Building multiple franchising empires has been the most empowering and rewarding experience of my life, and diversifying has been a key part of that. I strongly urge both franchisees and franchisors to branch out into new markets and new businesses when they’re ready. But how will you know when you’re ready?
Unfortunately, there are no certainties in life – especially in business – but for that reason precisely it is important to consider as many angles as possible before taking the plunge and expanding. I have been through this process many times and have owned 7 brands of my own. I know first hand what it takes to succeed, as well as what can cause you to fail.
If you’re thinking of diversifying, start by taking a close look at the following 3 areas in order to give yourself the best chance at success.
1. Do you have the right team around you?
This is without a doubt the most important element you need in your business, especially if you are going to grow. If you have a team of people you’ve conquered impossible challenges with before, your confidence grows and the obstacles that you face will be that much easier to overcome.
Do you have a team of rockstars that you actually look up to? Are they better than you, particularly in key areas where you have weaknesses? If you’re really going to build an empire, hiring people who are more talented than you is the most important skill you need to have. No one can do it all by themselves.
Know how to hire people smarter than you, people you can trust to do their job without needing any hand holding. When you can do this you free up energy and time, making everyone better in the process and letting your employees feel more free and fulfilled in their roles.
When you really find a star, don’t be afraid to share equity. I have lost valuable employees because I didn’t share equity soon enough, and seeing them flourishing in roles outside of my business kills me. Retaining my best people is an absolute priority, and it needs to be for you too if you want to grow to your fullest potential.
Lastly, how is your company culture? Do your employees work together? Do they like each other? Are they legitimate friends? Are people happy to show up to work and excited to take on new challenges?
If you have a team with this kind of energy you can take on anything. If you don’t, your crew might crumble and quit at the first sign of adversity, and if that happens it could tank you. If your team is ready, you won’t really need to ask yourself this question, you’ll just know. If you’re wavering, you may want to pump the breaks on expansion.
2. Are you ready for a new challenge?
Have you maxed out your ability to expand with your current brand in your current market? If you still have ample room to grow in your current space, it probably makes most sense to keep your focus around one goal rather than risk spreading yourself too thin.
If you’re ready for a new challenge everything should be operating smoothly in your current business. The surprises should be down to a minimum and you should be able to handle 95% of problems that do arise on auto pilot because they are problems you have faced before.
You should have a steady stream of income that is reliably within a certain range that you know you can count on, and you need to be able to trust the people currently in place to continue running the ship while you spend big chunks of your time elsewhere (see part 1!).
If you have a solid team and your business is running *relatively* smoothly, there’s only one thing left you need to have locked down.
3. What type of diversification do you want?
Opening a new business is never something that should be done without careful planning, and I wouldn’t be where I am today if I had made rash decisions. Unlike when you started your first franchise, on your second, third, fourth all the way to your millionth, you have the advantage of taking more time to make a more calculated decision.
You have more information at your fingertips, more knowledge of what will be required, and you’re already fully supporting yourself with income from your current businesses. What type of expansion makes the most sense? New market, new brand, or new type of business altogether? Diversifying comes in many shapes and colors, there may be more options than you even realize.
The most common type of diversification is to branch into a new market, a new brand or a new industry, and these are probably the best places to start your second franchise. It will provide fewer challenges, fewer new things to learn, and set you up on the easiest path forward. If you’re already on your 2nd or 3rd franchise or brand however, there may be more beneficial ways to diversify.
I’m currently on the brink of jumping into the service industry in order to branch out from retail. Direct-to-consumer sales is another good option I may look into if I find the right opportunity. You can try businesses with few employees, businesses with no inventory, or seasonal businesses like my first endeavor: Liberty Tax. There are positives and negatives to all of the different options out there, and each will help you hone your franchising skills.
Take your time, consider your options and don’t make a move until you find the best fit. A shrewd businessman turns down good opportunities so that when the great ones come along they are ready to pounce. If you focus first on building a great team and treating them well, you will have more of those opportunities come your way than you ever expected.