Franchising in Response to Unemployment

Several years ago I found myself unemployed for the first time in my 30+ year career. After the initial panic and rearranging of finances so that day to day expenses could be met, my partner and I started talking about options and decided that we would look into franchising. Franchising offered the promise of “being your own boss”, “90% of franchises are successful”, “building for retirement”, and “doing something fun”.

Being my own boss was definitely attractive since I tend to have definite ideas of how things should be run. I was also still on the rebound from the shock of unemployment. Little did I understand at the time, what being your own boss really means. You’ve got it all… the good, bad, and the ugly. There is also the mind switch from working in the business to working on the business. Give this some thought if you are thinking about starting your own business whether it is a franchise or an entrepreneurial venture.

As for the “90% of franchises are successful”, that may be true overall or may have been true in the past, but I would now take this with a grain of salt as opposed to “with statistics like those, how could we possibly be in the bottom 10%?” A franchise is a great way to get a head start on your business, but it is not a sure thing. You must be willing to follow the franchisor’s formula as closely as possible to help ensure your success. Looking at success rates within your prospective market niche is also a must.

As we looked into franchise options the next hurdle was choosing a business. The internet was a logical place to start and we did take a serious look at a fitness offering. Being on a successful fitness program at the time, this seemed a logical fit for the “fun” portion of the equation. It also appeared to be a real growth industry at the time. We met with the regional manager, went over the “Uniform Offering Circular” and met with a couple of franchisees.

At the same time, we got hooked up with a franchise consultant through FranChoice. This was probably one of the best moves we made during the process. The consultant talked to us about our backgrounds, work style, financials, etc. and then presented several options for franchises. He also told us about a program through Guidant Financial whereby I could parlay 401(k) funds into capital for the business venture. Shortly after starting our discussions with the consultant, we found a red flag with the fitness franchise… no “Discovery Day”! This is like a day long interview at the franchise corporate headquarters with the executives of the franchise. If a franchise doesn’t offer “discovery day”, be very suspicious.

We worked with our franchise consultant and went through the process of discussing our lifestyle, what we wanted out of the business, etc. He provided several concepts that may have worked out better than the one we chose, but rather than really look at the business, we looked with our hearts and emotions.

After doing a phone interview and a “Discovery Day” visit, we were off and running with a commitment for one location under our belts and an option for a second location. Little did we know what a ride we were in for.

Franchising can be a viable option when you find yourself unemployed, but several lessons learned need to be remembered:

• You need to think about working on the business as opposed to working in the business
• Find out the real success metrics for the business you are considering - not just revenue per day
• Understand what kind of employees you will have in your chosen business
• Choose with your reason and not your emotions
• Think about your investment risk and how your market niche is performing

Stress and Money

This past week Newsweek had a series of articles related to stress and how different people cope. Given the latest economic climate it is easy to see how many of us could feel stressed out and overwhelmed by the situations we find ourselves in. The most interesting article was written by Ben Sherwood who followed the work of Dr. Andy Morgan from the Yale Medical School. Morgan went to Fort Bragg to study the Army’s elite Airborne. He measured different factors to see if he could determine who would be successful and who wouldn’t.

Interestingly, he found that those who managed their stress better tended to graduate higher in their class as well as complete their given programs. However, it wasn’t quite as simple as you might think. He actually found that the elite soldiers were completely wired differently. These soldiers gave off more NPY ( Neuropeptide Y) in their bodies. This chemical helps to regulate blood pressure, appetite, learning and memory.

In one test would be soldiers are tied with their hands behind their back and legs together. They are then thrown in a pool. Those with higher levels of NPY tend to do better. Instead of fighting the water they tended to remain calm, fall to the bottom and then push off the bottom for air.

What I find interesting about the results of the study is that managing stress for the rest of us can actually be more difficult and we may have to take active steps to calm ourselves to reduce stress and make correct decisions. Most of us know that emotions can get in the way of making proper financial decisions. Emotions make us sell assets when we are scared instead of holding on for better market conditions. They make us buy snake oil that won’t really help us.

Sherwood has created a website called thesurvivorsclub.org for the rest of us to learn how survivors are different and how we can try to emulate them.

Everybody Be Cool This is a Robbery!

I completely laughed hysterically when I heard Tim Roth say those words in Pulp Fiction, but in real life it’s not quite as funny. Despite the increasing options for banking online there are still times a visit to a physical bank or ATM is required. Interestingly, as much as technology in Internet banking has developed so have the modern day physical security measures as well.

Companies like ADT Security have been investing in cutting edge security technology for physical bank security systems. I used to think that ADT specialized in high level home security, but they have a number of high tech tools for financial institutions. Banks are starting to use some of the biometric systems such as iris, smart card and fingerprint readers.

They’ve also started integrating alarm verification, interactive video and live remote video monitoring.

While it seems like bank robberies are something out of the old west a quick search on Google news reveals that they continue to happen every day. It is one of those things that everyone always thinks happens to someone else. It is always nice to see the company providing the security system to my local bank. If it is a company like ADT I know my bank has chosen well and has the right technology to keep me and my money safe.

Loan Fraud - What to Look for

I’ll never forget the first spam I received involving an African prince who would send me oodles of money. Unfortunately, these types of loans continue to proliferate the Internet and take advantage of people. The trend has only gotten worse as people are more desperate in these hard economic times. They prey on people desperate to get student loans and other types of financing. The most common type of fraud is called an advance fee loan scams. In this situation the person is told that they have been guaranteed a unsecured loan for a large sum of money. They simply need to pay the processing fee.

Here are a few of the signs that the company may not be legitimate.

• A lender who isn’t interested in your credit history
• Fees that are not disclosed clearly or prominently
• A loan that is offered by phone
• A lender who is not registered in your state

Do business with licensed companies. Ask your state banking or finance department about the licensing requirements for lenders and loan brokers, and find out if the company has complied.

If you are the victim of a fraudulant crime you can visit https://www.ftccomplaintassistant.gov/. This site helps people who have been victimized by credit card theft. It helps the government to aggregate data and ultimately apprehend those responsible for the fraudulant crimes.

Countering the Desire to Buy

Have you ever just had to have something? You’re not even sure why, but before you could say Visa you had made the purchase and then a week later you don’t even use or remember why you bought the darn thing anyway? Typically this is because a very clever marketer has tapped into your seedling desire and created a emotional state that made you want to buy. Think of those yummy pizza ads that made you order over the phone even though you aren’t hungry or buy one of those darn snuggies for $20 over the phone. Perhaps learning more about the tactics behind this marketing can help you resist future assaults on your buying psyche.

Unless you’re an Internet marketer you’ve probably never heard of Frank Kern. He is an Internet marketing master. He has put together legendary marketing sales copy that is responsible for bringing in tens of millions of dollars with his slick tongue. People pay this guy large sums of money in the form of royalties to help promote their products. I was recently listening to one of his free videos where he was dispelling some of his wisdom. The purpose of the video was to help those selling items to sell more and think about buyer psychology, but it can also be useful to stop and pause to think before you buy.

Typically marketers try to tap into a seedling desire. A seedling desire is someone that has a small interest in a given subject. They want to then turn that small desire into a full blown emotional buying state.

Remember we buy emotionally and we justify logically after the fact. Any given copy or ad is trying to tap into your emotional state to present you with a future pleasure or way to avoid pain. In some cases it can be absolutely justified. There really are great products that can change your live. My DVR is living proof of that, but there are other things we don’t need.

One of things I have found useful is to actually wait one day and sleep on it. Sleep has a way of resetting our emotional state and changing how we feel. It is amazing how many times I’ve woken up the next day and the emotional state has passed.

Send a comment and let us know how you let the emotional state pass.

Compare Rates in Australia

One of my favorite financial sites is bankrate.com. When I was looking for a mortgage I scoured that site on a daily basis watching rates change and thinking about who I would place my mortgage with. Interestingly for me it wasn’t all about the best rate. I also wanted someone who wouldn’t sell my mortgage and who had an office close by. I was able to find it and get a decent rate easily. I am amazed at the difference between the advertised rate and the rate you end up with though.

Even though bankrate is the 800 lb gorilla in the market there are a growing list of sites specializing in financial niches as well.

Anyway, there is a new site that seeks to help Australians with their rates as well. The site is called GoodWithMoney. They compare traditional items like credit cards
and cheap loans, but what I also found interesting is that you can compare rates on items like insurance and broadband services. They have most of the major items that you need for your financial being on their site specifically geared to those living in Australia. They also have a section dedicated to financial Australian news.

If you have any other interesting sites that help to compare rates for a given niche let us know in a comment.

Pay Day Loans - Legislating Rates

The payday loan industry is enormous at over 85 billion dollars. In 2008 the state of Ohio passed legislation limiting the interest rate to 28% for businesses offering payday advance loans. This puts the interest rate at close to the same rate as a credit card. The state supported this bill by 64%. Proponents of the bill noted that payday loans cause the poor to get caught in a vicious cycle of debt that they cannot escape.

The interest rates on these types of loans ranges from 300% -600%. It is also important to understand the amount of risk involved with this type of transaction for the person lending the money. Given the size of the industry it would seem that there is plenty of profit motive to enter the market and that someone would lend at a lower percentage to pick up more business. However, the only thing to factor in must be the size of risk involved. More innovative online pay day lenders such as those that offer no fax payday loan have actually decided to stop lending in Ohio due to the new legislation.

This limits choice for Ohioans and others in States that limit pay day interest rates. Some have suggested that state level assistance programs may be necessary in the absence of this form of credit.

I’m interested to hear your thoughts on the subject. Leave a comment and let me know what you think. Does the new legislation protect those who would otherwise be taken advantage of or is this a necessary service that people depend on that will no longer be an option?

How old are you in credit years?

I came across this fun credit quiz that will tell you your credit age. It takes about 2 minutes to take the quiz. At the end you will get your credit age and a description of your credit self.

Oh, and by the way my credit age was also 47. In this case I am assuming that older is better, but I’m not really sure. I had my cousin take the quiz and she failed miserably. I think that explains a lot. This is the same woman who collects tons of longaberger baskets and complains about not having any money. Hmm, I don’t know what could be the problem.

Anyway, here is the link to the quiz Credit Quiz. Don’t forget to tell everyone how you did.

Balanced Score Card for Managing

Whether you are a big time CEO, departmental manager or someone just trying to get your family to organize their finances a balanced score card methodology is one way to think deeper about your finances. Oftentimes people just look at the financial number at the end and don’t necessarily focus on managing the inputs leading up to that number. If you think of someone on a diet they will often measure their weight but some of the more important metrics objectives are things like how many calories they consume or how much time they spend exercising. While intended primarily for business the balanced scorecard approach seeks to focus on managing the inputs that lead to that final number at the end.

The traditional balanced score card buckets are

• Financial
• Customer
• Learning and Growth
• Internal Processes

Financial metrics are typically things like how much cash is in the bank, how many people owe me money, how many people do I owe money and what am I doing to manage this process. With customer you can focus on metrics like how many customers are late to pay, how many new customers do I have, where are they coming from and what activities am I doing to retain them. You can even apply these concepts to your personal life. It may sound strange, but thinking about how much time I spend with my family etc. Some of the concepts related to the balanced scorecard can be difficult to understand one of the best ways to get a grasp is through the use of a bsc case study. The are many examples online that can be very useful in helping to get a better grasp on the subject.

When it comes to measuring each of these items they are referred to as KPI’s or Key Performance Indicators. These are specific measurable items you can use to define your progress. Using our diet example from above you can think of calories consumed or time spent exercising as KPI’s for a diet. There are also many metrics case study examples available to help you think through as well.

Recently, I started working on a KPI dashboard for a company where we used some of these measure to alert managers of some of the key inputs before they turned into problems. Previously the data was difficult to get to and the managers were not following their KPI’s closely. Now they can see from a quick glance if any of their KPI inputs are in danger by highlighting red. Using the right software can make the balanced scorecard much easier to implement. It allows you to measure the right behavior and act on it appropriately.

Ultimatum game - How to trade effectively

In life we are constantly making deals in ways we might not even think of. It doesn’t have to be as big as buying a house, paying off debt or some other major life event. We make deals as simple as splitting a piece of gum with someone. Traditionally, I’ve used the 50/50 split rule. It seems intuitive and fair. Growing up when I used to split a piece of gum my mom used to tell me, “you split, I pick.” This method ensured that we both had a common interest in making sure the split was as fair as possible. However, you may be able to get a little more if you don’t get to greedy.

Enter the science of what economists call the ultimatum game. In this scenario, there are two participants. One participant is given a sum of money. He or she is told that they must make an offer to the second participant. If the 2nd participant accepts the offer they can both keep the money. Remember, the 2nd participant will always be better off by accepting some offer. For example, a single penny is better than nothing. As you can imagine, the 2nd participant declines the offer at some level. What numerous studies have shown is that regardless of income level or size of offer that the 2nd participant usually declines when their share drops below 30%.

This has numerous implications for deal making and sharing of resources. As long as you can position yourself to let the other person think they are getting more than 30% of the benefit in a deal there is a good chance they will accept.

If they have the gum in the future you may want to opt for a more even split

How Living Cheap, Looking Rich Can Help Your Personal Finance and Career in Recession

Living below your means doesn’t seem a desirable decision to survive today’s recession.

There are better ways, and although living below your means are the next logical step when you are in financial strain, your sense of achievement must be maintained.

Why is that?

In order to keep yourself on track in navigating through the economic storm, you need to stay focus. Staying focus can be achieved through the fulfillment of your need for achievement - and living below your mean is not the way to fulfill yours.

Live cheap, look rich

Living cheap is not living below your means. Living cheap means living within a closely controlled budget to achieve the living standard that anybody else has on a higher budget.

The main idea of living cheap, looking rich is to aim to get the best deal in every way, including clothing, entertainment, etc. in such a way that nobody would know that you spend less for the look you have right now.

‘Look’ here is not only clothing, accessories, or any other apparel and fashion related products - ‘look’ is your lifestyle, in a standard that can’t be achieved by living below your means.

‘Look’ is going to Starbucks occasionally, and socialise with your friends and colleagues. ‘Look’ is how people perceive of you, no matter you achieve ‘it’ by bootstrapping. You shouldn’t overdo them, though.

The key in living cheap is total control of your budget.

Why living cheap, looking rich is smart

We live in a society that value physical appearance, lifestyle and charisma. Enhancing yours will actually help you land better job, secure more business, or socialise with more people (which can present you with more opportunities) - all in all will affect your bottom line: your personal finance, in a positive way.

You deal with people, and most of them don’t really care how much you make - what they care is what they see, and how they preceive of you. For example, in a meeting with business prospect, you need a professional look that commands confidence, charisma, and trustworthy. You don’t want to meet your future client in your t-shirt, don’t you.

How to live cheap, look rich

There are ways you can consider to live cheap but look rich:

• If you are into fashion and business as well, purchase your clothing needs with a wholesaler. While hard to find, wholesale clothes can save you a lot of money. The problem is, they usually only allow you to buy in bulk (usually in half-dozen or dozen).
• Alternatively, you can shop in consignment and/or discount stores.
• Shop for everything on the web - groceries, clothing, accessories, electronics, travel deals, etc. You can always receive a lower price for the same item you want.
• Attend charity events and/or be volunteer. Charity events - the large one - are where socialites and celebrities. Attending the events, as an attendee or a volunteer will help you raise your profile.
• Purchase used car - no body is really care how much you pay for the car, as long as its condition is top-notch.

Remember, don’t live below your means - Live cheap, look rich. That is good for your economics and, in effect, your personal finance endeavour.

Image by net_efekt.

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