Why caring about your finances can work wonders for your franchise

While many franchisees may consider financial management to be the most boring part of running their business, they'll benefit from getting their heads around it

Why caring about your finances can work wonders for your franchise

Face it, few franchisees find dealing with business finances to be the most exhilarating part of running a company. It’s hardly surprising that many would rather let accountants deal with all their financial woes, worries and war chest qualms. However, tempting as it may be, letting someone else handle it all can be dangerous. Especially since paying attention to your finances pays dividends.

That being said, getting your head around all your business’s finances can be quite challenging. For instance, the list of things to look out for includes initial scoping, calculating venture viability, raising the necessary finance for a successful launch, monitoring a range of financial key performance indicators (KPI’s), investing in new assets and funding new expansion opportunities.

Fortunately, we’ve put together simple financial fundamentals that will shift your perspective from boring to brilliant.

Finance unlocks doors and drives business performance

For many, raising the required initial investment is one of the greatest obstacles to overcome on the business journey to opening and operating a successful franchise. Clearing the funding hurdle takes a special skill set. Some prospective franchisees do possess these skills but others may be better off seeking help from industry professionals. The key is ensuring the correct amount of working capital is raised, ensuring the business can hit the road with enough cash in the bank for a startup franchise success.

Finance motivates

Not only is financial success a clear motivator for business owners, it also motivates staff, suppliers and customers. It’s certainly wise to consider incentive schemes for employees and rewards schemes for loyal customers. If done correctly, these schemes can lead to increased productivity, client retention and a better managed cash flow. Furthermore, negotiating favourable terms and discounts with suppliers, depending on the nature of your prospective business, can also enhance your business’s cash flow.

Finance fills in the blanks

Monitoring appropriate KPIs is important. It’s vital you start as you mean to go on. If you don’t monitor any KPIs or the right mix of KPIs, you might find yourself running into financial trouble. Reviewing and comparing your monthly management information to your original business plan gives you the opportunity to identify trends, highlight where things may have gone wrong and discover why. This information assists you in ensuring the same mistakes don’t happen again.

Finance can transform or break a business

Cash is the key to upscaling. Lots of franchisees aspire to grow their operations to a point where they take on a second van, open a second store, expand into multiple territories, or even set up a different franchise brand. This becomes unachievable when a franchisee cannot contribute the minimum percentage of the investment that lenders require. While help is available to boost your capital resources, you need to be in a healthy position to demonstrate that your business can sustain the necessary repayments at an agreed rate and period.

Beware though, overtrading is a real risk unless you are managing your finances effectively. Monitor, monitor and monitor some more. Keep an eye firmly on cash flow and manage your stock and expectations accordingly.

You don’t have to be an expert

Don’t be disillusioned and think you need to be a financial expert to successfully operate and maximise your future franchise business’s performance, because you don’t. However, you do need to have an awareness and an understanding of your business’s financial affairs. There is help available to you if it is needed, you can lean on your accountant, professional advisor, financial planner, or even a clued-up friend or family member. Just make sure you’re never afraid to ask.

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