We Live in Uncertain Times - aka - I've Been Laid Off, Now What?

We live in uncertain times. The continuing war in Iraq and Afghanistan, terrorism, an economy that has been in the doldrums for a couple of years with only faint hints at a possible rebound, continued corporate layoffs and downsizing, etc. Many people in our community have recently been laid off and are looking for answers. They are asking themselves meaningful questions. How do I support my family, pay my mortgage, cars, etc? What about the children’s education, health insurance, etc? How do I prevent this from happening again? Where can I make some money??

The question is with all the uncertainties in our environment, where can you go or what can you do, to find a level of security that is acceptable? As in all things in life, there are no guarantees. After all, even those infamous infomercials on television spend millions of dollars hyping their latest get-rich-quick product or service for half an hour and once you are convinced they have the magic formula the small print pops up “Unique results. Your results will vary”. Well, if their formula is so effective, why are the successful results “unique”? Simply put, life has risks. The best we can do is to make the best-informed decisions we can with the best available information.

First, a disclosure, I own a consulting firm and previously owned a business brokerage. Our job is to assist business owners in the sale of their business and while a business broker, to assist potential business buyers to purchase a business. As a business broker we met with people daily that are being directly affected by these uncertain times. The vast majority of our new clients were ex-corporate middle to upper level management who had recently been told that their services are no longer needed. In many cases, these people have performed at or above corporate expectations, but due to circumstances that are beyond their control, the company decided to downsize, right size or reengineer (I’m not sure what is the current favored term, but in all cases what they are really saying is “You no longer have a job”). These people are responsible, successful and determined people who understand they need to support their family and provide for their own future.

Take our typical client. Mr. Smith. Mr. Smith is a middle-aged man, married with two children, was in middle management for a medium size company for the last ten years. Due to technological changes and a slowing economy the business he had been working for is not making as much money. The officers for the company, in their wisdom, decided that to maintain profitability (or, more commonly, to minimize losses) eliminates his division and now Mr. Smith is unemployed. He doesn’t know it yet, but, as with all unemployed, he only has three courses to take.

He can:
Option 1: find himself a jobr
Option 2: start a businessr
Option 3: buy an existing business and/or franchise.

That’s it. If he is to maintain his responsibilities to himself and his family, there are no other choices.

Like most “corporate refugees” (one of my clients first told me of this term) Mr. Smith has spent the last few weeks looking for a replacement job. He has called his “contacts” and spent hours fishing through the want ads and has not had one bite. After all, he is a mature worker with high expectations. He is, as they say “overqualified” for most jobs. What it really means is they can (and will) hire a kid out of college who would take the job for half the wage and no conce
s about retirement and few questions regarding employee benefits. Option 1 is not very viable.

Perhaps, if Mr. Smith can’t find a job perhaps he should own a business? He has always considered owning his own business but people told him that it was “too risky”. Of course, the people he had sought advice from were employees themselves. Not exactly the most unbiased opinion, but heck, it was an opinion right? In fact, they were only partially correct, but more on that later.

On to option two, starting a business. Mr. Smith has always had an entrepreneurial spirit. With a fresh perspective he looks around and sees businesses everywhere. Surely if they (the business owners) can succeed, he can. After all, he was successful in his job. The sad fact is, according to the Small Business Administration (SBA); in excess of 60 percent of startup business do not survive to their third year and over 90 percent to their fifth year. A failure rate of 90 percent! Those employee friends were right after all—or were they?

Option three: Buying his own business or a franchise. Mr. Smith through his due diligence and business opportunity search came across the very same SBA statistics regarding business failure, but he also continued reading and came across another interesting statistic. Franchises have a greater than 90 percent SUCCESS rate. Businesses that have been in existence for more than 5 years have a similar successful track record. Why?

A franchise or an existing business have many things a startup business does not possess. First and foremost, they both possess a proven track record. A history. This track record, without a doubt, proves that this business has marketability (a customer base that wants its’ product or service). If a business has been in business for more than three years or if the franchise is established, clearly their business model works. Believe it or not, I have people come into my office--look at a business that has existed for more than 10 years and during those years provided a good living to its owner and family and they tell me, “I don’t think this is a good business. I don’t see how this business is profitable.” Excuse me? Sometimes, people can’t see the forest from the trees.

The purchase of an existing business offers significant benefits to a buyer. Here are just a few:
• Actual results, rather than pro forma
? Immediate cash flow
? Trained employees in place
? Established suppliers and credit
? Established customers and referral business
? Existing licenses and permits
? Training by the seller
? The availability of owner financing.
In many ways, you are buying the work and time of another person. In the case of a 10-year-old company, you are buying 10 years of another person’s hard work, presence in a community, marketing, infrastructure, etc.

With a franchise, you are purchasing (or in fact, licensing) three very important and critical elements to a successful business.

First, a franchisor offers a business model that has formulated a system that, in some cases, has been proven hundreds or even thousands of times across the country.

Second, support. As many franchisors are fond of stating, “You are in business for yourself, and not by yourself”. The franchisors have a vested interest in your success. No franchisor will survive long if their franchisees are not successful.

And lastly, a franchisor provides name recognition. Have you ever wondered why when you are driving down a highway and you would like a quick bite, you pull into a McDonalds as opposed to Sam’s Hamburger Joint? Name recognition. McDonalds means something to you. My association of the name McDonalds means consistent average food quality with a recognized menu. I have traveled extensively and a McDonalds hamburger in Buenos Aires Argentina, Hong Kong or Paris essentially tastes the same. (Why eat at McDonalds in Paris? I have two young children so, yes, McDonalds is a fact in my life).

Does Mr. Smith have options? Of course he does. I believe that life is about risk control. I further believe that in these uncertain times, it is much better to be in control of your life and future than to be at the mercy of others. Option 3 is clearly the choice I prefer. After all, I have chose
Option 3 multiple times myself.