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E-Myth – “Why most small businesses don’t work & what to do about it”

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Edmonton Accounting Firm | Is A Franchise A Good Investment


One of the reasons why business owners might be drawn to purchase a franchise says Edmonton accounting firm. Is because people tend to think that there is a higher success rate associated with purchasing franchises.

According to industry Canada, the failure rate for small businesses in Canada is quite high. With 15% of business owners failing within the first year of owning their business.

30% of business owners fail within the second year of owning their business. And half of all business owners fail in their small business within five years of opening the doors to their business.

However, while these are very startling numbers. Franchises are shown to have only a 14% failure rate within five years. Which can make them a lot more attractive to many people.

This could be that there is brand recognition. And business owners are starting their business, knowing that people are already familiar with the name of their business.

And that they are starting a business that already has customers that are ready and willing to buy the products and services that they sell. And the more popular the franchise, the more money is going to cost a business owner to purchase it.

However, it can be very valuable to be purchasing a business that already has brand recognition and customers. Which is why people continue to buy franchises every year.

Unfortunately, this does not mean that every franchise is the same good deal. Which is why business owners need to hire and Edmonton accounting firm to help them sort through the information.

Especially the financial information. In order to determine if this is as good a deal as people think it is. When they first started talking to the franchise about purchasing a location.

Each franchise will have its own franchise fee says Edmonton accounting firm. As well as its own royalty fees. And while some franchises will have a royalty fee. Which means once business owners make a certain amount of money every month. They will not pay any additional royalty fees.

While other royalty fees will continue increasing no matter how much money a business owner makes in their business. It will have to pay a percentage of their monthly revenue in royalty fees every month.

In addition to that, accounting firm says some franchises will require a separate buy-in for things like advertising such as on the radio or television. And this can be an additional cost to their overall revenue that they may not be aware of initially.

They might also be required to use the franchisor website that is set up for them. Which may also have its own individual fee. That again, will cut into their overall revenue.

That they may not be aware of when the look at the financial information of that location, and see with the overall revenue is. This is why it is very beneficial to hire an accounting firm.

Because not only will they be able to look at the franchise agreement. But they will also look for the things that are most often overlooked. To help the business owner make the most objective decision about whether they should buy this franchise or not.

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Many people are drawn to purchasing a franchise says Edmonton accounting firm. Because it comes with built-in processes and systems. That they can use to hit the ground running as soon as they purchase their business.

The benefits of a franchise. Is the fact that they have already figured out how to operate the entire business. And have created checklists and templates. To easily teach that to the franchise owner. So that they can follow the same system to success.

This is something that all business owners should eventually create in their business. So that their own processes can be easily taught to others, so that a business owner does not have to be responsible for doing everything in the business.

However, if business owners want to customize too many processes. Or change too many of the checklists or templates. A franchise may not be a good investment.

The reason why, is because if business owners want to have their own systems in place. Or do things their own way. Why would they pay the franchise fee. An ongoing royalty fee for a franchise system they are not using.

However, if business owners are willing to follow the processes and systems set up by the franchise. Purchasing a franchise can be the right decision for them.

However, before they start choosing which franchise they like to own. Their accounting firm recommends they compare about three franchises at the same time.

In order to help them make an objective decision about the franchises. And can compare different franchises to each other. To see want systems are the most advantageous for themselves.

One of the first things that their Edmonton accounting firm asked. Is to get accountant prepared financials for more than one franchise location. While the franchise might push back on this.

The reason typically is because they want to show the financial information for their best locations. While business owners are going to want to see average financial information from typical locations.

And the reason why they should be asking for accountant prepared financials. Is because typically, the franchise will hand out plain paper copies. That may have errors or omissions that can end up with the financial information being incorrect.

If business owners are going to put a significant amount of money into purchasing this business. They should be well satisfied that the financial information is exactly what they expect.

And that business owners are purchasing a business that is as financially viable as they were initially led to believe. This is why it is very important to hire and Edmonton accounting firm.

Because they will be able to look at things that are often overlooked. Help business owners come to objective conclusions about the information that they receive.