Start a Trading ‘Franchise’ Business

It’s a well-known fact around 80% of start-up small businesses fail within the first couple of years. The reasons for such an alarming stat are varied but when you take a closer look at core issues it generally boils down to people starting a new business not having proper systems in place to run their new business venture. Effective system process building and application is the best way to ensure your business survives. Even if you lack experience or possess poor financial habits, having effective systems in place can counter act these poor qualities and increase chances of success.

This is why franchising has exploded over the last decade or more. Compared to the high rate of small start-up business failures only around 7% of franchises either fail or sell-up within the first couple of years. McDonalds is the perfect example of a great franchise system at play. Started by the McDonald brothers in the 1940’s, McDonalds started its path to the worldwide conglomerate it is today when in the late 1950’s milkshake mixer salesman Ray Kroc, amazed by the efficient system the McDonalds brothers had created that allowed them to make the exact same hamburgers every time purchased the business.

It’s not hard to see for yourself how successful McDonald’s has become. What other business in the world can be so big yet be run by a bunch 14 year olds? Again its success comes down to the specific implementation and application of business systems. Everything from how many pickles to put on a burger to the exact time it takes to cook the perfect French fry – everything at McDonalds is systemized.

If you’re serious about becoming a trader and building your own trading business, its stands to reason you can take a lesson out of the McDonalds book and give your own trading business a ‘franchise’ makeover.

Most traders fail – we know that – but more specifically the reason why they fail is because they have poor system application in their own trading business. The crux of the problem for trading business failures comes down to three key issues, all of which are (not surprisingly) the same areas causing every day small start-up businesses to fail. These reasons are: poor risk and money management, lack of education and emotional rather than logical decision making.

If you’re a struggling trader, I bet my last dollar that one or more of these three areas and importantly the lack of an efficient working system in these areas is the root of your current failings. So let’s take a look at each of these areas in more detail and more importantly I’ll provide the basis of the fixes you can put in place to shore up each of these areas and get your trading back on track

Risk & Money Management

This is the number one area that many a trader comes short yet is probably the easiest to fix. Simply put, you need to ensure that you don’t risk more than a set amount of money (usually defined as a percentage or fixed dollar amount) on any one trade. How do you decide on this amount? There is a well-worn rule that says you should not risk more than 2% of your total portfolio on any one trade.  I agree with this rule in part however if you are a newbie trader I believe it’s easier to focus on a small, set dollar amount such as $250 per trade. This amount has to feel comfortable to you. If you stress out every time you place a trade or you can’t sleep at night, tossing and turning about your trading it’s more than likely due to the fact that you are risking far too much money. The markets will always be there but you might not so ensure you select an appropriate amount and stick to it. When it comes to systemizing this as part of your trading business, your risk amount should be documented in your trading plan. Again when you do trade, use the same documented amount each time. Don’t risk more money because you think you have the ‘perfect’ trade set-up, this is a quick way to blow your trading account. Every trade you make must be recorded in a spread sheet. Not only does this provide a trackable performance record of your trading but when it comes to tax time, it’s much easier to hand your accountant a simple spread sheet than going back over numerous broker records in a frenzied and stressful fashion in order to complete your tax obligations. Additionally, if your goal is to have your trading funded by someone else or become a fully-fledged proprietary trader you’re going to need a history of performance before anyone will be confident in giving you a run with their money.

Your trading money should be set aside from other money used for living expenses. If you’re going to make a business out of trading then you must demonstrate that your trading is a legitimate business and you don’t want to be mixing up your funds, particularly when it comes to tax purposes – keep things separate. It’s a good idea to get some advice on an appropriate tax structure for your trading. Some opt to trade through a trust type set-up. This can be a good idea from a tax reduction perspective but also from a legal stand point if are working or involved in an industry that could land you in a lawsuit of some description. As the saying goes, it’s better to be safe than sorry. Protect your assets and don’t assume the ‘it will never happen to me attitude’ as you never know, it just might.

Logical Rather Than Emotional Decision Making

An emotional trader is a bad, and more than likely, unprofitable trader.  Emotions and to a more targeted degree emotional trading decisions have no place in a traders repertoire. A logical decision based system for your trading is the best way to erase any emotions around your trading. To do this you simply need to implement a trading plan that outlines each trade set-up and how you will trade it. Include images of specific chart set-ups if this helps you to rationalize your trading. Essentially what you are looking to do is produce a step by step procedure that if A, B and C happen in the markets you are watching then your actions will be D, E and F. The plan does not have to be exhaustingly extensive. Keep things simple.

Your trading plan will be your ‘go-to’ guide on all things trading; it will outline the goals of your trading. The markets or instruments you will trade and how you will trade them, your preferred trade set-ups etc. Basically any physical action you take in your trading must be outlined or included in your trading plan.


I’ve placed education last as I firmly believe you can know bugger all about trading, have only a basic set of trading skills yet still clean up. I’ve seen many traders in this position and because they have strict risk and money management in place and because they have a control over their emotions they still make great traders. Essentially, you want to have a trading system in place that is so simple, you could show it to a ten year old and they too would be able to easily interpret and make money from it.

Just like Ray Kroc produced an educational training system so young employees could run McDonalds stores, you too need to understand and apply your own trading system efficiently and effectively. How do you do this? Learn a successful traders system and apply it for yourself. Please note that I am not referring to reading a few books here as this is a waste of time, just like a franchise by investing in quality education you are buying someone else’s experience – which can be invaluable and short cut your own trading journey by months or years. You need to immerse yourself in a trading education that provides you with everything you need to know. Try and stick to the one source for this education so that you don’t come across conflicting strategies and ideals.

In my perfectly biased view, the Diploma of Share Trading and Investment provided here at WW is the perfect start and will provide you with all you need to become an effective trader.

As a side note, one issue that comes up regularly when I discuss education is cost. What I will say here is that your trading education will cost you one way or another. You can waste your time with a few books or like many faceless wanna-be traders on some of the more popular trading forums out there, spout how your system works and paying for education is a waste of money – at the end of the day an investment in quality education will pay off in the long run. Don’t be tight and don’t be under the assumption that you can do it on your own. Be like Ray Kroc and McDonalds, follow a system that suits your trading goals and mold it into your own specific system over time.

Trading: The Best Business on the Planet

No customers to put up with, no employees to look after and the option to easily scale–up and leverage your earnings very quickly once you have identified a profitable system that works for you. Successful trading can be a great business to have however like all things you need to put in the work. Learning how to trade can take a couple of years however you can short cut a lot of heartache by simply following a trading system. Do the smart thing and approach your trading from a perspective of the franchise system and you will be much more profitable from the experience.