Most prospective business coaching franchise owners aren’t sure exactly how much they should expect to invest to launch a new business coaching franchise.
That’s because the full costs of starting a business coaching franchise are often hidden in the fine print or wrapped up in the day-to-day operations of the business.
So if you’re wondering how much you should realistically expect to burn through as you get your business coaching franchise off the ground, here are some straight-up facts and figures…
1. Be ready for large up-front fees when you buy your business coaching franchise.
These can range from $25,000 to $50,000 for the license alone. For the training, you’re going to need to throw in another $10,000 to $25,000 depending on how lavish the 7 to 10-day training is. So, count on $35,000 to $75,000 just to get out of the gate. To compare the up-front fees for many of the major business coaching franchise brands, derived from their Franchise Disclosure Documents, check out our Business Coaching Franchise Buyer’s Guide.
2. Expect to be charged monthly royalty fees by the business coaching franchise.
Royalty fees begin almost immediately, though in recent years some business coaching franchise systems have begun to delay the start of royalties as their entire business model has come under increasing scrutiny in the industry. Royalties can be either a fixed amount or a percentage of revenue. As a business coaching franchise owner, understand that royalty fees in the $1,000 to $1,800 per month range are typical. Try to find a franchisor who opts for percentage-based royalties as opposed to a fixed amount, as this will mean that the franchisor is confident in the business model and willing to shoulder some of the risk and work harder to help you succeed.
3. You may pay “brand-building” fees into the business coaching franchise system.
On top of these costs, find out if the business coaching franchise system includes a brand-building fee. This fee is usually 2 to 5% of your revenue. It is (allegedly) used to build the brand locally, or in your region — though in most of the business coaching franchise systems we’ve studied, very little large-scale branding actually takes place with these dollars. So be sure you know that you’ll be getting your money’s worth.
4. Don’t forget your material costs.
Franchisors may also require you to buy a website, software, and marketing and branding materials which include stationery, letterhead, and the like.
You’re likely to invest more than $200,000 to start your business coaching franchise.
From my years of selling business coaching franchises for several of the best-known business coaching franchise brands, I’ve observed that start-up costs for a business coach franchise average about $200,000, including working capital. It’s not uncommon for a first-year business coaching franchise owner to spend more than $100,000 to set up their business and then go through another $100,000-$150,000 in working capital while trying to get cash-flow positive by landing those first few clients.
Some business coaching franchise opportunities require less working capital, some much more. But understand that many business coaching franchisors charge huge up-front fees just to survive themselves… and that’s because their franchisees aren’t producing enough royalty income to keep them solvent. Buyer beware!
SO, that’s how much money it really takes to start a business coaching franchise. Obviously, you don’t want to end up tied to a business coaching franchisor who cares more about selling his brand than seeing YOUR businesses succeed. So, if you’re considering purchasing a business coaching franchise, make sure you conduct thorough due diligence and have all the facts first!
For more information on the business coaching franchise industry, as well as a comprehensive breakdown on all the ins and outs of buying a business coaching franchise, download our FREE ebook: The Business Coaching Franchise Buyer’s Guide.