In this week’s blog edition, we’re going to tackle the issue of using a franchise or small business to diversify your portfolio of investments. As you’ll see, there are several advantages for doing so, the least of which is the creation of a figurative safety net. This safety net is designed to do two things:
- To prevent the depletion of wealth in the event of a severe downturn in the economy—something we all became familiar with beginning in 2008.
- To provide a fall-back source of income should your current job or position be eliminated.
While signs of recovery continue to aggregate, arming yourself with additional information will be a helpful exercise in diversification.
As an investor, if you have a healthy portfolio, you are always looking for ways to diversify your holdings. Owning a small business or franchise opportunity can be a smart addition which gives you the option to stay engaged in the semi-absentee model of operations while keeping your day job, so to speak. As we have covered before, the semi-absentee model allows you to run the business from afar, typically with a smooth “manage the manager” philosophy.
Through a diversification of your portfolio, you can also begin your journey into franchise ownership by purchasing it with relatively little (or no) debt. By utilizing your existing capital, you can liquidate at-risk assets for the purchase. In doing so, you have now created an additional income opportunity for yourself and a true safety net to guard against the depletion of liquidity-based wealth. We all know how wildly the stock market can fluctuate at times. And keep in mind — a business owned is a business that can one day be sold for a profit. Therein lies a true point of diversification for your portfolio.
It would be advantageous and highly recommended that you discuss such a potential move with your financial advisor, along with a highly trained franchise consultant. Both will be happy to discuss particular strategies which lessen your risk and even your tax-burden. If you are heavily vested in a 401k program, there are specific tax-free and penalty-free withdrawal options for starting a franchise such as through a ROBS (Rollover for Business Start-up) program, the 401k rollover method.
If you’ve arrived at the point of consideration of owning your own small business or franchise, perhaps it’s time for a review of your financial position in seeing just how this process can be a true diversification of your overall holdings.
FranNet Bio: FranNet is North America’s most respected leader in matching individuals with franchise ownership opportunities. Founded in 1987, FranNet has more than 100 experienced consultants across the United States, Canada, Germany and the United Kingdom. FranNet uses a proprietary profiling and consultative process to determine a business model unique to each client’s goals, skill sets and interests, and has matched thousands of prospective business owners to rewarding small business franchise opportunities. Based in Louisville, Kentucky, FranNet has been recognized by Inc. magazine as one of the fastest growing private companies in America for the last five years.