So many of our readers and clients have commented on the bitcoin value in the end of 2020 and what is our opinion on bitcoin going forward into 2021?.
This one is really hard for us to answer when it comes to should you invest in bitcoins or not.
We always say when it comes to crypto currencies or investing in high tech high risk companies that they should not make up more than 10-15% of your total investment portfolio.
So here in lies the answer for you, if you feel that you want to invest in bitcoin then use 10-15% of your portfolio but not more than that to make sure that if it comes crashing down you do not lose to much of your portfolio.
So we have personally missed the bitcoin train many times starting way back in 2014.
Hindsight is always 20/20 in these cases but it is a highly volatile investment.
For the once that was lucky enough to take the chance on the bitcoin back in 2014 and have held on to it are today multi millionaires, no doubt about that.
We also know a lot of young people who put everything they owned into bitcoin and other crypto currencies and they are richer than they ever dreamed of in their wildest dreams.
So our hat off to them.
But there are also people we know that bought the bitcoin and then it dropped 50% and they got nervous and sold it at a 50% loss.
We have told our clients who bought at the last top, and when it started to go down to stay calm and wait for the turn.
And from October 2020 that turn has now arrived with a value at over 30.000 dollars per bitcoin.
So many have now the opportunity to sell and make 50% in profit on their initial investment, evern if they where down 50% at one time not to long ago.
This here above that we have mentioned is the reason a seasoned investor would never put more than maximum 15% of their Net Worth into the bitcoin or any other crypto currencies for that matter.
There are rumors that the bitcoin might go up to over 150.000 dollars so 5x in the next 2 years time compared to todays value in January 2021.
The value of bitcoin in 2021.
But we would not be surprised if it would fall back down to 15.000 dollars again by the end of 2021.
So this type of investments are very risky compared to Warren Buffet type of long-terms investing in blue chip stocks.
SO BE VERY CAREFUL WITH THESE TYPE OF INVESTMENTS.
So this is one of those million dollar questions many of our clients that are parents, are thinking of daily when they have teenagers who soon will go off to college, either state schools or private institutions.
The big question is this!, is it worth the money to send my child to a state school for 25.000 dollars a year, or a private for profit school that costs 40.000+ a year for up to 4 years.
So we see that text books have gone up 800% in 40 years time and the medium wage when taking inflation into consideration has gone up 200%.
So the cost of going off to college in the US in 2021 is just insane.
We can see from stats in the past that it has paid off to go to college up to around the 2010, but after the financial crisis in 2008-2011, we can see that the majority of the college graduates from the year 2008-2012 are making less than 40.000 USD a year.
So in the past we saw that a college degree gave you on an average 30.000 USD more per working year from the age of 32 until your retired compared if you only had GED or a high-school diploma.
This has not been the case since 2010, so 2004 was the last year it actually was worth the money taking a business or a law degree, because a lot of jobs got lost in the financial crisis and they never came back!.
So here we have to figure out what the future holds for coming college student.
The scary thing right now is that for profit colleges have switched their teaching into the online format, but are not offering any discounts towards the student.
So it is scary that for profit schools like IVY league schools like Stanford, Columbia, Harvard, Yale and many others that have anywhere from 10 to 49 billion dollars in assets will not even lower the tuition cost by half for online learning in a the worst pandemic since 1918 so over 100 years.
So the greed that the for profit schools are showing in this crisis, is just borderline ridiculous to us normal business people.
So from a business standpoint, as business advisers we would not send kids to college in the next 5 years time.
Rather get them into the workforce by different apprentice programs.
If you can have your kid living for free at home for a few years and let them learn a trade profession that would be the best option for families that does not have a lot of money put aside for higher education, and where the student needs to take on high interest loans with a long-term payment plan.
The one exception would be going to MED SCHOOL to become a doctor of some kind.
But a business or a law degree, not to speak about any kind of art degree will not help you land a proper job these days.
Digging yourself into a 100.000 USD debt at the age of 24 knowing that the average salary is 40.000 or less per year as a college graduate is scary regardless of what financial parameters we would be looking at to justify that debt ratio to income.
So the best advice would be to hold off on higher learing, speciallt if you do not have a full college fund that will give you a full debt free ride for 4 years.
Or if you can get scholarships and grants to cover 75% or more of these four years of higher learning.
If you are one of the lucky ones that you have a full college fund waiting for you, do not waist that opportunity on studying something that you have no chance of making a living on in the future.
So if we are goanna recommend a few programs to read that would be nursing ,dentist, doctor and something to do with mental health since we are goanna need a lot of mental help in the world, once the worst of this COVID-19 crisis is somewhat over in the end of next year 2021 or early 2022.
So sorry to burst some bubbles , but right now unless you are picking the right program or you are one of the lucky ones with a college fund, put off college for a few years.
Many plumbers are looking for apprentices since the average age of a plumber is high in the US.
And you can make 120.000 USD a year, as a plumber if you are willing to go out on emergency calls in the evenings, on weekends and even night time.
Where you can easily charge 100-200 dollars an hour.
If you start to work as a plumber, try and find work in an affluent area where the plumbing prices are higher than in low income neighborhoods.
So if you do not want to go into debt and you are willing to learn a trade and work a full days of hard work with your body, you can avoid going into debt and you can also live a good life.
There is always that option that you go to college when you are 30 years of age and you have worked for a good 10 years time and saved up money so you do not have to go into debt.
There are a few upsides to going to college at the age of 30 and that is that you are (hopefully) more mature and you do not waist your time on parties and young adult bullshit , when the cost is 25-45.000 dollars a year to attend.
It is very difficult to have that conversation with a 18-20 Year olds, due to that the brain is not fully developed until around 27 years of age.
So you parents that keep emailing on this topic for next year or for the next few years, here is our answer to that question.
It very much comes down to the dollar, can you do it without student loans and other debts.
So here comes a very intersting article on how to manage Hollywood actors money ,and other peoples money who are expected to have a short career properly!.
Alan a long time consultant of us, from Los Angeles have managed the money and investments for hundreds of clients in the business we call Hollywood or showbiz.
Alan ran for over 30 years a full service accounting and money management firm in Hollywood and he used some really smart strategies to help his clients out along the way towards their financial independence.
So Alan new from experience that most Hollywood careers will last around 5 years, and that means that you will make the bulk of your money with that one hit or a few hits that you usually get in a normal acting career.
So Alan new that a lot of young actors and musicians are goanna be hot for that 5 year period and then usually it gets trickier since Hollywood is based on new talent coming in all the time
And very few people make it to the A-list or even the B-list categories over time.
What we mean by A and B list careers is that you act every year on a regular basis and you have real income coming in on a yearly basis from acting.
So what a typical Hollywood career looks like is that at 22 years old you get cast in that tv-show that becomes a real hit and you act 5-6 years in that show.
But then usually the second project after the hit show ends is more difficulty to pinpoint.
And maybe you can act for another 5 years after the show has ended, but if you have been type casted for one roll type it will be much more difficult to re-invent yourself in Hollywood.
So Alan had a few ground rules that the clients needed to accept upfront and those where that he did not take on any clients who had not signed at least a 500.000 dollar a year contract before taxes.
So he wanted to have clients that had something he could work with.
The second thing he demanded was a 3 year Power of attorney to handle the finances for the client, and many potential clients did not like that term and that was a deal breaker for many clients, but the once that stayed where all satisfied in the end.
Alan had checks and balances in order in the sense, that he had an outside CPA checking the accounts once month so there was no misuse of funds from Alans companies side, and the client got that report once a year.
Which is something that we also highly recommend that there is checks and balances, that if you give an adviser full access or a power of attorney, find a CPA who will cover your back by looking at your financial statements and investments from your financial adviser, so you have your back covered.
Because it happens all the time that financial advisers take advantages of clients funds, and there are even some real scammers out there.
Most of the financial adviser are serious about their profession, but you need to do your due diligence properly before you choose a financial adviser.
Alan was often brought in by various agents who represented younger clients who had signed nice looking contracts.
Alan charged 5% of the income of the actor or client, and on top of that he took 10% of the investment returns.
And this is how he handled his clients money and how the explained the situation to the young red hot clients, who wanted the world today here and now!.
Alan sat down with the clients in front of a big tv and he played clips from different tv-shows and movies, and said look at this actor or this actress.
And here is where they are today financially, and he used the examples of people who made millions and lost it all!.
This can be you in 10 years, do you want that or do you want me to help you secure your financial future going forward?.
And this kind of visual schooling did really take and the client understood that this is a real thing in Hollywood when the lights go out on your careers ends, and you have nothing to show for more than just memories.
So the way Alan invested was that he first set a monthly budget for the client to live on , which was usually around 8.000 dollars a month.
So the rent for an apartment was set at 30% of the net spent income so 2400 dollars + utilities.
Then he set 900 dollars for a car, a good nice new car who the client could use for 10 years going forward, usually he opted for an Audi A6 or Range rover, a car that would take take the client to where he or she needed to go, but also had many good qualities as looks and safety features.
Then insurances and health care plans was important to make sure that the client was well protected in all aspects.
Usually the client had then 3500-4000 dollars left that was goanna cover Everything Else that month.
And what Alan did was that he made sure that the client had 500 dollars in tip money cash, everything else had to be put on a credit card with cashback rebate, he did not like the point rewards since they get inflated by purpose by the companies offering the points.
This Way Alan could see the monthly spending of the client, and if we saw red flags he could act on in for each individual month, and then sort out with the client why certain areas took up so much of the monthly budget.
So how did Alan and his colleges invest the clients money?.
So we as an example we use here a client that was making 300.000 dollars after taxes and agent, financial adviser costs.
What was always looked at was from which town or city was the client originally from?, and Alan always suggested that it was a good time to leave Hollywood and Los Angeles when your career was no longer booming.
So if the client was from a nice smaller town where houses where trading at 5-15% of the Los Angeles prices then Alan took a mortgage on a house in their hometown, of course with consulting the client, and making sure that there was a good family/relatives still living in that area
And the goal was to pay of this house inside 5 years time, so the client had a financial asset in his or her name.
The second investment that was made was to build up a stock portfolio with 30-40 companies and use the 60+20+20% method for the clients.
If you do not know what the 60+20+20% method is, it is a investment method used to buy 60% blue chip stocks in 30 different companies so 2% per company, then 20% is for bigger tech companies like Facebook, Google, Amazon and similar companies.
The last 20% was to try and find those high risk ,high reward stocks in new start ups for both tech and biotech each year, and hope to find that one rocket every other year.
So usually 100.000 dollars was invested each year this way into the stock portfolio.
Then the reaming money which was anywhere from 50.000-75.000 Alan suggested that 20% of that was given to animal shelters and the rest was used to invest in the clients own LLC/business.
So the idea was to figure out what the client was interested in and then open up an LLC and then help the client source products or whatever to slowly build up a solid business.
A few really good examples are Jessica Alba and Jessica Simpson who both made a lot of money starting up their own business along side their acting and music careers.
The business goal was that inside 5 years time the company should have at least 1 million dollars in annual revenue and earn 25% in net profit.
So this would give the client a way to have a life outside of the Hollywood show business.
And this idea of a small own LLC is in our minds a genius idea to build up a money generating side hustle, that other people can manage for the actor/actress, but is there when the Hollywood career comes to an end.
But where the client can use social media for marketing the business, when they are still active and hot in the business.
This was not possible 15 years ago, with the lack of social media back then, but in todays world it is very easy for the client to actively market their own business.
So this is how you invest money for a client that you know will have a short career according to all available statistics over the past 60 years time.
The same goes for athletes, that also have an average of a 5 years professional career according to all available statistics.
So when you have a client that you believe will have a short career, you do not want them to handle their own finances, but you want a professional person to handle these investments but also take care of all taxes and other serious matters so they dont end up owing back taxes.
What people also forget is that, this way the client can say to friends and family and hang rounds that my financial manger is in control of my finances, so i can not lend you 100.000 for that fantastic business adventure that most people come out of the woods to present to you once you make a little bit more money than the average person does.
So you take way that decision making and it helps the client out with not having to say NO to friends and family and getting shamed for not being able to give everybody a big chunk of change.
So this is a question that a lot of clients ask us on a yearly basis.
How do i invest on the stock market for my savings and for my retirement?.
So this is what we tell all of our clients, we can look back 100 years on the financial markets and also go over the history of the stock market since it started.
So having your money liquid/cash/savings account has been a really bad idea for the past 100 years time.
Inflation has then eaten up your savings over time.
So investing into to the stock market is the best way to let you nest egg grow, even if it only grows with 8% on an average.
So the way you build a stable but also interesting stock portfolio is to follow the 60+20+20 principle.
The principle works like this, and we learned this principle from a very good investor who helps us out with the stock market support to our clients, this Swedish guy worked at the factory floor for over 45 years time and he invested 20% of his monthly net income for 45 years and he retired with over 5 million dollars in his stock portfolio, having had a 50.000 USD salary before tax for most of his life.
So the way he could invest 20% of his monthly net income was that he picked up extra shifts in the factory he worked in as overtime when there was big holidays and when he got double pay for his hours.
This extra work made sure that he did not have to go without normal stuff, just because he wanted to invest 20% of his monthly net income into the stock market.
One tip he gave to save money was that he read all newspapers once a week in the library instead of having any subscriptions.
Another tip was that he never overspent on clothes or drinking alcohol, more than a few times a year.
So how did his investment system look like when we talk about the 60+20+20 principle?.
What he did was that he bought 60% , Blue chip stocks, blue chip companies, and if you do not know what blue chip stocks are, they are companies like Pepsi, Coca-cola and similar stable oldtimers.
And the way you divide these 60% into blue chip companies is that you pick 30 different companies and you invest 2% of your monthly savings into these 30 companies.
The second part 20% is meant to be invested into big tech companies, he started with IBM and Microsoft , Cannon at the time.
And over time for him it became Facebook, Youtube, Twitter and Google/Alphabet and similar companies.
The last 20% is what he called gambling stocks, where he tried to find 4 companies each year in the start up sector for bio medics and high tech companies.
The way he saw this was that he wanted to find one stock that could reach the stars over the next 20 years time, and then one that would be decent.
And then he was willing to let the other two stocks be complete busts.
This way he was able to find a few 100 times the money stocks over time!.
So when our clients asks us how to invest over time, this is a method that we like to use and to promote.
So a lot of clients have asked us what a reasonable marketing/ad budget should be in a recession.
So we usually recommend that you spend 3% of your total turnover on marketing when we are in a recession.
So if you have a 500.000 dollar turnover a year business, then you should spend around 15.000 dollars of that on marketing for your company.
This 3% is a good rule of thumb in a recession and when we are in a bull market then you can raise it to 5% a year.
Because marketing is the key to attract new business, so everybody who is looking to grow the business needs to market their business one way or another.
Then some clients ask us, what are the best ad plattforms to use when you want to market your business.
So we recommend an equal four piece split for all marketing campaigns.
Number one use google ads, since google controls so much of the search engine traffic.
And with Google you should talk to someone who understands the google ad-words program, it will save you a lot of money if the keywords are targeted properly.
Second source for marketing should be Facebook ads, it is less likely to convert into business than google ad words, but it is a cheaper plattform to market with.
For your third marketing plattform you should use Youtube because the moving picture ad market are growing, and has been growing for years.
The fourth aveny for marketing should be with local influensers who can boost your business to potential customers in your town,city or region where your business is located, because you want to have local customers as much as possible even if you sell online.
So this is one way to go about marketing your company for growth purposes.
Thank you for reading and take care of yourselves .
So a lot of our clients have asked us this question why the stock market is only down 5% compared to when the COVID-19 hit the world, and the market was at a ATH, all time high.
Okay so the short answer is that there is a lot of big companies being traded like AMAZON,FACEBOOK,APPLE,GOOGLE,TESLA and so on, and they keep going up.
The longer answer is that a lot of heavy players are sitting liquid right now and that scares us a little bit.
And of course a lot of stocks have been slaughtered in the process.
And some stocks have gone down from 50 dollars to 10 dollars and then jumped up to 20 dollars, so the people that owned them at 50 dollars are down quite a bit , but the people that bough at 10-13 dollars are up a good chuck of cash.
So Boeing is a typical example of a stock that went down a lot, and when the rescue package came it jumped up over 90% in a sort period of time.
So basically the stock market has a lot of smaller buyers right now , and the big elephants are sitting liquid with cash to maybe make a long game play in early September.
So when our clients ask us what they should do, the answer is quite simple, we dont know, nobody knows where the market is gonna go from here.
If we do not have a lot of Covid-19 cases in the second wave in Sep-Dec there is a big chance that the stock market will jump up again overall, and if we have a lot of cases then the market will most likely go down quite a bit.
So usually the rule of thumb is this, if you have lost 60-80% in value of the stock you own, then you should ride it our to when it goes up 20-40% and then sell.
Because there are studies that shows that more often than not when a stock goes down by more than 60% then it takes a very long time to get back to where it was at the ATH.
The expectation can be when you have a special circumstance like the COVID-19 to deal with and in these kind of special cases a stock can bounce back in a year or two.
If the underlying valuation was accurate before the special circumstance happen.
So looking 100 years back the stock market has been a good place to keep your money growing.
But in general if you time anything wrong including the stock market you can get into a lot of trouble.
But this is why the market is so up and down right now.
But there is still a lot of belief in the future and this is why the stock market is not as bad as you would think even with the Covid-19 crisis.
So we see this question asked often in forums world wide.
Pretty much on a daily basis.
So how do you get rich, without inheriting the money.
So there are a few ways you can go about this , but the reality is that almost everybody you see that are rich today, they where in the right place at the right time without taking away anything from the person that is rich today.
But all people who are smart knows that they got lucky, that they where in the right place at the right time.
Because no matter how smart you are, you also need luck.
There are a tremendous amount of smart and hard working people who never made it past a some what normal paying job.
Even if they had great ideas and worked really hard, and maybe invested in something really smart along the way.
But they where a few years to early to the show.
Or they where never able to find funding for their project or company.
There is a rule of thumb in the angel investment community that for every 100 pitches you get you invest in 1! , yes in one project.
So often 99 projects or starts up out of 100 never get the necessary funding to be able to get things off the ground.
Mark a client of ours, got really lucky and he knows it!.
In the year 2009 he started working for a smaller mining equipment company the year after the financial crisis in 2008, as an engineer he had worked in another field for 10 years and he wanted a change in his work-life.
So after he had worked for the company for 1 year, the owner of the company wanted to close it down because it was losing money, and the large cooperation that owned it was willing to let it all go for 1 million dollars for the lock stock and barrel.
So 10 people in the company bought a 10% stake in the business for 100.000 dollars each.
Then in 2013 one of the companies clients where bought up by a huge cooperation many billions of dollars in revenue annually.
And after a year in 2014 they received and offer for a whopping 100 millions dollars, the owners did not want to sell and a year later after the initial offer they got a 170 million dollar offer from the same company a raised bid so to speak and they accepted the offer.
So in a few year period Mark had made 170 times his initial investment of the 100.000 dollars.
So this is by no means and unusual story, very often a company takes off by share luck, and a bigger company comes and says we want to buy your business.
And this is often how people become rich.
Then once they have made their first million, it is easier to make the next one, and so on.
Mark knows that he got lucky and that his family has now generational wealth, by him investing 100.000 dollars that he borrowed from the bank putting up his house as collateral.
A house that he had paid 200.000 dollars for over a 15 year period, so by paying of on his house he had the opportunity to borrow money and make this investment.
So you also need to have some money to make money, this is a real fact of life.
The second way people can get rich is by a fluke like buying for instance bitcoins at a very early stage.
So these kind of fluke investments are often common in stocks or digital currency.
To be fair 99% of the people trying these kinds of fluke investments fail and they lose most , if not all of their investment in the process.
The third way people get rich is by working hard and living a very frugal life for many years and then investing long-term in property and stocks often actually in blue chip stocks.
So there is not just one way to go about getting rich in life.
But it is very unlike that you can get rich on a normal paycheck unless you ar willing to work hard , and save most of your money for 30 years time.
So best way is to go into a start up, and work hard and hope that inside a 5-10 years period some larger company will come in and buy the company you invested in as an employee.
There is also another way and that is that you invest you savings in several starts ups and you hope that 1 or 2 will be very successful in the future.
But every investments has its risks and pretty much it is safe to say that any investment is a risk that you have to be able to take to ever get ahead in life.
And there are almost never any risk free investments out there in the world.
But here is a few concept you can think of when trying to get rich in the future.
But please remember specially now in COVID-19 times that your health and your families health and safety is much more important than getting rich.
We know a lot of rich people who are miserable in life and we know a lot of people only pulling a medium size paycheck who are blessed with family bliss and good health and are over the moon in happiness.
So dont get fooled by money, it is nice to have but it is far from everything is life.
So a question we here a lot is from parent who runs semi successful small business that their sons, usually 99% are sons, wants to do day trading and selling and buying crypto-currencies and so on!.
Instead of working in the family business.
There is a fact that is the cold hard truth and that is that 80% of all day-traders who buy and sell normal financial instruments lose money, but the same can be said about those people who trade crypto currencies also.
So this illusion that your kid has that he can become successful on day-trading is just an illusion.
We can tell you who the 20% are who makes money on day-trading are so you get a better picture of how this works in real life.
So the 20% of the people making money have big bank rolls and they can have millions of dollars invested, and they will survive longer in a bear market.
Most of the times, what happens is that the day-trader is semi successful in the first year, they hit some winners, but then they start to invest with more risk, and they only need a few bad picks and then they are skint!.
So number one is that you need a big bank roll.
The second thing is that you need a financial background in investing and trading if you are gonna sit and day-trade.
Day-trading is much different from investing in a individual stock that takes off, or investing in mutual funds over a long period of time.
You simply need to know much more about trading than most traders do!.
Now somebody is gonna come in and say that what about bitcoins and other crypto currencies and many hit it big on bitcoins for instance.
Let us burst that bubble for you, bitcoins was a one hit wonder and even if 10% made money on bitcoin over 90% of the people investing in in later has lost money.
Not to talk about the people that has lost huge money in pure crypto currencies scams!.
So a big congrats to all the people that bought crypto currency early on and sold it prior to it dropping 50-90% when the masses came in and started investing.
So when your young adults or barley legal kids come and say that they will be the next Gordon Gekko (Wall street movie) from the 80s with Charlie Sheen, you burst there bubble with statistics that 80% of the day traders will lose money.
So there is no future for your kids to sit and day trade rather than go out into the real world and get a real career going!.
So today is the biggest game of the year, it is the Superbowl.
Please do yourself a favor as a business owner and do not place a bet on the game.
For a lot business owners the Superbowl bets are the first really big bets they have ever placed in their lives and, that has usually been the spark towards a downward spiral.
The worst thing for a business owner is to place 5000 or even 10.000 dollars on a Superbowl bet that goes in, and then the taste and the allure of easy money gets triggered in your brain!.
And before you know it you are betting on NBA,NHL,MLS,MLB AND NFL on a weekly basis with thousands of dollars on each bet!.
Often if the first big bet is on the Superbowl and you lose it, then more often that not there is no positive trigger, to place more bets.
So we can not tell you how many small and medium sized business owners has placed their first big bet on a Superbowl game and after that they started to rack up losses on hundreds of thousands of dollars after a few years of betting.
In some cases we have seen that a bigger placed bet on the Superbowl that goes in has made small and medium sized business owners to lose millions over the next upcoming years.
Also the Superbowl is known to be very difficult to predict, and the reason is quite simple, it is one game, and both teams are really good and that is why they are participating in the Superbowl.
So one or two interceptions or fumble mistakes can do that one team wins or loses the game!.
So today everybody believes that the Kansas city chiefs lead by the offensive powerhouse QB Patrick Mahomes , should win this game against the SF 49ers.
But the 49ers have a better running game and a better defense.
So just enjoy the game without any money on the line.
If you want to bet on the game, bet with your friends about a dinner, so the loser pays for a great evening out!.
If you stick to that then you never run the risk of getting addicted to gambling.
The reason many smaller and medium sized business owners gets addicted to gambling is because they are willing to take risks.
Every business owners needs to be willing to take and face risks.
So stay safe and do not ever start and gamble on anything in your life!.
So this might sound boring not to ever bet, but take it from people who have cleaned up more than our far-share of addicted business owners, that the risk of losing your business is never worth it!.
So as formers business owners to many different types of business globally, we can once for all debunk the so called franchise ownership/system.
This opinion is strictly our own,and we are very much a where that there are a number of very successful franchisees out there.
But our blog and our advises are meant for mainly smaller business owners who lack big amounts of working capital.
So a lot of people come to us and ask about different franchises, and if they should buy in to one.
Often they will have to borrow that money from family and the bank.
Our general answer is always a big NO!.
So what is a franchise?, so very easily put you buy the right to open a business that already exists.
What it is means in layman terms is that somebody has started a business somewhere and they are selling you their business model for a cost, so you can run a smilar business in your area/town/city.
So usually there is a upfront cost to acquire the rights to a franchise.
This can be anywhere from 5.000-1000.0000, so from 5000 dollars up to a million dollars.
And the average cost is around 150.000-250.000 dollars.
Then there is usually a license cost also involved in the this deal.
And this can be either a percentage of your turnover or your profits or even sometimes a flat fee every month!.
So as you see here, the initial start up costs are very big, on top of that you have to continue to pay monthly fees to the franchise owner.
So in general you will be paying true your nose as a franchisee!.
There are some studies that show that almost 40% of franchise owners makes less than 50.000 dollars a year.
And then you should really take into consideration that many of them work 14-16 hour days.
So if you would find a job that will pay you 50.000 dollars a year for 8 hours then you are much better off based on the statistics.
There are also other studies that show that 15% of franchise owners makes more than 200.000 dollars a year.
What you need to know about these people making 200.000 dollars a year is that they usually have a lot of capital behind them and they run a big food franchise or another large franchise.
So they are not a corner store so to speak!.
Sometimes when clients come to us, we see jaw-dropping agreements from franchise owners to franchises, that we would never see in agreement around the world for normal buying and selling of services and goods.
So we can become very sad, when we see how a franchise has been taken to the cleaners by the franchise owner.
We would never recommend anybody buying into a fitness or a gym franchise under any circumstances.
Because this is not a hard thing to run on your own with one or two very experienced gym rats by your side.
To open up a gym/fitness center you first just need to know what customers you are targeting with your business.
Is it normal gym training with some spinning classes and some group classes that you want to cater to.
Or are you looking at cross-fit type of customers and maybe even half a gym and half martial arts gym, MMA and similar stuff!.
Once you know what customer group you are targeting then you need to do a very proper due diligence to make sure that the area you are looking to open up in, does not have to much competition and that there is enough of a customer base for you to open up a training facility of some sort.
Then try to find a location with enough parking spots, and where the rent is not gonna be true the roof.
Because your fixed costs will be the one major player in your business and it will determine if you make a profit or not.
There is a huge difference in paying 4000 dollars and 8000 dollars a month for a similar space.
Sometimes the 8000 dollars is justified based on the location but you have to really do your due diligence before starting up any kind of business.
So it was quite fun to see the last episode of undercover boss in January when one gym franchise chain sent out a women who basically new very little about training and running a business.
There is always that problem when you enter into a franchise that is owned by a large company who has a lot of employees and many of them are sitting in there ivory towers and they have no experience from running their own business of any kind!.
So when they make cooperate decisions that will affect you as the franchise, they do not really understand how bad those decisions can affect you and your business.
What was also jaw dropping with this particulate gym chain was that they even admitted not having any contact with the owner of one gym for over a year.
As every good franchise owner knows, the communication with head office is always a major key, so you know what is going on and what is coming in the pipeline the upcoming year/years so you can plan for your business.
The cost to buy a franchise is often way to high, and it is usually much better to spend that money of your own equipment for the gym for instance, than to pay somebody-else.
There are also some issues when you want to get out of a franchise agreement, because it is not always that clear cut that you can sell your business to anybody upright.
Usually you need approval from the licensee to do this!.
And not every buyer of your business will qualify to become the new franchisee , with the head office.
So then if we speak about food franchises of course many of them are well branded, but that does not mean that you will as the owner make a lot of money on a smaller store, once you have paid all the monthly cost that comes with being an franchisee.
In general you also need to be careful with franchise opportunities that require a lot of money upfront.
Because a lot of the bad franchise option will take most of there money upfront from you.
And very often leave you high and dry after that.
One other very important thing you need to know is that for a franchise to success you need to be working for the first 5 years yourself in the business to make sure that everything runs smoothly and cost effective.
So if you come to us as a client and ask us about if you should open up a franchise, we would almost always tell you not to do it!.
And for you out there saying we dont know what we are talking about.
We have created over 10.000 lasting jobs around all continents, over the past 50 years time.
And these jobs are stil there, in Sweden in Germany in America, in France, in Taiwan, in England and many other places.
So we have started with nothing and built and lost companies over the years, so we are in a very good situation giving business advise to smaller and medium sized companies, because we have been there, done that!.
So if you are looking at entering into a franchise , you really need to have your eyes wide open, and understand what you are entering into!.
One final note on franchises is this!.
Just because a franchise works well in California does not mean that it will work well in Iowa or Texas for say!.
So that is why it becomes so difficult to look at the success stories that the franchise owner is trying to pitch to you as the possible franchisee.
Thank you for reading.
About This Site
mrlifeadvise is a company that specilizes in supporting smaller and medium sized company owners and CEOs who need busines advise from a company with a track record dating back over 60 years.
And mrlifeadvise has created over 10000+ lasting jobs during that time frame.
Welcome to join mrlifeadvise.
About This Site
mrlifeadvise is a business consulting company specializing in smaller and medium sized companies.
We have 60+ years of experience from building companies, and we have created over 10000+ lasting jobs during that time frame.
We will help your business with good advise, regardless of what business branch you belong to and regardless of what part of the world you are active in.
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