7 Questions To Ask Before You Invest in a Water Damage Repair Business
Getting the answers you need will save time, money, and a lot of lost effort when starting a water damage repair business
You’ve done your homework and weighed the cost of opening an independent business against purchasing a franchise opportunity. Like thousands of entrepreneurs before you, you’ve realized the benefits of franchising more than justifying the initial investments.
Congratulations! You’re well on your way to becoming a franchise owner. And if you’re reading this, chances are you’ve zeroed in on the water damage repair business. That makes sense, because the restoration business is a $210 billion industry.
But before you pull the trigger on buying your first water damage repair franchise territory, you’ll need to spend some time researching franchise opportunities. After all, there are many franchises out there, and not every opportunity is created equal.
“Buying a franchise can be a great move for a would-be entrepreneur who doesn’t want to create a new business from scratch,” notes Forbes. “In theory, franchisees acquire a model that already works on every level, from branding to pricing to marketing.”
It’s true that franchise systems take the guesswork out of starting a new business. Companies like 1-800 WATER DAMAGE have worked out the kinks of their business and are offering a product that customers need. But, as Forbes points out, that’s all in theory.
Dig beyond the theory and into hard facts with these seven questions every potential franchise owner should ask before they invest in a new franchise opportunity.
1 – What are the qualifications to become a franchise owner?
Every franchise opportunity has a set of requirements that a potential owner must meet in order to become a new franchisee. These qualifications can include both financial and skills requirements. When examining your franchise opportunities, understanding these qualifications will help you determine which franchise is right for you. Ask your franchise consultant what the requirements are—both financial and otherwise.
While you are discussing these qualifications, you’ll gain insights into the franchise system and the franchise company will get to know you. They want you to succeed because when you make money, they make money.
Financial requirements vary greatly from franchise to franchise. That’s because startup costs, operation costs and the time it takes to grow a sustainable revenue stream differ among systems. Understanding how these startup costs impact your path to business is a vital step to deciding if this is the right opportunity for you.
Pro Tip: While you’re discussing the financial qualifications, make sure to establish whether the financial requirements are liquid capital or line-of-credit based. Some systems may seem expensive at first but are quite affordable when a potential franchisee’s credit worthiness is considered.
2 – What are my startup costs?
There’s an old adage, “It takes money to make money.” That’s as true in a water damage restoration franchise as it is in any other business. Franchises cost money to purchase, and with good reason. When comparing opportunities, it will be necessary for you to understand the kinds of costs associated with a franchise as well as how much investment a particular franchise needs.
While every franchise has different costs associated with purchase, there are some that are common to all franchise systems. A few of these costs associated with starting up a franchise include:
- Initial Franchise Fee: This is the amount the franchisor charges new franchise owners for becoming a part of the company. Think of it as the money you pay to become a part of their brand.
- Travel and Living Expenses: These are the costs associated with traveling to training centers, visiting franchise locations, and completing the initial training. Travel expenses may seem small, but they can pack a punch if you’re not expecting them.
- Leasehold Improvements or Construction: When you lease an office or retail location, you’ll have to invest in a “build out,” or making it ready for occupancy. Depending on the kind of water damage repair business you’re opening, this could be a big expense.
- Insurance and licenses: Almost all businesses require some kind of insurance, whether it’s blanket liability or just workers’ compensation. Your franchise sales consultant should provide you with some guidance on the kinds of insurance your venture will need.
- Operating funds: Few are the businesses that cash flow from day one. You’ll need to pay salaries, rent, and utilities on your business, as well as keeping a roof over your head. Many franchise companies recommend two or three months’ worth of expenses in order to launch a successful business.
These expenses are just a few of the costs you can anticipate when you’re exploring your franchise options. Each franchise opportunity publishes these costs in their Franchise Disclosure Document, and your franchise sales representative can walk you through the financials.
3 – How long have your franchise owners been in business?
If you’re like most entrepreneurs, you’re not opening a business simply to make a quick buck. You’re looking down the road and building something you can be proud of. Many are looking forward to handing off a business to their children.
Talk to your franchisor about the longevity of their franchise owners. Chances are they’ll even connect you with like-minded entrepreneurs who can share with you the long-term prospects for your franchise opportunity.
For owners of 1-800 Water Damage franchise locations, they’re tapping into one of the most established and fastest growing brands in the industry. Homeowners, businesses, and insurance companies trust the work our trained professionals provide. That gives you a leg up on the competition.
4 – How long between on-boarding and grand opening?
When it comes to planning your franchise investment, one consideration that can have a tremendous impact on your decision is how long it takes to get your business open. Until your business is open, you will not be generating revenue. That can be a significant factor in whether a franchise opportunity is a good fit for you.
Some water damage franchise concepts can take a new owner from training through a grand opening in just a few weeks. Others can take a year, months or longer. Discuss the timing with your franchise sales consultant before you make any decisions. They’ll be able to provide you with a clear understanding of expectations and timelines before you make any decisions.
With 1-800 Water Damage, we’ve worked to build a training program and on-boarding process that speeds your time between decision and Grand Opening. In fact, many of our franchise locations are up and running in as little as 8 months.
5 – How large is the market for your services?
At first, asking how big the market is for a franchise opportunity’s services seems like a no-brainer. After all “bigger is better.” Right? That’s not always the case, though. The size of a franchise opportunity’s market impacts all kinds of factors.
Market size impacts work-life balance and potential growth. If an opportunity taps into a relatively small market, this could limit the amount of revenue you can expect to realize. For a water damage restoration business like 1-800 Water Damage, that market is substantial. If the market is vast and underserved in your area, it could mean a bonanza for your new business. That also comes with a price: you may have to invest more time than you’re wanting to put in.
Throughout all of these considerations, you’re not going in this alone. The franchise opportunity’s sales team is there to provide you with guidance and a clear understanding of what to expect. They aren’t there to simply sell you on their product. They want you to be successful and committed to the brand. Put in another way, it’s their job to help you decide if this is the right opportunity for you.
6 – Do I need special skills to own a water damage restoration business?
With thousands of franchise concepts on the market, there are businesses serving every possible segment of the economy. Plumbers, building contractors, restaurants—fast food and fine dining and everything in between, technology companies, and more. If there’s a market, you can bet there’s a franchise opportunity serving it.
However, think about each of those kinds of businesses and then ask if you have to have the skills necessary to deliver the service. Or, are you able to simply manage the business and hire staff to deliver services? The water damage repair business is no different.
The answers will surprise you. Some franchise opportunities prefer owners who are not the primary service provider, because the owner can get bogged down in delivering a service instead of growing a business. Other franchise concepts are geared towards owner-operators, where owners provide the service or products themselves. And others still are tailored to allow the franchise owner to establish for themselves the kind of business they want.
If a franchise opportunity requires the owner to deliver a service or sell a product, you’ll need skills to deliver on those goals. That’s not to say a building franchise isn’t for you just because you’re not a builder. In many cases, the franchisor will provide you with the training you need to become successful.
7 – What are the ongoing franchise costs?
The biggest differentiating factor for most entrepreneurs comes down to one question: How much does the franchisor charge your new business each month? Franchisors collect royalties on sales ranging from 3% to 6% or more.
Also, a franchise company might charge a marketing fee to support the brand’s position in the market. This money might be used to pay for advertisements in local or national publications, television ads or online resources.
Other costs may include licensing fees, products you have to order from the franchise company, and lead generation charges. Understanding the structure of ongoing franchise costs is a vital piece of information you’ll need to ultimately make the best decision for your business future.
Consider becoming a 1-800 WATER DAMAGE repair business owner today
Owning a 1-800 WATER DAMAGE repair business might be the right opportunity for you. To inquire about how you can deliver a vital service to homeowners and businesses, download our free Franchise Information Report today.