Financial Practices Franchisees Should Consider
Entrepreneurs, franchisees and business experts unanimously agree that starting your own venture or investing in a franchise is for the people who want more than just a corporate career and the assurance of the monthly paycheck. These types of ventures are for the risk takers, who are ready to take the leap into the uncertain world of owning a business, who are ready to take the responsibility of managing different departments and calling all the shots. In return, they get a sense of thrill, excitement and in many cases financial freedom.
We asked the Quality Franchise Association experts about the top financial consideration franchisees should keep in mind when they are planning to invest in a franchise. As experts, they are familiar with the challenges and hardships many franchisees go through when they buy a franchise and manage it, in the first few months, which are the toughest for any new business. The financial decisions they make as the boss and the manager of the venture have a tremendous effect on their personal life as well. Therefore, all financial aspect should be considered carefully.
Here are some financial practices franchisees should follow:
Keep An Eye On Spending
One of the most common reasons why new businesses including franchises UK fail is that they run out of money within the first few months of opening. Franchisees should be mindful of all the earning and spending their franchise is doing, it is integral to keep track of them because as the owner it is one of the most important jobs. Any carelessness in this department will greatly jeopardise the future of the business.
Experts suggest if the franchisee is not taking care of this matter personally, then they should hire someone who monitors and maintains the books. They should be diligent about this responsibility because mistakes can come back to haunt during the tax season.
Everything that your business earns will be revenue, from this money the expenses will be paid and the leftover amount will be the profit. Keeping this in mind, it is important for the franchisee to remember that every pound spent will be an expensive and will, therefore, eat away the profit and the only way to ensure that they are taking home as much as possible is to minimise the overheads and only spend on the essential items.
One way to stay on top of the expenses is to list down all the probable expenses, make a plan on how they will be paid and then stick to them. Financial planning is a key component of running a business, whereas strategising and staying on track ensures success.
Have A Plan B
For franchisees and small business owners it is important to have financial contingency plans that they can rely on when the times are tough. Having an emergency fund or cash reserves in addition to the funds needed to run the business is important, especially for businesses that are new and are yet to generate a profit.
Look into revolving credit options as the contingency plan that will help the business stay alive when times are tough.
Prioritise The Investments
As a new business that is trying to survive it is important to prioritise all the spending including investments. It is not important for new businesses to invest in big marketing campaigns that may seem lucrative, but will eat away a big portion of the revenue. Instead, look for more affordable ways to generate buzz and be noticed by the target market and as the business takes off franchisees can invest in bigger and bolder marketing campaigns. This consideration should be maintained in all investments.
New franchises UK should spend more effort trying to trim overheads, investing only in necessities and finding new creative ways to generate business.
Have Cash On Hand
Cash reserves as mentioned earlier should be one of the contingencies that are reserved for tough times. This cash should only be used when initial savings have been used and liquid assets are the only way out.
Experts believe that new franchises, low cost franchises, home based franchises, van based franchises can avoid major financial problems by closely monitoring their cash flow and keep its track. For a franchisee cash flow should be their number one priority.