We may earn money or products from the companies mentioned in this post.
All franchises & business opportunities can be analysed for both growth and profit potential using very simple rules. These rules apply whether you are starting a business on your own or considering buying a franchise opportunity.
The first golden rule in business is to analyse the market place that you are contemplating to enter. Is it a declining market or is it growing? Is it becoming more competitive or less? Is it forecast to grow or decline? The same rules apply when you are considering buying a franchise opportunity. What forces are at play in this segment?
Let us assume that you are thinking of entering the retail trade and specifically men’s clothing.
By analysing the market or commissioning market research you will quickly discover that the segment is very tough indeed. Average retail prices when taking inflation into account have actually fallen in real terms. Average cost prices have not fallen so quickly. Margins are being squeezed. Average spending power has actually increased so certain highly specific segments within this segment could still hold their own.
The growth in mail order and internet shopping for these products has risen over the same time. Supermarkets have entered the field and now hold a significant market share. The quality of imported goods has now reached the standards of some inferior brand names.
All the above should sound alarm signals for anybody considering entering this business segment. So the first golden rule in business is to enter a growing market segment where profit margins haven’t been already squeezed. In reality the opportunity has already been exploited. Again if you are contemplating buying a business franchise in this segment I would advice you to think twice.
A rapidly growing market segment is to supply health care, holidays, specifically designed products and other services to the elderly. In the last 50 years the rate of growth of the over 60s has exceeded any other age group. Their disposable incomes have risen at the same time. This is forecast to grow even further as better understanding of health risks, improved medication and exercise facilities enable the population to live longer.
The need for help with every day activities also increases with age. Most elderly people need help with one or another area of life that we all take for granted.
Another very important feature that has been widely seen is that the elderly now seem to be a lot different from the same age group only 50 years ago. They are much more likely to travel on their own, exercise in the gym & demand greater services from both the business community and the government.
So in this case the first golden rule has been overcome. Profit margins are healthy and the market segment is expanding and forecasted to continue expanding. Spending power is on the rise and forecast to grow further in years to come.
There are many market segments that are forecast to grow so the above example is just one of them. Again there are other segments that have already started declining.
The First Golden Rule states that if you find a niche in a market place that is growing rapidly even a hard working fool can make money. Your accountant can help you analyse any market segment very quickly and easily. Why enter the wrong segment when you are likely to be in that field for at least the next 5 years? Look out for my next golden rule out soon.