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Can You Bootstrap a Franchise Business?

By: Bill Bradley

 

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The expression started out as “pulling yourself up by your bootstraps”—an impossible thing to do, so in the 19th century it meant a tall tale or an impossible claim. In the 1920s, it gained the meaning of succeeding by one’s own efforts or being a self-made man. By now, the expression has turned into a verb. Bootstrapping a business means starting up with few resources and gradually building a business with the funds that business earns.

 
This is the business that sells a few customers on an idea and reinvests everything those customers pay into producing goods and services for the next group of customers, until eventually the business scales to a profitable size.
 
Most franchise business opportunities don’t lend themselves to bootstrapping. They require a pretty hefty initial investment in franchise fees, building costs, start up inventory, staff, and marketing. Often, they also require a high net worth and a good deal of cash on hand. The path from paying the franchise fee to earning revenues can be a long one, and the franchisee needs to have enough capital to sustain the business and his or her own lifestyle until that ship comes in (to use another popular business expression).
 
 
There are exceptions to the rule.
 
Social Owl, for example, offers a “business in a box” approach with low overhead and work-from-home capabilities. A franchise that can be started as a solo venture without an immediate need for offices or inventory can be a bootstrap option.
 
Ambit Energy, an energy consulting service, is a licensing rather than a franchise arrangement, designed to give consultants a chance to earn commissions on sales. A business like this can be started with very little investment and built up gradually.
 
If you find a franchise that’s a good fit for you and an option for bootstrapping, keep these things in mind:
 
  • Bootstrapping means reinvesting most of the revenue into the business at the beginning. Be sure you’re ready to live modestly until you get your business off the ground.
  • That investment will probably include your time as well as your money. Time-intensive low cost marketing will probably be required, and you won’t have minions for a while.
  • DIY as much as possible. When you’re starting out, you’ll probably have more time than money, so do your own work as much as possible. This will also help you learn what you really can’t do well, so you can prioritize the skills you’ll be hiring or outsourcing when the time comes.
  • Get expert advice. Your franchisor provides training and support, so be sure to make the most of it. You can also reach out to organizations like SCORE to get mentoring.
  • Be cheap… but smart. Cut corners on what you can, including things like office furniture and travel. Don’t just buy the cheapest every time, though, especially when it comes to things that will affect your customers. You can end up wasting money if you have to replace your bargain finds too soon.
  • Follow the rules. You still must meet the requirements of your franchise, so don’t cut corners on purchases or investments that are covered by your franchise agreement.
 
This article was originally published by America’s Best Franchises
Published: March 31, 2015
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Bill Bradley

Bill Bradley

Bill Bradley is founding member and CEO of America’s Best Franchises, LLC.  Bill founded three financial services firms, Ocean Shores Ventures, Denali International and William Bradley Enterprises. In addition, to launching America’s Best Franchises in 2005, Bill orchestrated approximately 20 private equity transactions in excess of $31 million, and launched five specific purpose private equity partnerships.

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