# Contemplating A New Business



## tygrus (Mar 13, 2012)

For back ground, I run a small farm with a little help from my aging father. I make a decent income off it for only a few months work and it allowed me to get out of the rat race at age 40. 

But the business is not sustainable. My dad can't keep working on it and we are too small to hire employees and doing it alone would require a large investment in better machinery. Expanding is impossible since very large operators have surrounded me and swallowed up all the land. Also, I have come the realization that its not even something my kids could enter into if they wanted to. 

So I have decided to wind it down and rent out the land to one of the big guys and take a million dollar credit line against the land and start a new venture. Trouble is, I am drawing a blank at what that could be. The farm is tough work and there are obstacles like the weather, but there are also some great aspects too. Setting your own hours, having winters off and no customers in your face.

I am interested to hear what businesses people have been involved with and their experiences.
thx


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## gt_23 (Jan 18, 2014)

Apply to be a Tim Horton's franchisee and get rich


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## donald (Apr 18, 2011)

Real estate agent lol....i have a few friends who are agents and they are past the initial stage(they have somewhat of a built up clientele)
It's unreal the amount they make.
With a farm background though contracting can be similar in lifestyle(you can start a business without a specific trade)most of my friends are in 'industrial' type businesses.
I have a friend that started a garbage hauling business for residential and commercial(he invested in a few 3 tons and 5 tons and basically drops and picks up containers and hauls to recycling or waste facilities,he has a mechanical device that loads)I am shocked how well he is doing!people would be surprised!he bought a few discarded heavy bin containers off inventory from city municipal sales and expanded from there....has a driver or 2 on part time wage work.
If you are of the industrial 'mindset' aka blue collar,there is a ton of niches and spin-offs where you can build a small operation and make a far go and be profitable.
I have at least half a dozen friends that run small business in industrial/construction sector and all make over 6 figures(ya not as good as your standard white collar gig with bennies)but your out of the rats race doing your own thing!not working for the man or being in a maze of political correctness,or layered corporate soul sucking moral killing get out of bed and dream of the day you want to tell the boss to f.o lol
Tim hortons is prob a good idea though  lol


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## tygrus (Mar 13, 2012)

gt_23 said:


> Apply to be a Tim Horton's franchisee and get rich


A lot of people see dollar signes when they look at a Tims. Frankly, I see chaos and a lot of headaches.


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## gt_23 (Jan 18, 2014)

tygrus said:


> A lot of people see dollar signes when they look at a Tims. Frankly, I see chaos and a lot of headaches.


Maybe, but more of a sure thing than building something from scratch.

I think any business you start/buy/run is going to give you stress and headaches, so maybe you should invest the $1mm passively instead.

Actually, I take that back....buy a campground. If you get a good one with a base of year-round leases and solid seasonal traffic, I think it would be a great gig for a while, not to mention minimal work over the winter.


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## Just a Guy (Mar 27, 2012)

I've got a buddy who owns a bunch of Tims. The cost to get in is about $500k in assets I believe, and the profits per store for the owner is only around $100k/year. It's a lot of hands on work if you only own one...and not all are successful. 

My buddy specializes in buying the unsuccessful ones and turning them around. He's hired a manager who gets paid very well, gave her a car and other perks, does all the work and he's now pretty hands off but owns several stores...

Run like that, it's not a bad gig.


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## gt_23 (Jan 18, 2014)

Just a Guy said:


> I've got a buddy who owns a bunch of Tims. The cost to get in is about $500k in assets I believe, and the profits per store for the owner is only around $100k/year. It's a lot of hands on work if you only own one...and not all are successful.
> 
> My buddy specializes in buying the unsuccessful ones and turning them around. He's hired a manager who gets paid very well, gave her a car and other perks, does all the work and he's now pretty hands off but owns several stores...
> 
> Run like that, it's not a bad gig.


I heard $500k upfront too...although I believe not all of that has to be equity.

I also heard owner earnings were $200k-$300k per store, although that was from a buddy (and potential franchisee) and actuals could be very different...


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## marina628 (Dec 14, 2010)

I am a big gambler but even I would have serious trouble sleeping at night to mortgage the farm for 1 million in hopes to build a business.You have to service that debt and then if something goes wrong with the business plan you can literally lose the farm.The most troubling part is you are asking strangers on a forum to help you decide what your options are.I recommend you do nothing until you lock down what your interests are and have sound financial plans in order.


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## gt_23 (Jan 18, 2014)

marina628 said:


> I am a big gambler but even I would have serious trouble sleeping at night to mortgage the farm for 1 million in hopes to build a business.You have to service that debt and then if something goes wrong with the business plan you can literally lose the farm.The most troubling part is you are asking strangers on a forum to help you decide what your options are.I recommend you do nothing until you lock down what your interests are and have sound financial plans in order.


How's it any different than borrowing from the bank to buy or start a business - happens every day. Many ppl have to give personal guarantees which could put their real estate at risk too.

I don't think it's troubling at all that he solicited advice on a forum - how's it any different than the people who ask for investment advice? He's looking for ideas, not signing on the dotted line. There are lots of steps between the two.

Finally, the debt service would obvisously be factored into the business plan. The fact that "something can go wrong" in business is universal and not specific to this situation or the use of leverage.


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## tygrus (Mar 13, 2012)

Regarding franchises like Tim's, while you might make $100k, consider that the only thing you own is the Tim's name, no land, no buildings, no equipment. Thats always the thing that bothers me about franchises.


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## Eclectic12 (Oct 20, 2010)

gt_23 said:


> I heard $500k upfront too...although I believe not all of that has to be equity.
> 
> I also heard owner earnings were $200k-$300k per store, although that was from a buddy (and potential franchisee) and actuals could be very different...


I thought it was higher .... plus it was tough to get one as existing owners were offered new franchises first (I have not verified this).


In any case, what was published from the lawsuit by a group of owners was the average by province. As I recall, Nova Scotia was at the low end with something around $210K per store. Saskatchewan was at the high end at $398K per store. Ontario was somewhere around $270K.


Cheers


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## Just a Guy (Mar 27, 2012)

Could be pretax vs post tax and expenses. The other thing is, you can be stripped of your franchise as well...or they can open more right across the street.


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## Eclectic12 (Oct 20, 2010)

^^^^

Now that I found one of the articles that has not moved behind a pay wall, it is after-tax.

http://www.discoveryfinance.com/average-annual-income-of-tim-hortons-owners.html


I would preferred the Macleans article as it had more than a quick summary.


Cheers

*PS*

As for the "they can open more" ... you mean like the Vancouver intersection with a StarBucks on each of the *four corners*?


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## Cal (Jun 17, 2009)

You didn't tell us much about yourself, but we will assume you are handy as you farm, and you didn't tell us where you live, but perhaps being an arborist (tree removal), or water well driller, job at local co-op, grain/dairy employee.....


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## RBull (Jan 20, 2013)

It seems difficult to get a Tim Hortons franchise. You will need ~$400K, a working partner and you will likely be dealing with the scraps in terms of what is available for location after existing franchisees step up first. This is what I discovered after making a formal application approx 9 years ago and being declined. I did not have a working partner which is what they claimed as the reason. I did end up with another franchise but not in the retail area. 

Tygres, not sure why you would consider the line of credit amount when you don't even have the business idea at this point. 

I suspect running a whole new business with anywhere near that kind of debt is going to be a huge new challenge, and stress compared to working a couple of months on an established family farm. Good luck.


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## gt_23 (Jan 18, 2014)

tygrus said:


> Regarding franchises like Tim's, while you might make $100k, consider that the only thing you own is the Tim's name, no land, no buildings, no equipment. Thats always the thing that bothers me about franchises.


That's the difference between going into business vs. investing. Unless your buying a manufacturing biz or other capital-heavy industrial type biz, the major value in the enterprise comes from its rate of earnings. If you put $500k into starting up a Tim's or similar biz, you might get out $100k if you had to liquidate the FF&E. But your $500k is not buying you fixed assets, it's essentially buying you a stream of future earnings.


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## gt_23 (Jan 18, 2014)

RBull said:


> It seems difficult to get a Tim Hortons franchise. You will need ~$400K, a working partner and you will likely be dealing with the scraps in terms of what is available for location after existing franchisees step up first. This is what I discovered after making a formal application approx 9 years ago and being declined. I did not have a working partner which is what they claimed as the reason. I did end up with another franchise but not in the retail area.
> 
> Tygres, not sure why you would consider the line of credit amount when you don't even have the business idea at this point.
> 
> I suspect running a whole new business with anywhere near that kind of debt is going to be a huge new challenge, and stress compared to working a couple of months on an established family farm. Good luck.


I recently read something about Tim's wanting to open 1000 new franchises in Cda and more in the U.S. It's probably true that they're very selective as you suggest, but they can be considering the are probably the Top franchise to purchase in Canada.

I'm not sure why the debt would be an issue unless the business isn't successful. He could probably have it paid off in 5 years if the store performed like an average store, and then it's owned outright.


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## tygrus (Mar 13, 2012)

gt_23 said:


> That's the difference between going into business vs. investing.


And thats what makes dispersal so difficult if things don't work out or if you want to retire. If I own a business with the buildings and land, I can always get out by just shutting the door and either selling the property or re purposing it. 

To get out of a Tim's you need to sell the franchise which is only going to be worth the same as what a new franchise is. And its only set up for a Tims while my own property can become anything even if fads change.


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## tygrus (Mar 13, 2012)

RBull said:


> Tygres, not sure why you would consider the line of credit amount when you don't even have the business idea at this point.


The line of credit is just on stand by. It can be closed down anytime if I change my mind so there is no risk yet.


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## OurBigFatWallet (Jan 20, 2014)

I'd consider becoming a franchisee for a large gym. Anytime Fitness is a good example. The one near my home, when fully operational, will have 1500 members. Gross monthly revenues would be around $50k. A decent sized investment to start with - advertising, franchise fee, equipment, building setup, lease etc but once its up and running it seems like it has potential. Even better if its in a growing area or near condos where people can't have the room to set up their own home gyms. Its open any time (hence the name) but staffing costs are low and I'm not sure what the monthly lease is but I'm betting its nowhere near $50k. The member contracts have like 3 pages of fine print so they are basically iron-clad. I noticed the gyms also have the right to charge an annual maintenance fee if they wish.


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## gt_23 (Jan 18, 2014)

tygrus said:


> And thats what makes dispersal so difficult if things don't work out or if you want to retire. If I own a business with the buildings and land, I can always get out by just shutting the door and either selling the property or re purposing it.
> 
> To get out of a Tim's you need to sell the franchise which is only going to be worth the same as what a new franchise is. And its only set up for a Tims while my own property can become anything even if fads change.


True, but it takes a lot longer to get rich off buildings and land than it does with a successful business. Look at the world's most valuable firms...sure they own RE and other fixed assets, but 99% of their value comes from their rate of earnings.

I think you could resale a franchise for much more than you paid for it if you have a track records of solid earnings (pref with growth). The downside with a franchise is you're limited in your ability to make the adjustments needed to achieve that growth. Once your sales get to high, they'll probably open another in your district, but you would most likely have the first right to purchase it.

The advantage of a franchise like Tim's would be that you have line-ups the day you open up and you're learning curve would be much steeper. I also don't think you'd have any issue at all re-selling it at any time in at least the next decade, provided you don't drive your sales to 0.


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## gt_23 (Jan 18, 2014)

OurBigFatWallet said:


> I'd consider becoming a franchisee for a large gym. Anytime Fitness is a good example. The one near my home, when fully operational, will have 1500 members. Gross monthly revenues would be around $50k. A decent sized investment to start with - advertising, franchise fee, equipment, building setup, lease etc but once its up and running it seems like it has potential. Even better if its in a growing area or near condos where people can't have the room to set up their own home gyms. Its open any time (hence the name) but staffing costs are low and I'm not sure what the monthly lease is but I'm betting its nowhere near $50k. The member contracts have like 3 pages of fine print so they are basically iron-clad. I noticed the gyms also have the right to charge an annual maintenance fee if they wish.


That's a brilliant idea actually....a license to go into ppls bank accounts and take their money even though many won't come through the doors more than once!

Any idea what the initial investment for a decent-sized gym is? Seems like all the equipment would be pricey...


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## OurBigFatWallet (Jan 20, 2014)

gt_23 said:


> That's a brilliant idea actually....a license to go into ppls bank accounts and take their money even though many won't come through the doors more than once!
> 
> Any idea what the initial investment for a decent-sized gym is? Seems like all the equipment would be pricey...


From the looks of it the actual investment cost can vary widely according to their website: http://www.anytimefitness.com/franchise-opportunities

The site lists equipment as maximum of $16k, but I think this is likely understated - a decent commercial grade treadmill can cost $3k and most gyms have 8-10 of them.

As you mentioned the potential upside is that people pay monthly for the right to use equipment that they likely won't use often at all. I assume there are other opportunities for upsell like personal training, nutritional products etc.

Also, the real estate costs would be relatively low (aside from leasehold improvements) at the start as most sites don't actually own, they sign long term leases which is ideal from a cash flow perspective because it doesn't require a huge upfront cost

If anyone has any experience with owning a gym feel free to clarify


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## Synergy (Mar 18, 2013)

Keep in mind that overhead and equipment costs including ongoing repairs and maintenance can be substantial. $ per sq/ft can eat up your profits pretty quick, especially when trying to build a membership base. 16K for equipment is grossely understated, even for a really small gym. I was talked out of the gym business quite a few years ago and I'm glad I stayed away. Many of the gyms in my area have closed down, changed ownership numerous times, etc. Most of them are staying alive these days courtesy of women's fitness classes - yoga, pilates, crossfit, etc. It's a tough and competitive business in my opinion and if the demographics aren't in your favor I'd be careful. A good commercial treadmill that's going to withstand daily punishment will run you closer to 4-6K, depending on how many you purchase. Most people go into the gym business out of a passion for fitness, health, sport, training, etc., sometimes they get a rude awakening when they build a great facility, but no one shows up to the party.


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## gt_23 (Jan 18, 2014)

OurBigFatWallet said:


> From the looks of it the actual investment cost can vary widely according to their website: http://www.anytimefitness.com/franchise-opportunities
> 
> The site lists equipment as maximum of $16k, but I think this is likely understated - a decent commercial grade treadmill can cost $3k and most gyms have 8-10 of them.
> 
> ...


The fixed royalty is interesting...I'm not sure why a franchisor wouldn't want to participate in the success of the store if he believed it had a decent chance of success.


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## Synergy (Mar 18, 2013)

tygrus said:


> Trouble is, I am drawing a blank at what that could be.


Have you considered building self storage facility / business?


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## PrairieGal (Apr 2, 2011)

Are you sure you wouldn't be better off hiring someone part time to help you on the farm? Most new businesses are going to require a lot of work on your part to be successful, with no winters off. And there is a real risk of failure. Stick with what you know, and that works for you. Winters off sounds pretty good to me.


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## RBull (Jan 20, 2013)

OurBigFatWallet said:


> I'd consider becoming a franchisee for a large gym. Anytime Fitness is a good example. The one near my home, when fully operational, will have 1500 members. Gross monthly revenues would be around $50k. A decent sized investment to start with - advertising, franchise fee, equipment, building setup, lease etc but once its up and running it seems like it has potential. Even better if its in a growing area or near condos where people can't have the room to set up their own home gyms. Its open any time (hence the name) but staffing costs are low and I'm not sure what the monthly lease is but I'm betting its nowhere near $50k. The member contracts have like 3 pages of fine print so they are basically iron-clad. I noticed the gyms also have the right to charge an annual maintenance fee if they wish.


I looked very carefully at this and at Snap Fitness. The biggest issue is capital required for equipment. They were high on my list but some issues with territory here that couldn't be overcome so passed on them. Gross revenues vary widely between franchisees and markets however. The real plus on this is the low staffing and much more passive type of arrangement.


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## crazyjackcsa (Aug 8, 2010)

I'm unclear as to why you would even consider any of this. You have a business, you're a land owner. Rent it out. Call it a day. Sever the house and sell it if you want. Sell the whole damn thing if you want and invest it. If you're unfulfilled, volunteer or pick up a part time job. But why would you try to sink two ventures in one fell swoop?


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## donald (Apr 18, 2011)

Seems low(the capital requirement)A lot of these gym franchises i see are in prime real estate area's that are neighboring home depot/costco etc,the sheer size of these gyms are staggering.....the 'good life' inc gym i go to is a multi-level building with state of the art everything at least 30-40 treadmills(with dozens of flat screens)countless machines in another area the free weights in another again countless equipment.....a glass room upstairs for yoga.
The bathrooms are huge(the bathrooms alone with multiple showers/lockers/sitting area)The exterior is cladding in culture stone and the windows on this building(the treadmill area)is basically a wall of windows(It seems like a multi million dollar building)
I realize this is a lease and i know nothing about this business but these buildings are mega capital intense,something tells me this type of business is ill suited for someone unless you are seasoned in running businesses like this in the past.
There has to be more to the story,something tells me it aint that easy


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## tygrus (Mar 13, 2012)

crazyjackcsa said:


> I'm unclear as to why you would even consider any of this. You have a business, you're a land owner. Rent it out. Call it a day. Sever the house and sell it if you want. Sell the whole damn thing if you want and invest it. If you're unfulfilled, volunteer or pick up a part time job. But why would you try to sink two ventures in one fell swoop?


Well I plan on renting it out, but my income will fall in half by doing that, hence the incentive to create another stream. 

Plus I am only 45 so I still need something to get me out of bed in the morning and I don't have enough hobbies or outside interests to fill a lot of my time.


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## gt_23 (Jan 18, 2014)

crazyjackcsa said:


> I'm unclear as to why you would even consider any of this. You have a business, you're a land owner. Rent it out. Call it a day. Sever the house and sell it if you want. Sell the whole damn thing if you want and invest it. If you're unfulfilled, volunteer or pick up a part time job. But why would you try to sink two ventures in one fell swoop?


Probably because his ROE is likely very, very low.


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## tygrus (Mar 13, 2012)

gt_23 said:


> Probably because his ROE is likely very, very low.


Well, ROI is in the 15-20% range if farmed, and half that if rented. The land has tripled in value so yes, ROE is low now because there is a million plus in entrained equity in the business that is doing nothing and only growing at 3% per annum.


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## e86s54 (Mar 27, 2014)

Not sure how many here that have posted have actually started and run a business. IMO lots of posts that jump the gun. What I would do is look at what is missing in your community and contemplate the opportunity. Keep in mind that it should conform to your lifestyle. For example a Tims franchise was mentioned. If there are many tims in the area (as their seems to be) along with others (McD, Starbucks), then that one is filled. If Tims is possible but you like to attend all your kids functions and go on vacations, then perhaps that's not a good idea either.

So back to the OP...what's missing or in need in your area?


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## Tinman (Feb 17, 2014)

For starters, I wouldn't suggest getting into something based on people's feedback of "what should I do?" it's a very broad question likely to get feedback on people's own perceptions of what they would get into, not necessarily what would be best for you. You know your market/area better than anyone on this board, yes, lots of valuable guidance to be had, but you should stick to something that you have personal interest/knowledge in - even if only entry level. Are you looking for a B&M location, or some kind of world wide online shop?

Myself, I was the largest retailer of poker chips in the country from about 2003-2006, started it because poker was a hobby of mine (long before everyone started playing it). Started off with ordering 2-3 thousand chips from a wholesaler in Florida and reselling them for little margin, my last order was for half a million chips from China. My landed cost for a set of 500 chips was about $27, and at the peak, was selling them for $300/set. Next thing I knew, Walmart and Costco were selling poker chips...everyone was - even Hallmark Cards! I was going to lose my niche so I sold the biz while the getting out was still good.

As e86 asked above me, what needs need filling in your area? What interests you and what can you add value to from a knowledge standpoint?

I know nothing of buying a franchise, I'll stay away from advice on that. If you're looking at starting a small biz from scratch:

- go out and buy "beat the taxman" book this was my starting bible

http://www.amazon.ca/167-Tips-Canadian-Small-Business/dp/047015974X

- Owning your own small biz, there is a massive tax benefit to also being employed, even if only part time. I'd be happy to go into detail why if interested.


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