Residual Income is a Beautiful Thing

So many people, when investing in a franchise, set out to buy themselves a business but end up buying themselves a job. Now, I’m not saying there’s anything wrong with owning your own job, it’s just that owning your own business is better. It gives you much greater freedom and flexibility. It becomes more valuable as it grows.

For me, the single most important ingredient that I look for in any business or franchise is residual income. It’s the silver bullet that, on its own, turns a “job” into a “business”.

Residual income is when customers pay you a set amount, each month, usually by direct debit. And the impact that has on your life is immense. It starts with the quality of your sleep. I’m serious.

Across the country, when the calendar moves round and a new month starts, for the vast majority of franchisees, the scoreboard is reset to zero. They have to do as much work this month as last month in order to earn the same amount of money. Their earnings are directly linked to the work that they do. Think about it; a carpet cleaner only earns more money by cleaning more carpets.

Compare that to a franchisee in something like thebestof (and I’ll fully declare my interest here, because I founded thebestof, the fastest growing franchise ever in the UK, back in 2005). You see, his or her customers make monthly payments by direct debit. On the 1st of the month, they know, that on the 11th, say, £11,000 will be hitting their bank account and that’s a wonderful position to be in. It allows them to focus on the things that matter and grow a business; things like the marketing and development of strategic partnerships and customer relationships. It enables you, as a franchisee, to take August off and spend it on the beach with the kids because your income doesn’t go down.

Oh sure, there’s still plenty of work to do, but the flexibility and security, not to mention the uplift in saleable value of your business, that a solid stream of residual income brings is almost magical.

And that’s why it’s top of my list and why, if you’re serious about buying a franchise that can become a business, and isn’t just a job, then residual income should be top of your list too…

Nigel Botterill is the founder and Chief Executive of thebestof. In total, he has built eight separate million pound plus businesses, all in the UK over the last eight years.