5 REASONS...

Making money is at the heart of a successful franchise.

Why you need to manage your numbers.

Everyone goes into business to make money, and investing in a franchise means there’ll be systems and processes in place to help you get the business up to speed and run a profitable operation. Even so there will be economic challenges from outside and inside the business. Check these five behaviours that will help you get the money matters right from the start.

1. BE REALISTIC

Whatever the scope of your business dream it needs to be matched to a realistic goal with a plan and a deadline. And that means setting out a strong budget that takes account of your current and future commitments, savings, and potential earnings.

It’s not uncommon for fledgling franchisees to overestimate the value of a house to be mortgaged, for instance, or to underestimate the real costs of living.

Many franchisees sacrifice their standard of living for the initial period of business-building but whether or not you will adopt a more frugal lifestyle your choices need to be based on true numbers not fantasy.

2. BE HONEST

If you’re lucky enough to have funds to support your franchise purchase, great. But for most franchisees a bank loan is essential.

Whether you are turning to one of the big four banking institutions, a community bank, an alternative funding firm, or even your family, do yourself a favour and don’t fudge the figures.

A viable business is not one built on false financials so ensure the lenders have the right numbers to crunch.

Banks like to lend money but they don’t like to lose it and will base their offer on their understanding of the brand potential, and the figures you provide.

Stay on the right side of the financiers and share honestly. After all, do you really want to find your business cut short because the numbers don’t add up - and never did?

3. BE PRACTICAL

Work your way to success in a franchise with a cost effective purchase. Consider whether or not you have the budget to not just buy the franchise but trade for a few months until the income picks up. Consider the lease, particularly if you are investing in the food and retail sector. Will you be paying too high a price to get yourself set up in a prime spot? Use your franchisor’s negotiating skills and experience to secure the most favourable deal, and one that will be sustainable as rents increase.

Speak to the franchisor and other franchisees about unexpected costs that might crop up. Estimate the costs of setting up in business - and add a bit more! There can be all kinds of obstacles thrown in the path of a brand new franchisee opening a new business, and any delay can eat into your initial savings.

4. BE ADVISED

Costs are tight when you are investing in a franchise. However there are distinct advantages to seeking expert support in the process.

Yes there will be more expenses to add to your budget but the value-add of a franchise-experienced professional can be significant. Lawyers and accountants who understand the nuances of the franchise world can spot danger signs in franchise agreements, leases, profit and loss statements… and that may save you substantial funds in the long term, particularly if you decide to walk away from an opportunity that has no hope of profitability.

Many franchisees are new to business ownership and to the financial terms and concepts used, so it is a good move to leverage the expertise of industry professionals who can explain and advise on crucial matters.

Once you are in business, it might be a good investment to use a bookkeeper if the accounts become a struggle for you, freeing up your time to build the business.

5. BE VIGILANT

Buying a franchise is just the start of your exciting journey. So much energy, commitment and paperwork goes into the start-up that once franchisees have found a solid rhythm and understand their business processes they tend to relax a little.

It pays to be constantly critical of the business though and ensure the adherence to proper processes and financial analysis continues through the life of the franchise.

Many franchisors look for financial transparency from their franchisees and use franchisee data to benchmark the network’s performance. Learn from other, more successful franchisees what steps they employ to stay on track to achieve their high performance goals.

Revisit your business plan regularly and above all keep sight of what’s happening with the income and outgoings of your business.

Todd Agius, a Ferguson Plarre franchisee for 15 years, says “I have full control of my business, of the payroll. I stay on top of it all, assess the numbers - I can summarise it fairly quickly.”

Paying attention to your finances gives you a good chance of success.