Look Before You Leap Into A Managed Services Franchise
Still, franchises aren't for everyone. I had lunch the other day with a franchise consultant who helps people find a franchise that’s right for them. Here are some key thoughts from the conversation.
At first glance, franchises are for fast food and retail stores. But franchises are popping up in the managed services market, and quite a few are successful.
Still, franchises aren’t for everyone. I had lunch the other day with a franchise consultant who helps people find a franchise that’s right for them. Here are some key thoughts from the conversation.
During our chat, we agreed that for the past half-decade or more, franchising has been driven to some degree (I think a large one) by middle-aged Baby Boomers who grew tired of their jobs in corporate America and found an easy way to buy themselves a job through the equity in their homes. They bought an unprecedented number of franchises, writing checks from easy-to-get equity lines of credit.
I knew some of those people personally–the ones who would have been better off spending $10,000 on a Club Med vacation, rather than $200,000 on a franchise, because all they really needed was a change of scenery for a while. Now, many of those people have closed their businesses because they did not find the success that their franchisor and their own fond wishes had promised them. Along with shuttered businesses, many have lost homes and/or their kids’ college savings.
I’m not one to look for silver linings in bad news. The stories I have heard are harrowing. There’s no “Oh, well, it’s a learning experience” to be said when someone loses their house.
Real Players Enter the Market
The future landscape, which became a reality in the last month but has been taking shape all year, looks very different. My friend the franchise consultant is already seeing it in the people who come to him looking for a business to buy. The people who were going to buy a franchise out of boredom, or because they couldn’t find a job after a layoff, are gone. They are being replaced by people with maturity, management experience and cash.
It turns out that not everyone can or should own their own business. Entrepreneurship is not something everyone can do. That’s why, when I’m asked by prospective franchisees about whether the particular franchise I own might be good for them, I do everything I can to get them to run for the hills. If they’re crazy enough to be entrepreneurs, they don’t need encouragement from me. They’ll go ahead and do it anyway.
MSPmentor contributing blogger Mitch York coaches executives who are evolving into entrepreneurs. He is a veteran of high-tech media and an entrepreneur himself. Find York — and his personal blog — at www.e2ecoaching.com.
Great insight Mitch, hopefully I can offer a little more.
Chip Reaves, CEO of Computer Troubleshooters (world’s largest IT solutions franchise), has definitely put together a go-to-market franchise for SMB managed services. How do I know (or be somewhat biased)? I used to work for him during the development and selection of their Managed Services offerings.
Being a franchisee has tremendous benefits beyond the marketing, advertising, community, etc… It’s a tried and true model of what works and what doesn’t work. At Computer Troubleshooters I know they’ve gone through tremendous pains that a lot of Managed Services provider have – selecting the preferred vendors, RMM platforms, PSA solutions, pricing, and all the other things that take extreme diligence to navigate when starting a new business. On top of actually selecting those platforms, they’ve used the economy of scale to negotiate killer deals and provide them to the franchisees. With a very, very modest buy into a CT franchise it is definitely worth looking at if you are starting your own Managed Services business.
Just my $0.02….
John Kilgore
Director, Managed Services
Computer Service Partners, Inc.
John: Good to hear your perspectives. It sounds like you have the focus and vision to be a franchisee. But I think Mitch is pointing out that many so-called entrepreneurs make the following error: Just because they lose a corporate job or hate their current position, they “assume” it might be time to become a franchisee.
I remember when I had positions that I didn’t like. I always assumed the grass would be greener if I had my own business. But you have to find the “right” business (or franchise model) for your talents, rather than jump in blindly.
Haha – agreed. The problem is that an overwhelming majority of SMB IT VARs/MSPs/SPs/Etc. came from a corporate job, cut the purse strings and hung out their shingle because they thought they could deliver services better than their boss. Whether they bought a franchise in an entrepreneurial seizure or whether they hung out their own shingle isn’t the dangerous part. You could lose your house by jumping into any form of business without proper planning and business management savvy, and even then the effects of economy, competition, financing, etc. can put you out of business quickly. A good franchise can be a great solution especially for an IT person who has no business background, or finance background, or management background. I never bought into a franchise because when I had my entrepreneurial seizure, I was too stubborn to look at a franchise, I thought I was smarter than that and could figure it all out on my own. 😉
Amy Luby
http://www.mspsn.com
aluby at mspsn dot com
Amy: To your point — sometimes it pays to be stubborn. Alas, some stubborn people flame out and never learn from their mistakes. Other stubborn people turn out to be Steve Jobs, Bill Gates … you get the picture.
I hope your stubborn ways lead to continued success at MSPSN. I respect stubborn entrepreneurs.
Glad to see my article sparked some good thinking. I think whether someone succeeds in a franchise has everything to do with whether the individual has great business instincts, which perhaps cannot be taught or read in a franchise operations manual. Franchisors try to make their franchises idiot-proof. And the best of them succeed – one word: McDonald’s. But when it comes to B2B it’s another story. For that, success depends on whether the franchise owner can look at client in the eye, have real credibility, and deliver consistently.
Mitch: The old argument of “instincts” vs. “experience” is a fun one. I think we sharpen our instincts through experience.
But it’s difficult to explain, because sometimes experience can lead to bad decisions. Sometimes we assume yesterday’s good decisions are still the same decisions we should make today. Meanwhile, markets and customer demands are ever-changing.
For me, I can’t imagine buying into a franchise because I’m not good at following another person’s routine. I constantly create and recreate my own routines. There’s some upside — and some downside — to my approach. But I’ve learned to live with it. (And I hope my business partner has, too.)
Joe: Your business partner is learning to live with it. Luckily for Nine Lives Media, our instincts tend to be similar, and when they are not, a healthy debate typically ends with a clear path forward.