Top 10 reasons why 2020 might be the best time to buy a home-improvement franchise
According to a 2009 study by the Ewing Marion Kauffman Foundation, 57% of Fortune 500 companies have been founded in a recession or bear market, even though only 31% of all years since 1855 counted as “down years.”
I actually started Spray-Net in 2009 in the midst of the housing crisis because customers were looking for a low-cost home improvement that provided as much value as possible; the biggest bang for their buck! It would be arrogant to say that I planned it this way (I obviously didn’t) but in hindsight, I see why this makes sense. Problems are plentiful during down years and businesses exist to solve them in exchange for money. In today’s COVID environment, it’s easy to see that there are a lot of problems (to be solved), but many people say there’s no money out there. And I would disagree. Amazon, Costco, Zoom etc. are hiring more than ever these days, so the money is not disappearing. Instead, it is simply transferring hands. Let’s not forget all those essential service workers- they’re homeowners too! Here are the top 10 reasons why I believe 2020 is the best time to buy a home improvement franchise.
- You don’t need to come up with your own “ground-breaking” idea.
Entrepreneurship has become somewhat of a buzzword. If you google “types of entrepreneurship,” you’ll find up to 26 different types. My point here is that you don’t need to be “an innovator” or the next Steve Jobs to become an entrepreneur. Steve Jobs himself said, “To me, ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions.” There are many ways to become an entrepreneur without a ground-breaking idea and a franchise is one of them. The Spray-Net idea (your multiplier) has already been proven so you don’t have to start from scratch or work out all the kinks. In a franchise, execution is everything!
- You can sell your business, not your job.
It’s no secret that job security isn’t what it used to be. Nowadays, finding someone who’s kept a job for more than 10 years is the exception rather than the rule. With market fluctuations come massive layoffs as businesses over leverage themselves to grow at all costs. You could give your blood, sweat and tears for a company and due to the inherent structure of corporate America, you could be fired regardless and ultimately left with nothing. Sure, you have something to put on your CV, but you can’t sell your job. It’s not an asset once you’re not doing it anymore. People talk about sweat equity all the time, but don’t take the time to really quantify how much it reduces risk when buying a low-cost, home-improvement franchise. If you buy a franchise business and for whatever reason realize it isn’t for you, you can sell it and recuperate some of that sweat equity and initial investment. Does this mean you’ll make a ton of money? That depends entirely on how well you ran the business; but the point is you won’t lose it all. Worst case scenario, you’ll be left close to break-even which is where you’d be if you lost your job, anyway. At least you’d be the one making the decision, though.
- You don’t need start-up experience.
That’s the beauty of franchising! It’s a mid-way point between corporate America and a start-up. I would argue it’s the best of both worlds. There are tons of articles out there about the advantages of buying a franchise, so I won’t go too in depth about that here; but, in franchising you’re in business for yourself, not by yourself. You have the luxury of leveraging the experience of many other entrepreneurs doing the EXACT same thing as you, sharing best practices and pooling resources together to do things that would be impossible to do individually. A tech-enabled franchise that fulfills a customer need during these times is ideal. One that is agile and able to pivot to the quick changes in the market. Here’s a snippet of what we’ve done at Spray-Net to battle COVID so far:
- You’re not starting guns blazing.
It takes time to learn any business. If you speak to any of our franchisees, they’ll tell you the first year is tough- but necessary. You’re not starting from scratch, but there’s a lot to learn while bringing in sales, hiring a team and making sure customers are happy. Times like these are relatively more forgiving as the macroeconomic pace has generally slowed down. It’s generally understood that things take longer now, and consumers are more patient. This actually creates a rare opportunity for anyone starting a business during these times to better handle the learning curve, stay focused and build an even more solid foundation. Contrary to existing businesses, you don’t have any legacy costs yet, no pre-planned commitments to downgrade or any existing employees on payroll. You can scale at your own pace. That also means some weaker competition, as existing businesses scramble to re-adjust to declining forecasts giving you an advantage that can last for years to come!
- Finally, access to labor!
Probably the biggest challenge for any business is labor. One positive from this whole situation is that people are looking for jobs. This benefits those of us who are hiring, especially in the renovation space. Compared to businesses who service customers in a confined brick and mortar location, the renovation space (especially exterior) will relaunch operations much sooner, as they’re a lot less invasive and don’t involve crowds. With unemployment rates at an all time high, labor is plentiful. And that means one less challenge when starting a new home-improvement business.
- Funding has gotten cheaper.
Governments understand and recognize that new businesses create new jobs. Under the CARE act, SBA loans are now up to 90% government-backed and payments including principal, interest and fees forgiven for the first six months! There will likely be more programs to come, but even as I write this, interest rates are at a historic low and you can get a Spray-Net franchise for less than $100k, all-in! The best part is we can help you secure financing in the process, as Spray-Net is an SBA-approved franchise.
- Marketing has gotten cheaper.
Most digital advertising is auction-based, where keywords are put to a bid. In general, the higher you bid, the better your ranking and the more people will see your ad. In the panic of the coronavirus, many businesses have either made an irrational decision to cut their marketing or have been forced to do so for liquidity reasons. Either way, this creates an opportunity and one that Warren Buffet would be all over. He famously said, “Be fearful when others are greedy but greedy when others are fearful”. Not sure I agree with being greedy, but you understand the analogy; it’s now cheaper than ever to get in front of your audience online!
- People are staying home!
People are not going to be travelling for a while so it’s no surprise that Home Depot and Lowe’s have seen a great Q1. Bloomberg featured CFRA analyst, Ken Leon, to talk about why he thinks this forced “staycation” will be great for the home-improvement sector. DIY projects are on the rise as people spend more time at home, which shows that they care about their “staycation venue”. During uncertain times people will also look at ways to maximize their dollars. As they did when I started in 2009, homeowners will be looking for low-cost solutions that maximize impact for their property. Contrary to 2009, we’re now able to do virtual quotes and we’re way more likely to interact with both household decision makers, making our sales process much more effective (sales 101)! Most homeowners aren’t necessarily going to spend $35k to renovate their kitchen right now, but a remodel under $5k is more likely to make the cut (on average our job sizes range from $1500-$5000). Luckily for us, we’re the most cost-effective way to increase property value by offering the quickness and affordability of conventional painting with the benefits of replacement!
- People want homes!
Let’s just say living in a petri dish for the virus, aka a condo complex, isn’t as appealing as it once was. As homes become more desirable, values go up. As values rise, renovating makes even more sense.
- People are more open to non-invasive services.
We like to joke that we quarantine our customers in their homes when we wrap it all up to spray it. Although we might not be an “essential service”, we are completely non-invasive. It’s been surprising how many people want us to get their projects in the queue and completed ASAP! Of course, our teams are taking all the necessary precautions to prevent the spread of the virus between one another but there is practically zero risk for the homeowner; only reward!
For these reasons, I believe it’s the best time to buy a home-improvement franchise depending, of course, on the price point of the service. I believe anything in the DIY range (under $5k) that offers a big impact will be a winner in this environment. Our job sizes are not too small that we require hundreds of customers to cover our low fixed costs, but not too big that we scare people off with the price- a nice in between. The reality is that the people who have the disposable income to do a relatively small home-improvement like ours are not the ones losing their jobs. Higher ticket and more invasive home-improvements, however, are likely to decline significantly for now.
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