How your franchise business can learn from failureNo one sets out to fail, but the reality is a number of new franchises owners will. However, failure can be a great teacher and, if you are quick learner, you can act fast and ensure your franchise business survives and thrives.
Here are five of the most common reasons why businesses fail and the lessons we can learn from them:
Failure to manage effectively
Mismanagement is one of the most common reasons small businesses fail. Often it stems from people not being aware of their own strengths and weaknesses. One of the benefits of belonging to a franchise system is that there are usually processes and procedures available to you. The key is to remember that they are tried and tested for your industry and brand – trust them.
Small business owners are also guilty of trying to do it all. Sales, marketing, accounting, customer service, recruitment, administration, cleaning – the list goes on and if one person is doing it all then something usually has to give.
1) Acknowledge your own weaknesses and either upskill or look elsewhere to fill the gaps.
2) Accept that you can’t do everything and know when to ask for help.
Failure to plan
When buying a franchise business, you will need to the cover the upfront costs, any ongoing fees and some cash reserves or at least a plan to access more money should you need to. In small business, there is a constant two-way tug for cash between suppliers and buyers, so you’ll need to keep on top of your finances.
You’ll also need to a business plan that reflects your goals, the purpose of your business, your products or services, where you are now, where you're going, and how you're going to get there. As Benjamin Franklin said, “By failing to prepare, you are preparing to fail.”
1) Be realistic about your financial position, keep a close eye on cash flow, have sufficient working capital and come down strong on late payments.
2) A well-considered business plan will help you achieve your goals and overcome any challenges that come your way.
Failure to engage
If people don’t want the product or service you are providing, you are effectively irrelevant. Start with the customer – you need to understand them; know what they want, how they want it what it’s worth to them. To do that, you need to listen. You also need to maintain communication. There are so many ways to communication today – there’s traditional advertising like TV, print and radio, as well as social media, networking events and brand champions – all inexpensive yet effective ways of reaching your audience.
1) Engage in a two-way dialogue with your customers, not a monologue.
2) Learn the language of your customer - that is, don’t speak French to a Russian. Be clear, be concise and be compelling.
Failure to adapt
Doing what you have always done is sure to set you on the path to failure. To stay ahead of the game, you need to anticipate and react to competition, technology, consumer behaviour and other changes in the marketplace. A good leader will always challenge the status quo and look for better, faster ways of doing things. New technology, new ideas, new competition, new innovations – these are the drivers of change and the right change can propel your business to great success.
Keep your eyes wide and your ears open. Anticipate changes in the marketplace and react. Never stay still.
With the backing of a proven franchise system, franchise businesses often carry less risk. One of the biggest advantages is the support that is available. If there’s any sign of trouble, reach out to your franchisor or other franchisees. Although you own your own business, you are still part of a team, and if your franchise business thrives, you do too, and the brand is better for it.
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