Top budget tips for franchiseesThe two biggest financial hurdles for first-time franchisees are:
1. finding the capital to start, and
2. surviving the start-up years.
Assuming you have found the capital to purchase a franchise, here are our top budget tips for franchisees to ensure you don’t just survive the start-up years but thrive, long into the future.
Managing cash flow is one of the most challenging aspects of running a business. But cash flow is really just a by-product of budgeting. Learn to budget and your cash flow will pretty much take care of itself.
The same principles apply to a business budget as a household budget. The trouble spot is in the transition. Many new franchisees move from earning a regular, reliable income to a changeable and sometimes unpredictable income. This is part and parcel of being a business owner and is the single most compelling reason why all small business owners, including franchisees, need a budget.
Budget tips for franchisees:3h>
1. What is a budget?Budgets can be as simple or detailed as you need. At the minimum, they lay out your projected revenue and expenses over a specified timeframe – usually monthly, quarterly or annually. Over time, your data will become more reliable and accurate, which means you will be able forecast more accurately.
2. Why you need a budgetA good budget is the foundation for business success. Budgets enable businesses to plan and grow. They help to set targets, control spending, fund growth and overcome financial obstacles – expected and unexpected. They also provide a method of tracking income and expenditure.
3. Be realistic in your projectionsBeing accurate is not the same as being realistic. Accuracy is not always possible, whereas you can always be realistic. When it comes to sales, it’s hard to pin down the numbers. Things can look good on paper but the reality can be quite different. Look at your best and worst case scenarios, then be conservative as your budget will be better off if you underestimate your income rather than overestimate.
4. Don’t spare the detailsWhen you are developing your budget, be as specific as you can. Separate fixed costs (such as franchise fees) from variable costs (such as utility bills) and list out your discretionary expenses (such as client entertaining costs). Being detailed in your budget will help you to decide what you can’t live without and what you could postpone until your business can better afford it.
5. Don’t spend all the profitsIt’s important to enjoy the rewards of hard work, and reinvesting profits into the business is a great way to encourage growth, but you should always squirrel some of your profit away for contingencies.
Pay yourself a fair salary and pay it regularly – don’t be tempted to splurge if sales are higher then you expect one month. This way, you’ll be able to cover the shortfall should sales dip in subsequent months.
6. Keep looking for ways to cut costsIt doesn’t pay to be complacent given the rate at which technology is advancing. What worked five years ago may still work today, but there may be an even better and cheaper way of doing it now, so don’t be afraid of change. You may have to take a risk but that’s what being is business is all about.
A robust budget that is reviewed regularly will help keep your costs down and your spending in check, allowing your franchise to thrive and grow.
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