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As a accountable investor, you in all probability do not put all the things in a single funding car however as a substitute have a portfolio that balances threat and reward by drawing on a wide range of sources. That is the strategy it’s best to take when selecting firms so as to add to your online business portfolio. However how do you select? One of many core missions at my firm, United Franchise Group (UFG), is buying companies to put money into, and we have discovered one of the best course is to name on strengths that you need to use in a brand new enterprise.
In different phrases, purchase what you understand.
Correctly managed, success breeds success. As soon as you have led one firm to profitability and achieved different measures of fine well being, you will need to repeat the win. You will notice new alternatives that may add extra worth to your organization. Using your strengths helps make it simpler to reach a second or third enterprise.
Diversify in class
Plan to create a various portfolio, however do not stray from what has introduced you right here. Diversify throughout the class you are succeeding in. For instance, a profitable restaurateur would possibly need to have a look at different eating places however keep away from supermarkets. They’re each within the food sector however require a very completely different set of abilities.
On the identical time, do not buy one other firm that does precisely what you do. When pleasure fades for that area of interest, your losses will run twice as deep. When you personal a reduction grocery store, as an example, contemplate a connoisseur market.
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Go along with your intestine — for now
Funding selections at all times require goal, rational considering, nevertheless it all begins with what your intestine is telling you. Once you go to different businesses as a buyer, what impresses you? Let your intestine drive this a part of the method.
A enterprise dealer can even assist you to consider your choices. Search for profitable niches in your trade. For instance, at UFG, restaurant traders might contemplate our Greek meals and charcuterie franchise manufacturers, which have caught the eye of meals lovers looking for more healthy selections or who need to add partaking methods to snack at celebrations. Real estate and enterprise consulting providers would possibly contemplate investing in certainly one of our coworking franchises, which continues to draw professionals looking for flexibility of their workspaces.
Now go along with your mind
As soon as you have picked the kind of enterprise, it is time to let your mind take over on your intestine. Search professional assist in evaluating the assorted features of the corporate you are contemplating, comparable to monetary well being, buyer demand and operational efficiency. When you have a company crew, name on workers from the completely different areas you will need to consider, together with gross sales, operations, administration and accounting. Get to know the founders of the enterprise you are shopping for and determine if anybody will likely be staying after you purchase it. Ask a lot of questions, and in the event you do not feel proper in regards to the solutions or, worse, catch a deceptive assertion, do not be afraid to bow out.
A whole lot of this due diligence could be performed for you in the event you put money into a franchise model, which gives dependable techniques and processes, model recognition and, in the event you select the correct one, advertising and marketing and coaching assist.
The synergy of member manufacturers is a important consider franchising, nevertheless it also needs to be a prime consideration in the event you select to put money into independent manufacturers. Take into account whether or not your companies can share sources. Would you like them to seek the advice of with one another or stay utterly separate?
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Classes discovered
In my 40 years of acquiring companies for my firm to put money into, here is a few of what I’ve discovered about shopping for and promoting manufacturers in a portfolio:
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Non-public fairness has taken a dominant place in franchising. Whereas it may be superb for some manufacturers, it may be horrible for others. Go slowly right here, particularly if you’re giving up a majority stake. Even a minority place could cause challenges. Speak to others who’ve performed it earlier than promoting out.
It is virtually inevitable to have some regrets when making enterprise selections — mistakes are a part of the journey. UFG has had some hurdles and challenges in shopping for or promoting manufacturers through the years, however we have at all times labored them out. No matter occurs, I at all times give attention to the long run and transfer ahead — and it’s best to, too.
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