#8 - Finance Fridays - The 4 Traps of Success, McDonald’s Franchises and Forex Trading

Contents:

• 💡 Idea of the Week - The 4 traps of success

• 💹Business Model Review - Starting a Franchise

• 🥗Side Hustle of the Week - Forex Trading

💡 The 4 traps of success

Inspired by I built a 7-figure creator business and quit. Here’s why.

This YouTuber quit her content creation business to take a year off to reevaluate her life. Upon coming back she learned she fell into multiple traps of success which ultimately burned her out of her passion as a content creator.

On your own journey to success and greater wealth, avoid these 4 pitfalls and also  watch her video. It's great!

1. The Comparison Trap

In other scenarios some would call this “Keeping up with the Joneses” where you are always comparing yourself to your peers - regardless of whichever stage in life you and they are.

Key takeaway: Learn to run your own race and focus on making progress against your former self because everyone's circumstance is different.

2. The Scale Trap

Both businesses and content creators tend to fall into the trap of thinking bigger is better. More employees, more income streams, more opportunities but you are only one person. And in many cases you started your entrepreneurial journey to escape something that got too big i.e. the corporate world where 77% of U.S. Employees Feel Like They Are Just a Cog in a Corporate Machine. So what’s the point of being a solo entrepreneur just to recreate the business structure you ran away from? 

Key takeaway: Never lose sight of what motivates you intrinsically. I like to reference Daniel Pink's 3 intrinsic motivations - Autonomy, Mastery and Purpose. 

Ask yourself these 3 questions before expanding your business:

1. Will this grant me more freedom?

2. Will this make me better at what I do?

3. Will this leave a bigger impact on the world beyond making me more money?

3. The Sunk Cost Trap

The pressure of running a money making venture isn't talked about compared to the perks of being your own boss. Just because you don't have a line manager, doesn't mean you don't answer to no one.

Once you're committed to either your clients, customers or employees, it's very hard to get out of, even if it is well within your power to do so. The most costly part of the Sunk Cost Fallacy many times is your own mental health.

Key takeaway: Knowing when to quit is just as important as knowing when to not give up.

4. The Identity Trap

The internet allows us to see people better than us everyday which puts us on a path of constant levelling up to keep up. We do this by following hacks, tips, templates and content titled “10 Ways To XYZ in 2024!” to optimise our own content or business.

In this case, Vanessa Lau talked about trying to emulate the much more successful Alex Hormozi which led to her losing her own identity.

Yes we should imitate then innovate to a certain extent but we need to always be refining our own voice.

💹Business Model Review (Starting a Franchise)

1. Profit margin 🟡 - Huge upfront costs, recurring fees

2. Sustainable in the long term 🟢 - Established brands have staying power

3. Diversified streams of income 🔴 - Impossible to diversify from the brand model

4. Do they have a MOAT? 🟡 - In the local area, there would be no competitors

5. Market viability? 🟡 - Depends on your choice

6. Current Competitors? 🟢 - As long as you pick a good location

Inspired by this TikTok - Finding investment opportunities for my low to mid figure captial. I wanted to focus on franchises (worth less than 10K) that you can potentially run part-time and wouldn’t require super high levels of specialist knowledge. I’ve assumed that most people wouldn't want to become a McDonald’s franchisee based on a Personal Finance Newsletter.

These would be the best franchise types I felt could be operated on a part-time basis.

Franchises worth less than £10,000 to run part-time on the side

1. Educational services 

Take whatever you were good at in school and teach it in your own time. Personally I was pretty good at Maths so I believe I could teach it up to a GCSE level. Paying to operate under an established brand will provide certainty for parents wanting to optimise their child’s education.

2. Sports for children

Project Mbappe isn’t just a meme. Parents are more supportive than ever to letting their child pursue their extra-curriculum passions including sports. I would also use the brand equity to target schools that need extra expertise. Government programmes are more likely to consider your services if you're part of a respected franchise. Teaching sports in schools is a good way to monetise a sports passion you have. If you find the time in between your full-time job.

3. Pop-up Food Bar 

I know a Pizza brand that goes to festivals exclusively to sell pizza. What I like about this is that you don't have to commit to a whole store full-time. Instead you can rent a mobile kiosk or van then target seasonal events that would only require your full attention temporarily throughout a calendar year.

The main thing to worry about is time invested and the actual value of the brand. Looking at these websites it looks a lot like a lot of bang average businesses are trying to profit off their non-existent brand equity.

How much would it cost to run your own McDonald’s restaurant?

Most of these franchise brands are not worth the upfront costs. And the ones that are from Fireaway Pizza to McDonald’s require an immense amount of cash flow. For example, this is how much it costs to start a McDonald’s restaurant of your own - obviously the most extreme example but it’s a guaranteed success:

Upfront cost: £400,000 (You can bank loan ¾ of it)

Annual Cash Flow: £50,000 and £550,000.

Annual Sales Before Profit: £1.5 million - £4.3 million.

ROI over 10-20 years: 20% and 25%.

So you would become a millionaire from running from your own McDonald’s restaurant but you probably need to be a millionaire in the first place to start one. And you wouldn’t be allowed to have another business so it’ll be your only source of income/business venture. This is a pretty big negative for me.

🥗Side Hustle of the Week (Forex Trading)

1. Hours per week ⭐️⭐️

2. Skill required ⭐️

3. Up front cost ⭐️⭐️

4. Market saturation ⭐️⭐️

5. Timeline to reach success ⭐️⭐️

6. Income potential ⭐️⭐️⭐️

Forex trading has a poor reputation for good reason. It promises huge earning potential in return for little effort. The scams are numerous and the expectations unrealistically high. It is clearly unsustainable unless you have a killer unique strategy which you wouldn’t want anyone else to know. Unless you’re a Forex influencer selling a course. If you think you can perform better than 80% of active fund managers who are falling behind the major indexes, I have a bridge I can sell you but I will not deny the huge earning potential of being a successful Forex Trader, I’m just pretty confident your success will be short-lived. If you need a hater, to prove wrong, I’ll happily take on that role.

If you want to learn more, this YouTuber seems legit and portrays a realistic version of what day trading looks like.

I Lost My Funded Trading Account

✍🏿Quote of the Week 

Someone with half your IQ is making 10x as you because they aren't smart enough to doubt themselves

― Ed Latimore