Many people reach out to me asking how to use franchising to diversify their lives and business portfolios. Why? As recessions approach, people are concerned that all of their eggs are invested in one basket. Many feel that they are too dependent on their employer, looking for an additional investment income streams, or want to mitigate risks between industries.
The franchise industry offers three specific types of diversification:
- Employment Diversification
- Investment Diversification
- Industry Diversification
Employment diversification an opportunity to start a business that is manager-run, while you keep the security and salary of your current job. This type of diversification can serve as a safety net for their corporate job. As loyalty dwindles and lay-offs increase, it is good to have a back-up plan. Employment diversification is also great for those tired of working for others and want more control over their lives. If you have time flexibility in your current job, this is a streamlined path to business ownership.
Investment diversification is when one uses the franchise model to invest funds into a different market. For example, if most of your investments are in real estate and you’re worried about the market changing, you can invest into a franchise instead of buying more property. The proven model of franchising reduces risk and your typical learning curve compared to starting a business from scratch.
Industry diversification is when a business owner decides to invest into a different industry in order to mitigate risks across multiple industries. For example, a great couple that I worked with bought a window treatment franchise and grew it into to a huge business with multiple territories in a few short years. With market changes and more time on their hands, they decided to invest into four manager-run hair salons as well. This helped them ensure that if the housing market changed, they would have a strong recession-resistant business through the hair salons.
There is no right or wrong way to invest, however diversification can be a great way to maximize your return and minimize your risk. If you’d like to discuss diversification strategies for you, give me a call! This is one of my specialties and I have many opportunities I can share with you.
