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Running a tight ship is essential when spearheading a franchise

Written by Dave Galvin on Wednesday, 14 March 2018. Posted in Franchise, Finance

Boosting your franchise’s efficiency may seem like a lot of work. However, in the long run upping productivity can ensure that there is nothing but plain sailing ahead

Running a tight ship is essential when spearheading a franchise

Ever had that feeling – when you’re still sat at your desk late at night, disillusioned and drowning in work – where you’re pretty sure there must be a better way? That there have to be ways to make things faster, less complicated and far more efficient? Well you’re right: there probably is. Regardless of its size, every business is like a complex piece of machinery and, as we all know, machinery must be kept carefully maintained to ensure it works at its best for staff and customers alike. Fortunately there are plenty of ways that you can ensure things run as smoothly as possible.

Gain perspective on your productivity

Step back and look at your business from an outsider’s point of view, from start to finish. To help break it down, do it a stage at a time: for example, sort the process for targeting new prospects, then look at how your onboarding process works and so on. This puts you in a position where you can properly evaluate your processes and systems to identify and address any issues or make the most of any strengths. All too often inefficient, clunky systems are perpetuated in a business, just because “it’s what we’ve always done.” Remove this and you clear the way for a far slicker experience, both for you and your customers. While the very idea of change is daunting for many, if you want to progress, succeed and maximise efficiency, it’s important to have the courage to move away from practices that are no longer useful or relevant to your needs.

Elevate staff efficiency

Do you know your employees’ productivity ratios of billable versus payroll hours? This is one of the main areas that efficiencies can be made in a business. While 100% efficiency is never realistically going to be feasible, these staff ratios should be kept as high as possible to ensure you’re utilising the full capacity of your workforce.

The simple fact is that while an employee might be paid to be at work for eight hours a day, five days a week, not every second of those 40 hours will be work that can be billed to clients. Your staff aren’t machines and the cost of things like sick pay and holiday need to be covered. But that isn’t the only thing to consider. Downtime is an unavoidable factor: many tasks are necessary – and often useful – but not billable. Filing, staff meetings, training, waiting in line at the wholesalers, travel and even coffee and chat time are all inevitable parts of day-to-day business for many companies.

Taking all this into account, the vast majority of businesses run at approximately 65% efficiency. During an average eight hour day, this means that 168 minutes – or a little shy of three hours – of the average employee’s time every day is taken up with tasks that aren’t billable. The cost of this will have to be absorbed by the business. Try to remove obstacles and put systems in place that enable your staff to spend as much of their time on billable work as possible.

Price for profit

Some of this is of course unavoidable: I’m not disputing the need for downtime or suggesting you should ban your staff from loo breaks. However, what I do recommend is to streamline systems to maximise the productivity of your paid staff and work out who is paying for the other 35%. Ideally, you should recover the costs of your non-billable hours from clients through your pricing.

Imagine a small-business owner pricing up a job. Their pricing is based on a simple logic – that job will take an hour, so that’s a tenner. They’ve got £20 of materials, so that’s £30. And they need to make a bit of profit, so let’s call it £50. This is one of the biggest mistakes: what they’ve not factored into this process is the non-productive time – and that can be a hugely costly oversight.

Let me demonstrate by way of example. The average haircut these days seems to cost around the £55 mark but that doesn’t mean the hairdresser is earning £55 an hour. More likely they’re getting around £10 for an hour’s work and the remaining £45 covers the hairdresser’s holiday and sick pay, the company’s overheads, the equipment needed, the coffee and the time it took to take the call to book the appointment.

Ultimately every business can improve their efficiency in some way. And looking at your processes and streamlining where possible shouldn’t be a one-off task. As technology, markets and systems progress, there will always be ways to help streamline your franchise’s finances and operations and keep your business well-maintained and efficient.

About the Author

Dave Galvin

Dave Galvin

The head of franchising and senior business advisor at d&t chartered accountants is sitting on a wealth of knowledge about the sector.

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