosing to stay engaged in the business community by pursuing franchising, and are looking outside of the traditional stock investments. Even into their 70s, I work with mature and experienced investors to find the best franchise concepts. These franchisees are vital, engaged, and impactful, allowing them to be their own boss, invest in a known product/service, and call the shots for their day-to-day schedule.
I find that a franchise investment not only provides those looking to leave the corporate world with a solid departure strategy that will allow them to remain active in their careers, but also a financial cushion during retirement. By aligning with a company that has a solid track record and strong infrastructure, people with little time and lots of experience can plug and play, and not recreate the wheel. Not to mention, owning a franchise is also a sound way to protect your family’s financial future through legacy ownership.
Whether you’re a recent retiree pursuing franchise ownership to fulfill your lifelong dream of entrepreneurship “with a safety net,” or simply as a money play and long-term wealth building strategy, there are several factors I advise you to consider when thinking about a potential franchise investment during your retirement years.
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Lifestyle and Time Commitment
A primary goal, and theme, that has emerged when it comes to retirement is that people want to have more flexibility and a higher quality of life, as well as to spend more time with family and friends while doing so with minimal risk.
Those interested in franchise opportunities don’t necessarily need to be actively involved with running the business. When consulting with multi-unit franchisees and investment groups, I like to make sure the term “semi-absentee ownership” is foremost in their consideration. A franchise of this nature is one that is set up to have a manager in place from the time the business is opened, meaning the franchisee can be the experienced business interloped, and doesn’t have to be a full-time owner/operator.
By hiring “industry insiders” to run the daily business operations, the business owner can roll a franchise into their portfolio and engage in a meaningful role without the magnitude of responsibility that comes with overseeing day-to-day operations. For example, I hired experienced hair stylists to operate my franchise investments, allowing my time to be focused on financial impact, and developing infrastructure and a rewarding climate to work in. Thus, the franchise owner has more time and flexibility to enjoy family, friends, travel and all the finer things in life without having to handle miniscule details.
However, to reap the benefits of a semi-absentee franchise, you need to find the right fit for your portfolio – I do not take a one-size-fits all approach when I work with investors. Many concepts thrive under semi-absentee ownership while some concepts are most profitable with owners who are actively engaged in all operational aspects of the business on a full-time basis.
If you’re seeking out a franchise investment to stay active with during your retirement years and are interested in overseeing day-to-day operations as an owner, there are plenty of concepts out there that thrive under hands-on ownership.
With the right concept, building wealth through franchise ownership is a profitable pathway to financial success and security in your retirement years.
If your franchise investment decision is primarily driven by the potential profit margin, it’s important to know that the most profitable concepts aren’t always the sexiest ones; invest in a recession-proof concept that will do just as well in a downward facing economy as it will an upward one.
Financially speaking, some of today’s booming, most profitable categories to consider are:
- Home improvement
- Boutique fitness
- Personal care services
- Entertainment (children’s, adult, and pet) — examples of entertainment franchises include concepts like Party Princess Productions, Dogtopia, Pet Supplies Plus and Big Blue Swim School.
Many franchisors specifically seek out franchise prospects who are seniors or recent retirees because of the value of their business acumen, leadership experience and established financial security. For example, service-based franchise concepts and multi-unit retail concepts command effective communication abilities and strong management skills – two competencies that are often gained as a result of simply having both more life experience and overall career experience. Such concepts tend to be more suitable and frankly successful under the ownership of a more well-rounded and established franchisee.
Franchise Exit Strategy
Succession should be a topic that all franchisees, especially older investors, should discuss with franchisors from the very beginning. Ideally, a franchisee’s original business plan when investing into a franchise should include an exit strategy. Frankly, I like to see franchise concepts broaching the subject from the beginning, as it allows them, along with the franchisee, to create KPIs that will directly lead to that exit.
Franchisees should have a written plan in place for either selling their business or transitioning ownership to a family member.
When it comes to long-term financial planning and wealth building, it’s crucial to ensure your investment strategy is setting you up for success.
Today’s economic climate is favorable for franchising and small business owners, so it’s time to start finding the right investment for your portfolio in order to reach your long-term financial goals for retirement.
If you’re considering franchise ownership in your retirement years, I would be happy to work with you! As a business owner and consultant, I become familiar with your lifestyle and your goals, and acknowledge the risks of going into business. My role is to help you navigate the process, to guide you to find answers that make you feel completely informed and comfortable with your decision. In the end, I am aligning for your ultimate success, so I am always with you as a strategic, long-term partner.
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.