BUSINESS LESSONS THAT AREN'T TAUGHT IN SCHOOL | Summary and Q&A

TL;DR

Franchising can be a profitable venture, but it comes with high expenses, and entrepreneurs need to carefully consider both revenue and net profit before entering into a franchise agreement.

Key Insights

• 😘 Franchising can be an attractive option for entrepreneurs looking to start a business but comes with high expenses and a lower profit margin.
• 🪐 Revenue does not equate to net profit, and entrepreneurs must consider all expenses before investing in a franchise.
• 👨‍💼 Lack of financial understanding and exposure to the true costs of running a business are common reasons why businesses fail.
• 🆘 Seeking a mentor in the chosen industry can provide valuable insights and help entrepreneurs avoid common pitfalls.
• 👨‍💼 Copying the successful strategies of established businesses in different markets can accelerate learning and success.
• ✋ The school system's emphasis on perfection and high grades does not align with the realities of the business world, where mistakes are inevitable and learning from others' experiences can be more valuable.
• 🛝 Well-rounded knowledge and experience in multiple areas can contribute to entrepreneurial success.

Transcript

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Questions & Answers

Q: What made you decide to enter the women's hair industry as a man?

As an entrepreneur, I saw a supply and demand opportunity in the hair extensions market. After seeing the revenue numbers and success of a hair extensions franchise, I decided to invest in the business.

Q: Can you explain the process of buying a franchise?

Buying a franchise involves paying an upfront fee to use the franchisor's branding and business model. In return, the franchisor receives a percentage of the franchisee's revenue as a royalty fee.

Q: Why is it important to consider expenses when evaluating a business opportunity?

Many entrepreneurs focus solely on revenue and fail to account for expenses such as rent, labor costs, product costs, utilities, marketing, and taxes. Profitability is determined by the net profit after deducting all these expenses.

Q: Why did your hair extensions business struggle to turn a significant profit?

Despite generating a revenue of $450,000, high expenses such as rent, labor costs, product costs, marketing, advertising, utilities, and insurances significantly reduced the net profit to only $30,000, which was further divided between my partner and me.

Summary & Key Takeaways

• Franchising can be a profitable business model, but entrepreneurs need to carefully analyze expenses, including rent, labor costs, product costs, marketing, advertising, and more.

• Net profit is much smaller than revenue, and many businesses operate within a 15-20% profit margin range.

• Lack of exposure to the true costs of running a business leads to financial issues and is one of the main reasons why businesses fail.