We’ve all heard the phrase: measure twice cut once. When it comes to buying a franchise, a little careful forethought goes a long way. By this I mean the importance of proper business planning cannot be underestimated.
A suitable, realistic business plan is essential to attract funding. In addition, working out your game plan tells you how you will reach your breakeven point in a reasonable amount of time, so you don’t run out of money.
Many potential franchisees we talk to just see the cost of the franchise fee and believe that’s the amount they need to buy into a franchise. However, there are many other factors to be considered including your day-to-day living costs (a survival budget), the purchase of equipment like vans, loan repayments plus enough cash reserves to cope with unforeseen circumstances.
All these elements need to be balanced to produce a realistic projection and cashflow forecast. Yet no individual or territory will be the same, so it’s less about the numbers and more about modelling what can happen.
For example, at what trigger point can that new van be safely purchased or more staff taken on? It may be better to sweat your assets, increasing the hours one van is on the road by introducing shifts patterns. Modelling scenarios will provide these crucial insights and ensure you don’t overreach too soon.
A plan is also helpful on an ongoing basis. If you don’t have a plan and sell £1,000 worth of merchandise you have no idea if that’s good or bad? A ‘plan, do, check, action’ can ensure you are on target meeting the milestones set out.
Generally, the biggest mistake we see is that franchisees don’t anticipate keeping enough cash reserves in the business to cope with unforeseen events. Remember, it is easier to source sufficient funding at the outset, than realising six months down the line a cash injection is needed.
When starting out you usually have the highest costs in the business and the biggest drain on your cash reserves. Therefore, a contingency is even more important. It’s certainly easier getting out of bed in the morning if you have a ‘cushion’ and know all the bills can be paid.
The challenge often is that most new franchisees have either good sales and marketing skills plus plenty of enthusiasm but, understandably, it’s often the financial side where they lack experience. Here’s where an independent business planning advisor experienced in the franchise sector can help. Think of them as your very own financial director helping you to become as successful as you want to be.
The best advisors don’t work in isolation. The work closely with the number crunchers (the accountants) and those who can source investment funding if you need it (80 per cent of the new franchisees we work with do). In this way, positive outcomes are aligned with franchisees’ goals and ambitions for growth.
Buying a franchise is a significant outlay and so help with professional business planning is a small investment and a must-have to secure funding and ensure you are on target to break-even as quickly as possible.
Sounds like a plan? Why not have a chat to one of d&t’s friendly, experienced team. As well as a full range of accountancy services and a fully independent funding service connecting franchisees to much needed finance to start or grow their franchises, we provide business planning services.
We work with over 100 different franchise networks across the UK, proactively helping franchisees drive their businesses forward.
d&t is a multi-award-winning team of chartered accountants and business advisors, working with over 100 different franchise networks across the UK. Established in the 1990s and BFA-affiliated, they support thousands of franchisees and their businesses across a wide range of sectors, making them the UK’s market leading franchise accountants and advisors.