7 Steps for Preparing Your Franchise's Finances for the Future
1. Have a Strong Business Plan
One of the most important aspects of running a franchise is having a business plan. Although your franchiser will likely provide you with a template to follow, it is up to you to formulate the business plan based on your goals.
Some franchise owners feel like a business plan is a waste of time, but this is the wrong approach to take if you want to have high levels of success. Putting your plan on paper before starting a franchise will ensure that you remain organized and won’t risk overspending.
2. Consider Applying for Financing
Few people have the cash to pay for a franchise out of their bank account. Getting some sort of financing is standard for franchise owners. During financing discussions, you need to be prepared to show that you can make payments on a loan.
A franchise loan is a huge financial commitment on both sides. The bank or lender could have a lot of risk in lending money for this purpose. You need to prove to that you are a borrower who can make payments on time.
3. Don’t Borrow Too Much
Some franchise owners run into financial issues because they borrow too much money. A high level of debt is bad for several reasons. Not only will it decrease your cash flow each month, but it also decreases your flexibility in business. Trying to repay a massive loan can cause major stress for business owners. You can avoid this by improving your cash position before getting approval to start a franchise.
4. Invest in Marketing
Another important aspect of having financial success in your franchise is to invest in marketing. Although all franchisees receive some marketing support from the corporate location, it is always a good idea to invest in additional efforts.
When your franchise location opens, the biggest challenge is letting customers know that you are ready for business. The more that you spread the word about your franchise, the more likely it is that you gain consistent customers. Make sure to track the total return on all your marketing investments, so that you can adjust your spending as needed.
5. Trust the Process
Some business owners want to put their own mark on their franchise. Although some creativity is important in business, running a successful franchise is about trusting the process. It is imperative that you make decisions that are aligned with the overall corporate vision. If you deviate too much from the corporate vision, you could risk losing profits in the future.
6. Save for Emergencies
Having an emergency fund is critical to avoid future issues. There are some business owners who never save for emergencies and end up regretting it. If you have a major issue that requires financial support, it can bankrupt your business without an emergency fund to draw from.
Every month, you need to set aside some money to save for emergencies. Not only will this reduce your stress level, but it will ensure the future of your business if you face a serious issue.
7. Eliminate Waste
When running any business, eliminating waste is a great way to increase profits. This could be anything from limiting electricity usage to eliminating a type of service or product that isn’t producing profits. On a regular basis, you should review the how you are spending your franchise’s money, and should eliminate cut costs that are not productive.
Owning a franchise can be a rewarding experience, but it is pivotal that you spend your money wisely. By doing this, you can ensure your franchise business’s success!
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.