Most Americans think that their largest asset is their home; however, franchise business owners should consider their business as their largest asset. Business ownership offers Americans the opportunity to earn income and secure their financial future during a time that has many questioning their financial fate. Learn more about how and why you should create your own financial security by building a business as an asset.
How a Business Is an Asset
Owning your own business isn’t just about making your own rules, setting your own schedule, or increasing your income potential. Much like a home, a business can accrue or lose value during its lifetime. A business is something that you can own and grow over time. When the time is right, you can sell the business and hopefully make a large profit. This money can be put toward retirement and give you financial peace of mind.
Long-term, business ownership offers the promise of a valuable asset that can be sold or even passed down. Business owners can also choose to maintain ownership while delegating their responsibilities to trusted employees during retirement. This allows owners to have a form of passive income to support them through retirement years instead of selling their business for a lump sum.
But how much will your business be worth when you’re ready to sell?
Simply put, businesses are measured based on revenue and the total value of assets, like equipment, furniture and office supplies, or inventory. However, potential buyers may also consider price-to-earnings (P/E) ratio. This ratio compares a company’s share price to its earnings per share. It is commonly used to determine the relative value of a company, and it can be used to compare multiple companies — even in different industries.
Another factor to consider is your cash-flow analysis, which takes into account your business’s annual cash flow and forecasts future cash flow. Therefore, the best way to build value in your business is steady and maintained growth.
If you aren’t a business owner yet, it can be difficult to determine if a franchise opportunity could become the asset you’re hoping for. You may want to consider the past and current financial status of the companies you are evaluating. Financial performance information is contained in a franchisor’s FDD (Franchise Disclosure Document). While that information may not be an exact indication of your business’s potential value, it’s a great place to start when evaluating how much your business could be worth.
How To Turn Your Franchise Business into a Strong Asset
Businesses aren’t worth thousands or millions over night — especially not new franchise businesses. It will take time for your business to become an established and reliable asset for you and your family.
However, there are some things you can implement now to help you increase the value of your business. Here are some tips for home care franchise owners.
1. Diversify Your Client Pool
In the home care industry, franchise owners should maintain a steady pool of clients. These clients should be balanced between a few hours a week to 24/7 cases. By having a diverse customer base, owners can reduce their risk of taking a large hit if one or even several clients discontinue services. This can help improve cash flow while also maintaining consistent hours for your caregivers.
2. Continually Hire Reliable Caregivers
Additionally, home care franchise owners must have enough caregivers to meet their shifts. If you have a large pool of clients but you can’t fill your shifts, then you won’t be able to increase your revenue. We recommend that owners continually look for qualified caregivers to add to their team. You should also strive to build relationships with the caregivers you’ve already hired to build trust and maintain loyalty.
3. Plan for Growth
To increase the value of your business, it’s important to create a plan. There may be areas in which you can improve your process or efficiency to help you maintain caregivers or attract more clients. Evaluate the current state of your business and look for ways to improve.
At Caring Senior Service, we also help our franchise owners with growth planning so that they can identify areas of improvement or expansion to take their business to the next level. Perhaps your next step is to focus on a city in your existing territory. Maybe you need to focus on having more efficient processes before you expand. Our experts can help owners identify room for improvement and growth so that you can build your business into a strong asset.
Why Now Is the Time To Create a Business Asset
You may think that you have time to build your portfolio or buffer your savings account. However, many are facing unforeseen threats to their financial future and retirement. Market fluctuations or a recession could negatively impact your financial situation down the road. Or changes in an employer’s pension plan could eliminate or reduce income during retirement. For example, GE recently announced that it is freezing pension plans for 20,000 employees.
Americans can no longer count on their employer’s retirement plans to build their assets to prepare for retirement. Instead, it’s time to consider other options to secure finances. One great way to do that is by starting your own business.
With the number of seniors on the rise, the home care industry is projected to grow as well as more of those seniors choose to age in place. Not only does this offer franchise owners the opportunity to build a successful business, but it also means that the resale market for healthcare-related businesses is robust. Owners can build their business and grow its value until they are ready to sell.
Join the industry while it’s still booming and before it gets over saturated. To learn more about opening your own home care franchise, reach out to us! We would love to discuss your options and dive deeper into how a Caring Senior Service franchise can become a strong asset for you.