Myths about Revenue Streams
When looking into a franchising opportunity, you may come across companies that advertise all of the different revenue streams that will provide you additional sources of income in your new business venture. While they may say there are 12 different ways that you can make money as a franchisee with their company, it’s important to understand how these are comprised, because different companies categorize forms of revenue in different ways.
So why do companies call attention to these different revenue streams? In short, the answer is competition. Companies are always looking for an edge. At Burger King, the burgers are flame broiled. At Wendy’s they’re made “my way.” To me, they’re both burgers, but the fact that I know how they’re positioned tells me their marketing is working. In senior care, we’ve only just begun to scratch the surface of the industry’s potential since the baby boomers just started turning 65 last year, so the home health care industry has significant potential for growth. Even so, like most businesses, there are competitors in this marketplace because there’s money to be made here. As a result, companies will look for an edge that’s a quick and easy way to set themselves apart to attract prospective franchisees.
Companies may even artificially inflate the number of revenue streams to appear as though there are more ways for franchisees to make money. While at first these additional revenue streams may seem appealing, there are a few things to keep in mind when you see this. First, call franchisees and ask what percentage of their business is senior homecare, and what percentage represents these other revenue streams. Go through each revenue stream that the company offers, and ask how many clients the franchisee has worked with for each service. You’ll often find that these other revenue streams supply a very small percentage of revenue, and in-home homecare will be the core of the business.
Another good idea is to take one company’s list of “revenue streams”, and ask the other franchisors in that industry if they offer products and services that are comparable. You may find that the business models you’re considering are more similar than you think.
In addition, sometimes the lines are blurred. What some companies define as a “revenue stream” may be considered the normal mode of operation for others. For example, I’ve seen competitors in our space call out (as separate revenue streams) services that we also offer as part of our business model. I get it, and I suppose we should think about doing something similar. But, it’s not our style. We are very much so a “what you see is what you get” kind of company. It’s our culture, and it works very well for us and our franchisees.
No matter how many revenue streams a company offers, or how blurred the lines are, it all boils down to the bottom line: how much do their franchisees actually make? The key thing to remember is to not get caught up in counting the number of revenue streams and using this as a determining factor in your franchise selection, because the reality is that each franchisor may count them differently. And, ultimately many of their franchisees might not even be seeing a real profit from these additional services. Pay attention to the actual earnings current franchisees are seeing within their system, because at the end of the day you want your company to see financial success, no matter how many different streams you use to get there.