This is such an important question to ask before INVESTING into any Franchise or business for that matter.
This is the difference between buying a franchise business and investing in a franchise business and that is your return on investment.
If you buy a chair, you don’t expect to get your money back right? But if you invest in a chair and what that chair could do for you, then you expect that you will not only make back the initial cost of the chair but also make more money on top of that. Same chair, different intention.
Many people buy a franchise and they expect to make a living along the way, make enough profit to cover their family expenses and have their own business instead of having a job. Be their own boss. That is all good and if that is where you are at, then that is great.
At Gutter-Vac, even if you are not thinking yet about a return on investment, we certainly are. We want you to make a return on investment on your business BEFORE you decide to sell it and retire.
Most people wait until the day they sell their business to hopefully get their initial investment back. We want you to sell your business, get more money than your initial investment, but also have ALREADY got your initial investment back over the years.
Let me explain.
The common thought process in franchising is that you want to help franchisees get their initial investment back in the first term of their franchise agreement.
Let me give you an example ….
Let’s say your initial investment is $100,000 and your franchise agreement is a 5 + 5 agreement – that is 5 years and then you have the right to renew for a further 5 years. That means your ‘first term’ is 5 years.
This would mean that you want to make an extra $20,000 profit per year for 5 years on top of what you pay yourself so that before your first term is finished, you have ‘made’ back your initial investment plus also a living along the way. So if you decided to sell at the end of the 5 years or not to renew (which we would think would be crazy if you have an asset you can sell!) you have made back your initial investment on your business.
Now I’m not including any sort of tax here by the way… I’m not an accountant or financial planner, you need to get your own advice, we are just doing some basic numbers here as an example…. Also to note, usually it is not a straight split over 5 years. You might not make any extra in your first year as you build your business, but you might make say an extra $60,000 in your 5th year. It is not a straight line, more a curve of growth.
So you can see from this, if your initial investment into the franchise is high, then you are going to have to make a lot more over the years to get your investment back.
At Gutter-Vac we aim for better than this first term…. We want you to do it faster! Why? Because then you have more profit to invest for your future, more money for your family.
I can’t promise you anything here, I can only give you examples of franchisees and what they have earnt over the years. In the end, you have to do the work to make these figures work, but we have sort of set ourselves some targets of where we like to see franchisees as they progress in their business to ensure they are making a living, plus making a return on investment into Gutter-Vac.
Their first year is all about getting up and running and making a ‘wage’ for themselves.
We find it totally common for Franchisees to be reaching $100,000 in their first year at Gutter-Vac. With a profit margin of over 60% (for a single unit franchisee with no staff) this is really common and we have franchisees who do a whole lot better than this too! It is really up to you and how much you are willing to do what you need to do.
Then you go into your second year and this is where we see Franchisees really fly. Some of our franchisees are happy to stay at the $100,000 to $120,000 a year because it provides a great lifestyle business, but we are seeing more and more franchisees take the leap into growing their business AND still have flexibility on time to have a business AND a life. We commonly see franchisees reaching $150,000 + in their second year. Note, at $150,000 a year, you could still be working totally on your own. Some franchisees might have a casual employee if they have a lot of big commercial work that requires two people. Why do I tell you this? Because staffing is the only thing that might see your margin go down, but that being said, having a staff member means you should be making a return on investment to what you pay them as well….. Still, if working on your own, your profit margin will remain high (probably 60% +)
I can tell you about a franchisee that reached over $200,000 in their second year … on their own …. At around a 60% profit margin. That means about $120,000 profit…. Starts to not only pay you a living, but also takes off that initial investment payback too, right? As a note, I have to tell you that this was a young guy in his 30’s so working on his own… his body certainly works better than mine would yet if you ask him, he said he wasn’t “killing” himself. I do note, he still managed to go on holidays … a couple of times!
We now have single unit franchisees that are doing in excess of $250,000 a year… some are doing in excess of $300,000 a year…. The average profit margin of a single unit franchisees is around 50%. The top performers in single unit franchisees are doing more of an average of 65% profit margin.
When you start looking at these figures… let’s say $250,000 at a 50% profit margin, you are well and truly making your initial investment back.
The average wage in Australia – from the Australian Bureau of Statistics* for 2019 – is sitting at about $85,000 a year. So let’s do the numbers on this.
If you were doing a total revenue of $250,000 and had a 50% profit margin (not including any sort of tax remember), that would be a profit of $125,000 a year. Take off the ‘average wage’ for Australians of $85,000, according to the Australian Bureau of Statistics and you are left with $40,000 of profit (pre-tax).
So have you worked out how long it would take you to pay yourself back the initial investment of your Gutter-Vac franchise yet?
We are not ones to boast at Gutter-Vac. In fact, we kind of like being a bit under the radar. In fact, I like to use the analogy of sitting in the blind spot of a car. We are travelling along beside another car, just to the side, in their blind spot. No one notices us and then all of a sudden, we overtake them and the other car’s driver is left wondering ‘where did they come from?’
When I looked at the numbers – not what I hope for, but what franchisees are actually producing – I couldn’t keep quiet, I had to share it with you. Imagine investing in a franchise business that you can make a living (probably better really…) AND also pay back your initial investment easily before the first term is up. All you have to do is work your business. You are really the only unknown in Gutter-Vac…. Will you do what you need to do to get these results?
So if this has encouraged you to think a little more than just making yourself a living and being your own boss, then give us a call at Gutter-Vac on (07) 3357 6270 or make an enquiry via our website www.franchising.guttervac.com.au and we would be happy to talk to you about your personal goals and situation and if Gutter-Vac would be the right fit for you.