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Use of a Franchise Business as a Family Tax Planning Strategy

Suggesting the use of a franchise business as a vehicle for family estate and tax planning. Specifically using as an example, The Car Wash Guys, a portable car wash franchise, where you will be purchasing a completely designed and outfitted car wash truck and the right to develop a specific city or regional area with out of pocket start-up costs between $25-50,000. There are many other types of mobile franchise busiensses in the same general price range due to competitive market components.

Many questions on the minds of parents wishing to establish and perpetuate multigenerational estate assets for growth and eventual transfer. Programs they wish to develop can range from the simple gift to complex estate restructuring.

How can you help your children start a business that does not have extreme start-up costs, extensive asset liability and has a greater chance of being profitable?

What type of business could you establish, nurture and grow, that has a greater chance of being successful, increase in value over the years and is easily divisible among children with different management abilities, different interests in owning or running a business and who live in different cities?

What type of business can be owned and operated by a family limited partnership that wishes to diversify their holdings and add a “business interest” to insure qualification by the IRS for the valuation discount when gifting minority interests?

Family Gifting Using the Annual $10-20,000 Exclusion Gift Per Child

Usual gifts are the funding of IRA’s, pensions, additions to stock, bond, mutual fund or annuity accounts, purchase life insurance, fund education or special travel expenses. There is a desire for these gifts to be productive, protective, have long-term value, distribute income and have growth potential. A franchise business addresses all these issues.

Why not help your heirs purchase a mobile type franchise, such as a Decorating Den, Oil Butler, Dog Grooming Franchise or perhaps a Car Wash Guys franchise business? Two parents can gift in one tax year the out of pocket start-up costs to purchase this business. The other costs can be financed. When there are several children that live in different cities or just have different ideas of how to run things, the purchase price of this franchise business is low enough so that each child can have their own business. To accommodate the annual exclusion gift amounts per heir for families with multiple children and grandchildren and for families that wish to establish business area dominance, arrangement can be made with These types of mobile franchises like the Car Wash Guys can be purchased for several cities or several regions. If you discuss this strategy with the franchisors of such businesses they can assist you in accommodating your needs, after all they also want to sell franchises and extend their brands in as many places as possible.

Planned Asset Transfers To Children

Assets managed by parents for later transfer to their heirs include securities investment portfolios, real estate portfolios and personally owned business interests. There is a desire for these assets to have a greater chance of maintaining their success, increase in value over the years and be easily divisible so that all the children can be treated individually and fairly. A franchise business addresses all these issues. And when selecting an appropriate opportunity, why not make your new business venture an adventure full of personal growth, civic recognition, financial reward, fun and enjoyment for all.

Why not purchase a multiple city or multiple region Mobile Franchise franchise business? As a franchise purchaser you will be joining a proven system so that no prior business experience is needed for your new venture. You will be putting more odds for success on your side. As a Franchisee purchaser you will be joining a dynamic team that will enable you to be in business for yourself but not by yourself. A franchise business has an established ‘floor value’ that should increase over time with good management. The Car Wash Guys franchise can easily be broken up into individual cities or regions or organized and managed from the beginning as different cities and regions so that your heirs, who each have different interests and abilities, who may live in different cities across the country and who don’t want to be tied to their siblings or to one project in one city, can receive a separate and complete business interest. This is possible now in a variety of franchised businesses.

The Family Limited Partnership

Effective estate planning is intended to provide for family members and others, while minimizing taxes and expenses. Intergenerational transfers and gifts often involve assets with joint ownership, partnership and/or other types of multiple person/entity ownership. There is a need to limit family and asset liability exposure. Many families create a family limited partnership that provides a means to own, manage and maintain control of assets while providing a vehicle for the orderly transfer of wealth to a younger generation. They transfer various personal, securities, real estate and business interests into this partnership. In the future it may be necessary for family limited partnerships to own and participate in an ‘active business’ to insure qualification by the IRS for a valuation discount when gifting minority interests to your heirs. What type of business can families with varying business backgrounds as well as varying interests in owning and running a business purchase to insure IRS qualification?

Why not have your family partnership purchase a multiple city or multiple region franchise business? This would be a mobile business so there is no business property to own, lease or negotiate as well as no need for property to use as a store or office. In some mobile franchise businesses there is no need for a telephone answering service or additional telephone lines as this business comes with a nationwide 800 number and pagers. Calls for your business are received via this number and alphanumerically paged out to you or your staff. And there is no need for inventory, warehouse or shelf space as all equipment and supplies to run your business fits and can be stored on your truck. The ease of starting and owning a mobile franchise busienss or a business like the Car Wash Guys franchise business makes it a practical and rewarding addition to a family’s assets. You can start small and grow as your family grows or start regionally and continue your family’s life long legacy of quality and domination. Think on this concept.

The 7 Major Reasons Businesses Fail and How to Overcome Them

This year, over 800,000 of the approximately 2,000,000 start
up businesses will fail!

Nearly 1,000,000 of those remaining will fail within 3 years.
Why do so many businesses fail? Many studies show that
approximately 98% of all failures occur because of the
owners. The other 2% are a result of acts of God. Here are
the key reasons and actions owners can take to avoid and
overcome business failure:

Reason #1: The owner is not mentally prepared or
motivated to run a business. There are three different ways
to use your energy, and your physical and mental efforts to
earn money. I call them the three “Games of Work.,” and
they define the types of relationships between people and
their work. The rules that players have to follow to succeed
for each “Game” are shown below.

1. Bureaucrats,: Do what it takes to protect or expand their
position; Will divert responsibility whenever possible, but
will take credit for desirable results of others; The success
of the organization is secondary to kissing up to those who
make decisions about promotions, salaries and job
security; Have virtually no control over their job security; And
are compensated for basically showing up.

2. Partial Entrepreneurs: Choose to be responsible for work
performed or results achieved in their specialized field, but
do not want responsibility for the total business. Have more
control over their job and its security; And are paid for the
specific results they produce. Examples of Partial
Entrepreneurs include; commissioned salesmen, multilevel
marketing members, franchisees, and real estate agents.

3. Business Owners: Take full responsibility for their
business; Are in full control over their job and its security
(whether they know it or not); Have no one in the
organization to kiss up to; Learn to pass on as much credit
as possible; Constantly focus on the success of the
business; And are compensated only from the profits of the
business.

As you can see, the rules of a Bureaucrat and a Business
Owner are completely opposites in all categories, and the
Partial Entrepreneur is basically in the middle. The mental
effort it takes to convert from Bureaucrat or Partial
Entrepreneur to Business Owner is much greater than most
people realize. Many business owners never fully make the
transition.

Action: Before becoming a business owner in the first
place, determine if you truly want and will operate under the
Business Owner “Game Rules.” If you choose to, do so
IMMEDIATELY, and COMPLETELY! To survive, let alone
succeed, you must commit to operate under the Business
Owner Rules 100%. Otherwise, you should seriously
consider playing one of the other “Games of Work” that best
suits your desires.

Reason #2: The business owner is unable to operate a
business. The success or failure of a business depends
on the owner. As the head goes, so goes the body.
Running a business is completely different than any other
“Game of Work,” but, believe it or not, the rules are the same
for all types of businesses. Far too many owners fail to take
the time and energy to improve their own ability to run their
business. This means that they need to grow as a person
first and enrich themselves and discover their true passions
and priorities to be able to have the maturity, drive, and
energy to allow them to manage themselves and a
business simultaneously.

Action: You will greatly enhance your chances for success
by finding methods of self-improvement in all aspects of
running a business, and continue the process throughout
your entire business-ownership career. Obviously, as you
become better at running your business, the success of
your business will also get better. Many resources are
available to you, including respected advisors, mentors,
partners, “Godfathers, ” and coaches.

Reason #3: The business owner thinks he knows what it
takes to run a successful business and is convinced he is
fully prepared to jump in. This is rarely true. The
fundamentals of owning and operating a business
sometimes referred to as the “rules of the game,” are rarely
taught in the U.S. school system. (See Global
Entrepreneurship Monitor, published by Babson College
and Kauffman Center for Entrepreneurial Leadership, July,
1999.)

We are led to believe that an education fully prepares us for
running a business. In truth, the U.S. school system only
prepares us to get a job, not create jobs. The fundamentals
of successfully owning and operating a business are very
different from getting and keeping a job. Unfortunately, most
business owners are left to learn these fundamentals
through the age-old process of “Trial and Error” with an
emphasis on error. This “Trial and Error” dependence
causes far too many serious and fatal errors, and leads to
stress, financial damage, and eventual failure.

Action: Learn the rules of the game of business, other than
through the “Trial and Error” method. The very best way is to
find and use trusted mentors, advisors, and/or coaches to
guide you through the process of learning how to improve
your capability to run your business to avoid the many errors
others make. Frankly, the rules are simple, easy to learn,
and are based upon common sense, and high integrity

Reason #4: The business owner tries to execute all three of
the three basic functions needed for a business to succeed,
alone and without help. (See The E Myth Revisited by
Michael Gerber).
The three key functions a business must have executed to
succeed are:

The Technical function, which is the execution of the actual
service or product provided by the business. For example
the drafting action of a drafting company, the auto repair
actions of an auto repair company, the production of a boat
of a boat building company.

The Managerial function, which is the organization,
coordination, and supervision of the people assets and
activity of the business on a day to day basis.

The Visionary function, which is the discovery, setting and
communication of the future goals and purposes of the
entire business. The leadership to get all parts of the
business flowing towards the long term goals established.

The level of success of a business is limited to the level of
the execution of the weakest link of the three business
functions described. A business that has two of the
functions executed in an excellent manner and the other in a
poorly manner will eventually level out no higher than poor.

Yet, entrepreneurs (budding business owners) and
business owners try to personally perform all three
functions themselves. One single person will have an
extremely difficult time performing all three functions at a
high enough level for the business to eventually succeed.

Michael Jordan, one of the best basketball players of all
time, could not translate his huge basketball skills into a
successful baseball career. He proved that the skills
needed to succeed at the game of baseball are much
different from the skills needed to succeed at the game of
basketball. And when he returned to basketball, he had to
work extra hard to re-sharpen his basketball skills to his
previous levels. Likewise, the skills of owning and
operating a business are specific and very different than the
other two “Games of Work.”

Action: Get help from someone, a partner, an employee or
an outsourcing resource to perform at least one of the two
functions for the business. This way that function can be
executed at a very high level and will allow you to focus on
executing no more than the other two at a similar high level.
Normally entrepreneurs initiate businesses where they
bring the technical skills and motivation to the table.

The three skills necessary to win in the business game are:
Technical Skills of the business; Managerial Skills to
manage yourself, time, things, concepts, and people; and
Visionary Skills to set future goals and organize the
business so that current activities will contribute to them
(See The E Myth Revisited by Michael Gerber).

You probably bring Technical Skills to the table, but to
succeed, you will also want to master the Managerial and
Visionary Skills. You are not born with these skills; you
learn them. You are born with natural talents towards
certain skills, but you have to work to perfect them. Michael
Jordan, and Tiger Woods were obviously born with
unbelievable talents, but they became successful only
because they worked very hard at developing the skills they
needed to win. Likewise, you will want to work to develop
your Management and Visionary Skills (from the Business
Owners Perspective) and continue the process throughout
your business ownership career.

Reason #5: The owner starts a business for the wrong
reason: “No one can boss me around;” Or; “I will create my
own job;” “If he/she can be successful, so can I;” “I will buy
a business and enjoy the fruits of ownership;” “I want to
pursue my passion for serving others.” And so on. The
stresses and problems resulting from running a business
for the wrong reasons can become overwhelming,
especially when you generate little or no profits.

Action: “The only reason to have your own business is to
Make a Profit.” Though this may sound cold and greedy, you
will realize rewards and compensation only from your
business profits. If your business doesn’t make a profit, you
get nothing. You might even discover you have been
working for nothing, or worse, working to increase your debt.

This does not mean you have to avoid meaningful, and
emotional reasons for living. Not at all. The profits and
personal time gained from the business will provide you the
resources to pursue your life goals. Even religious
institutions require profits and time to pursue their passion
of serving others.

Reason #6: Business owners do not completely consider
the perspective and motivations of potential customers.
Customers’ perspective must be addressed so owners can
entice enough customers to buy their products or services
at a price over their costs to produce the desired profits.
From the very beginning, owners should be focused on
enticing customers to buy. Owners who do not know,
understand, or appreciate their potential customers’
perspectives will most likely see their business fail.

Action: Learn as much as possible about your potential
customers. Design and provide products or services,
delivery methods, pricing, and ways to communicate with
them around their perspective. This might require that you
get help stepping out of your own perspective and into
someone else’s.

Reason #7: Business owners insist on going it alone
without asking or accepting outside help. The sole
business owner has one of the loneliest positions in the
world. Many owners have difficulty confiding in their
employees, vendors, customers, lenders, or competitors,
for fear that any one of them will take advantage of revealed
weaknesses. Most owners try to go it alone by working IN
their business, and not near enough time working ON the
business. Consequently, they are not aware of what they
are doing, where they are going, or why! (the “Trial and
Error” method).

Action: Find and use Advisors, Mentors, Coaches, and/or
Trusted Partners who have the knowledge and desire to
educate and guide you, with your best interests at heart. All
professional athletes have one, if not several, coaches,
advisors, mentors, who help them become much more
successful than they ever could be on their own. Coaches
evaluate your ability to run your business. They will bring
you outside the stress, money, and time pressures you feel
from working IN the business, to help you make the
changes to result in improving your profits and reducing
your pressures. You will become much more successful
with advisors. Asking for help is not a sign of weakness, but
a sign of your desire to improve. Learning from the trials
and errors of others is an enjoyable and profitable
experience. Once you find the right advisors, you learn to
prevent and correct mistakes you might otherwise make.

My 7 Most Important Business Lessons

Millions of people start new small businesses in the United States every day. Many fail at running a small business every day. What causes one business owner to succeed where another fails? There are seven key areas to focus your efforts for a successful small business. It starts with knowing oneself and ends with not being afraid to ask for help.

1. Know Yourself

Having your own business is more than just creating a job for yourself. To be a successful small business owner, there are many personal sacrifices you will be required to make. You have to be willing to make them. By knowing yourself and what is truly important to you, you will be able to make these choices far easier than if you have never considered your priorities.

Your basic roles in a small business are in marketing, planning, finance, and administration. To get the best results, it is rare for one person to play all these roles equally well. You must know which parts you can handle yourself and which parts you’re going to need help with. That’s why it’s so important to be objective and take a close look at your overall strengths and weaknesses. Ask yourself the following questions:

- Do you plan before you take action?
- Are you willing to hustle for the sale?
- How financially savvy are you?
- Do you have a well thought out plan? And, do you work the plan?
- Do you know how to make sales happen? Can you ask for the sale?

In those areas where you assess yourself as weak, you can ask for help.

2. Ask For Help When You Need It

When you’re young and unseasoned, you tend to think you can do anything. This is a recipe for disaster for the small businessperson. If you insist on doing everything yourself, you will work 16 hours a day and not do some things well.

Remember, getting results is what counts! With outside advice and assistance, your quest for a successful business can be accomplished faster and with far fewer bruises than doing it yourself. When I started my first online business, I even created by own website. In retrospect, this was a big mistake. It took me far longer to create my site than having a more experienced person do it. Start equating every second of your time with money. Your time isn’t free. While you are trying to do everything, what’s falling through the crack?

Don’t be too proud to ask for help, we all need help sometimes. With the Internet, the small business owner has a wealth of experience available to them. Why not take advantage of the many resources, paid and otherwise, available to you? Join a small business forum, like the Small Business Forum (www.smallbusinessbrief.com/forum/) where you can exchange knowledge with other small business owners. Access the millions of online articles on every business subject you can think of at EzineArticles.com.

Qualified sources are also available from your local government offices and other professional services. It is important to recognize — what you don’t know can end up costing you money and greatly reduce the chance of achieving your business goals.

With all that knowledge, you need a plan of action.

3. Action Planning

I like to call it “action planning” rather than “planning”. Action is the only element which turns a plan into reality. Many people are great at planning but they suffer when it comes to follow-through. Successful small business owners are action oriented. But that action starts with a plan.

According to leading authorities, the main reason 80% of all new businesses fail within the first five years is not money, but the lack of planning. If you want to succeed, the trick is to know how to make right the decisions by implementing an effective business plan. Remember, if you fail to plan, you might as well plan to fail.

A business plan should include how you will finance the business, who will perform certain critical business functions, the license and permits required, accounting method, as well as what you know about your prospects and customers.

4. “Mind Meld” Your Customer

Just knowing your customer isn’t enough for long-term success in your small business. In Star Trek, the Vulcan race had the ability to perform a mind meld. At the time of the mind meld, they could see, think, and feel everything their partner was seeing, thinking, and feeling. This is how close you must come to understanding your customer. The closer you get, the more successful you will become.

Are you listing to your customers? Make it your business to give your customers what they want and they will buy from you. They are the reason you are in business, and your future depends on them. The products and services you provide should be a direct reflection of their needs. Think in your customers’ terms; buy, show, sell, and say things that interest them, not you. Don’t forget, it is the customer that determines whether or not you succeed. They vote every day by where they spend their money.

Reflect on the following questions:

- Do you know the reasons why customers shop at your store? (service, convenience, price) If not, ask!

- Do you seek suggestions from your customers on ways you can boost business?

- Do you use a store or online questionnaire to aid you in determining your customers’ needs?

- Do you stay in contact with customers on a regular basis?

- Do you ever try to re-establish a relationship with lost or inactive customers?

A key to success lies in knowing your customer. The other half of the equation is to know your industry.

5. Know Your Industry

You can gain the greatest competitive edge if you intimately understand your industry. You must know the ins and outs of your particular products and industry. You should know every competitor as well as their strengths and weaknesses. It’s in your competitor’s weaknesses where you will most frequently find your own success.

Your competitors size, services, location, marketing approach, type of customers, suppliers, and pricing strategies should be as well known to you as your own. Your local business climate, median household income, level of education, ethnic population, and the other demographics of your potential customers should be second nature to you. To prosper, you must know the game and the playing field intimately.

Many people focus upon these areas but still fail. Why? They focus more upon the product than the finances of the business.

6. Maintain Good Financial Records

If you don’t know where your money is going, it will soon be gone. The “game of business” is played with products and customers, but the score is kept in dollars and cents. Good financial records are like the instrument panel on your car, they keep you posted of your speed, fuel level and engine condition. Without them you’re flying blind trying to pace the other cars. If you know how much you’re spending, buying and selling, you can take control and help your business make more money.

- Do you have basic accounting knowledge? Or, do you have someone you trust to keep the books?

- Do you maintain every receipt you obtain through the running of your business?

- Have you computerized your business to streamline everyday tasks and business procedures?

- Do you use sales forecasts, expense sheets, and financial statements on regular basis to assess the progress or your business?

- Do you evaluate your operating expenses and make necessary changes on a regular basis?

Many people erroneously believe good record keeping is for the government and those financial obligations. They are wrong! Good financial record keeping can help your business succeed. Use the financial information available to make improvements to the operation of the business and improve profits. Remember through it all, the old adage “cash is king” is true.

7. Manage Your Cash

It doesn’t matter how unique your store is, your business can’t survive without good cash flow. Cash is the lifeblood of your business. The money coming into or out of your store is the vital component that keeps your business financially healthy. For profitability, more cash must come into the business every day than goes out of the business. You can have the greatest sales in the world, but if it’s all in receivables, how will you pay your bills?

A monthly Cash Flow Statement is a critical business tool. It shows the amount of money at the start of a period and how much cash was received during the period. It identifies the various sources of incoming cash and the reasons for outgoing cash. Budget wisely. Know the sources of your monthly income and expenses. Then, you won’t have to worry about running out of money. And that is a good thing.

Like any game, the game of business has rules and tools. Those who excel at the game, play it better than their competitors. Keep focused upon these seven critical areas and you will succeed. Remember, Albert Einstein once defined “insanity” as doing the same thing over and over again and expecting a different result. Isn’t it time you changed the things you are doing so you can succeed? I think the time is now!