Franchises are owned and operated by millions of people across the nation, each with its own unique starting position. There is a universal appeal when it comes to being your own boss, and many folks are eager to buy into a franchise so they can kickstart a successful business and build profits right away. With many elements of a business already set up for them, new franchise owners can jump right into the brunt of their business operations and hit the ground running.
Top Finance Tips for New Franchise Owners
But as time goes on, many new company owners are discovering that they have bitten off more than they can chew. Without early guidance helping them reach the best financial decisions, the franchise system may end up toppling over anyone who isn’t properly prepared.
In order to avoid many of the common pitfalls that beginning business owners face, our online bookkeeping services experts will highlight the top finance tips for new franchise owners so you can start off on the right foot.
Do Your Research
Before you get caught up in the popularity of a certain franchise, you’ll want to find out what type of business will work best under your circumstances. Make sure you spend a hefty amount of time researching different franchise options and see what your local area needs most. Something that is bringing in profits right now should also be able to rake in profits over the next one or two decades.
Save Enough Starting Cash
Although you have many avenues of earning capital as a brand-new business owner, cash still remains king. You can invest in different loan options through banks and online business lenders to help set you up over time (just be sure not to overborrow – more on that in the next section), but it is still important to hold onto as much cash as you can so you do not owe in the long run.
Business loans may not be enough to cover the continued costs of business expenses and other operational needs that will grow as your franchise becomes more popular. You need working capital in your company account at all times so you aren’t just relying on the popularity of the brand to bring in more customers.
Don’t Borrow Too Much Money
One of the biggest mistakes that new franchise owners make is borrowing too much money upfront, thinking that it will get easier to pay off these debts as profits grow. This is one of the major reasons why retail franchises only have a 65% survival rate when compared to independent businesses, which have a 72% success rate. It might be tempting to borrow enough money to cover the costs of operation and the opening of your business, but you may end up spending more than you earn at an alarming rate.
Keep Extra Costs in Mind
Budgeting is difficult, and there is no one-size-fits-all solution that will set all franchises on the right track. It might be a good idea to plan for some wiggle room in your budget to account for unexpected costs. Surprise events, mishaps, emergencies at work, and employee issues can all cause some major costs that aren’t typical of what you usually spend on the job. Not to mention, there are plenty of hidden costs of franchises that many business owners get hit with by surprise during setup.
The best way to manage surprise costs, payroll needs, budgetary concerns, and other important financial matters is with an accounting system that houses every process in the same place. Automated accounting systems, for example, offer automatic payment processing and digital bookkeeping services that can help you stay on track without requiring all of your time.
Invest in Automated Accounting Solutions
There are many things to consider when you are first starting your franchise. No matter what type of retail franchise you are planning to set up, it is important that you know how you are going to run your operations before you begin. Do you have a bookkeeper? What accounting software are you using? How often do you consolidate budgets and generate financial reports?
You can finally make sense of your financial dashboards and other accounting processes from the convenience of one single page, with tools and features built into it that are customized for your exact franchise. If you are looking for help with process improvement or you urgently need help with catch-up bookkeeping, Indevia may be the perfect choice for you. Reach out to one of our experts today to schedule a one-on-one consultation to discuss your franchising needs.
