Leaving a job to buy a franchise? See when the business could match your current salary, and how much savings you need to cover the months in between.
Enter your salary and the franchise figures to see your answer, or try the example.
Business profit before tax, over three years.
| Year | Business profit | Your salary | Difference |
|---|
For most people buying a franchise, the biggest worry is not the investment itself but the income they give up. A salary arrives every month whatever happens. A new business takes time to build, and in the early months the profit it makes may be well below what you earned in employment.
Revenue starts low while you find your first customers, but many costs start straight away. Royalties and marketing levies are usually a percentage of your sales, and running costs such as insurance, vehicles and software are due every month. The result is that profit tends to build gradually, and the months before it reaches your old salary need to be funded from savings.
Revenue rises in a straight line from your month 1 figure to your month 12 figure, then grows at your chosen yearly rate. Each month, profit is revenue multiplied by your gross margin, less royalties and running costs. That profit is compared with one twelfth of your yearly salary. Both figures are before tax, so they compare like with like.
The most reliable revenue figures come from existing franchisees. Ask several of them what they took in their first month, their twelfth month and their second year, and how long it took them to match their previous income. Then try a slower version of the same figures to see how much extra buffer you would need.
Add up every fee over the life of the agreement, not just the upfront price.
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