Over the past few years, there’s been a growing interest in semi-absentee franchise ownership, or what we call passive engagement ownership. Roughly 40% of my clients buy manager-run businesses, and some of the reasons I hear are a hedge against future corporate career uncertainty, maximizing corporate trajectory while creating additional economic engines, creating an annuity income stream for long-term financial security, and building a legacy for their family.
When you think about it, many say, “I’ve got a good corporate trajectory, I want to maximize it, but I also want to build wealth on the side and create two economic engines.” Others tell me, “Gary, I’m uncertain about the trajectory of my career. There’s a lot of disruption happening, and I might not have a job long-term, but I want to maximize while I’m there.
So let me start a business on the side, with semi-absentee management. Then, if things happen on the corporate side, I’ve got another place to land and grow from.” Some clients want to build a legacy for their family, while others seek to create a long-term annuity income stream that doesn’t require them to be there all the time.
Important Considerations and Challenges
Regardless of the reasons, semi-absentee ownership is not as easy as it’s cracked up to be, so there are important things to consider. First, it’s more expensive. Not only do you face the usual startup costs, but you also have to pay for a full-time, experienced manager from the industry to run day-to-day operations while you manage that manager. Because the manager won’t run the business the same way an owner would, it generally takes longer to ramp up and comes with higher operational costs.
Often, semi-absentee ownership is part of a multi-unit strategy. To reach real, substantial earnings, you might need two or three units over time. This typically unfolds as a five- to 20-year annuity strategy — in year one, you open the first location; in year two, the second; and in year three, with profits from locations one and two, you fund the opening of the third. By year five, all locations are running at full steam, with managers in place, and the multi-unit entity is generating executive-level annuity income and offering tremendous work-life flexibility.
Building Annuity Income and Next Steps
Once the business is running, managing the manager generally takes about 15 to 20 hours a week. Interestingly, as you add more units, your time commitment doesn’t increase proportionally; it changes how you manage. You may group managers to streamline oversight, making this a powerful way to build long-term wealth with flexibility.
If you’re curious about semi-absentee ownership and how you can create an additional income stream while maintaining your current career, I’d love to have a call to answer your questions and explore where the conversation goes. Book a call now.
Originally posted on LinkedIn
