231: Should You Buy a Franchise?

"Saying yes will get you to a million. Saying no will get you to $100 million." That's the advice I once got from a very successful centimillionaire friend of mine. And while, on the surface, it may seem like one of those things rich people say to sound profound, I assure you that the power of no is indeed real. As you may know, I have been a bit of a flaming entrepreneur since leaving surgical residency. I got the bug after reading a Kiyosaki book and from that point forward, I was like one of those kids who grow up repressed and tries to make up for it up by drinking too much in college. In other words, there was a period in my life where I chased too many shiny objects. I said yes to everything. It was fun until I realized it wasn't particularly profitable to be so entrepreneurially promiscuous. In fact, in 2014, I gambled away two successful businesses that were making millions of dollars per year by over-leveraging myself and trying to grow too fast. It didn't work and I lost millions in the process. That was my "come to Jesus" point where I realized that I had to get control of my desires. It was a fun ride, but I had to be more methodical going forward. And since then, I have trained myself to say no to pretty much every opportunity that comes my way. I only consider saying yes under very narrow circumstances. First, the opportunity has to be worth at least another million dollars per year in income for me. I'm not saying that it starts off that way, but it should be able to get there pretty quickly. The next criteria is that there is no significant over-head. Over-head crushed me when I tried to open up 5 surgical centers in 5 different states at the same time. I won't make that mistake again. Finally, the new endeavor cannot put anything that I am currently doing in jeopardy. This is fairly broad but, for example, I won't sacrifice ongoing cash flows from one business to support another for a prolonged period of time. In addition, I won't get involved with anything that will require a disproportionate amount of time when considering financial return (or other kinds of fulfillment). Sounds pretty obvious right? Well, try telling that to the entrepreneur possessed. It's not that easy. Whether you are an entrepreneur or an investor, you have to develop the ability to say no. Now, there is hazard on the opposite end of the spectrum as well. For example, I know guys who are very successful and they keep burying all of their money into the same business to grow it more and more. They aren't taking any of that money and creating other sources of income. That puts them at a high risk of single point failure. So, the moral of the story is that while it's probably best to lead with no, you should be open to saying yes once in a while for the right opportunity. You may be a highly successful individual who makes a ton of money through your income. What if you lost that job or were unable to continue to do it? What if there was a way for you to create significant income that was not considered W2 income and provided significant tax benefits? That's where being a business owner has its biggest advantages. You can't get fired and you will pay a lot less in taxes. However, starting a business is pretty darn risky and most fail. So, how can you mitigate that risk? Well, one option is to consider getting involved with franchises. This is an area that I have considered for years but have never really explored. But after this week's Wealth Formula Podcast interview with Franchise expert, Kim Daly, I am seriously considering it. I really enjoyed talking to Kim and I highly encourage you to listen to our discussion. It could change your life!