How fast should a franchise replace my current salary?

Many of us would love to leave the corporate grind to become a business owner instead – if only we could replace our corporate income without any interruption. Or with the shortest possible interruption, anyway. So what is the right way to look at this issue? How fast should you be able to replace your salary when starting a new business?

Unfortunately, nobody can give you a specific number of months. There are just way too many variables. But let me propose a different starting-point. You really do have to be careful not to commit to a business that you aren't sufficiently capitalized for. Start from there. Your available funding must be adequate to provide enough time - and more than enough time - to get the new venture off the ground.

The franchisor will give you some guidance on the investment requirement, including a working-capital estimate to get you through the first few months. Hint: you should have more than this. You can interview a number of current franchisees (as many as you want) to get an understanding of when they began breaking even, when they could start paying themselves a salary, and what the decisive factors were for them. Use this for best-case, worst-case planning. This should bring you reasonably close to what you can expect for yourself in implementing the same business model. Get a CPA involved if you want to write a nice, self-consistent business plan – and leave yourself a generous capital buffer just in case.

Another point. Some business models can be launched and ramped up much faster than others; it does not make them better opportunities. For example, B2B businesses usually rely more on relationship-building, and therefore they can take longer to get out of the gate than B2C businesses based on mass advertising.? For obvious reasons (site selection, lease negotiation, construction), most brick & mortar businesses take longer to get up to speed than home-based or even office-based ventures. Those timeframe differences don't necessarily make one business better than another, but they do have to be a realistic part of your planning, especially if you are leaving a job and giving up an income to launch the business. The unforgivable sin in business is running out of money.

Otherwise your current salary is not a great benchmark. Hopefully you will achieve more than that with your new business, accompanied by the freedom and independence of being the owner. In addition, you will have the equity value of the venture, which you may eventually decide to sell or leave as a legacy. But even if you have to tighten your belt for a while before reaching your current income levels, or possibly in some cases even if you never get to the current number, some of those other factors might still make entrepreneurship the right choice. This is all good stuff to think over and discuss with your family.