To a potential franchisee, if done well, a business plan can show franchisors and funders that they are serious about the new venture
So you’ve got big plans; you’ve taken that first step and decided you want to run your own business and no doubt your research and knowledge will have told you that one of the first vital steps along your journey as an entrepreneur is a business plan.
At this stage, it is about gathering all your ideas in one place, making every step towards realising your dream more achievable. We have all heard the adage: fail to plan, plan to fail. This could not be more true as, without a goal and clear strategic idea of where your business is going, you may never get there.
Managing a successful franchise usually requires a different skill set than the day-to-day work and it comes down to an understanding of figures, forecasts and as always, careful business planning.
What’s the plan
Planning helps a business identify its objectives and in preparing for the future. This allows leaders to consider the impact they would like the company to have and to determine a way to get there. The plan should explain your aims from where you are now to where you want to be in the future. Planning is basically a roadmap that guides us on how to complete a task before attempting to begin it. All businesses should have a business plan.
To a potential franchisee, if done well, a business plan can show franchisors and funders that they are serious about the new venture. On the personal and business side, it will show how you plan to make the business a success, how you will use the bank’s money and naturally, how you will pay it back.
A franchise business plan will combine components of both the franchisee and the franchisor. So if you are a potential franchisee, once you have signed the franchise agreement, the franchisor will provide you with some helpful information such as start-up and ongoing costs, demographics, marketing plans and the like, so that investors have a clear picture. Some franchisors will advise you as to their recommended service providers and an accountant is always a very useful source of advice. The likelihood that they have experience in obtaining finance for others within your network is high. For instance, d&t has been working within franchise businesses for more than 25 years and knows exactly what it is that the banks are looking for and how to write a winning business plan.
Details make all the difference
Whether you’re a new start-up or looking at diversifying or expanding, to secure any business borrowing it will be necessary to provide the banks with a detailed business plan. It will need to include information on cash flow, budgets and projections, but also an analysis of strengths, weaknesses, opportunities and threats (SWOT).
A SWOT analysis should always feature as part of business planning. This is a strategic planning tool that can help you look at your business in an entirely new way and from different directions, helping you to create or fine-tune your business strategy. Strengths – harness them; chances are, you’re already doing them. Shore up your weaknesses; seize opportunities and mitigate threats; threats that could potentially negatively influence staff recruitment and retention in the future or customer spending for example.
Business plans should be realistic and achievable. They should also detail milestones and set out a roadmap indicating thresholds when, for example, additional staff can be taken on, or when the business can afford to expand further. A well thought out and comprehensive plan helps avert risk for the business owner and is also essential for the lender to evaluate projections for steady, achievable growth.
A fundamental part of any business plan is an analysis of existing figures. Ensure accounts are entirely up to date as comparing forecast numbers to actual results yields important information about the overall financial health and efficiency of the business.
Eye on the prize
Key performance indicators (KPIs) are also an essential part of business planning. KPIs are the elements of your plan that express what you want to achieve by when. They are quantifiable, outcome-based statements used to measure your progress; an effective way of driving success through a business and when examined and addressed correctly they can even turn a failing business into a thriving one.
Monthly turnover, cost of sales and gross profit will always be the most important key performance indicators, as at a glance, you get a good idea of how a business is performing at a high level. There will, of course, be some more specific metrics that are tracked behind these, which might include, for example, variable and fixed costs, potentially, staffing, training, recruitment, heating, cleaning, marketing and others.
The big question, however, is what can you do to support those big hitter KPIs, what else can you monitor on a subsidiary level, that will reinforce those three metrics?
Try to see your business through someone else’s eyes. Too many business plans are written solely from the point of view of the business owner and often neglect to show the constituents that give the venture its financial viability – the market, including both existing and prospective clients and the investor, whether financial or otherwise.
Also, never follow a plan that isn’t working and a good business plan is never done! Don’t be adverse to change. Sometimes change is necessary. During your company’s growth mode, you should constantly evaluate and adjust your business plan. Depending on how quickly your business expands, you may need to update your plan on a monthly basis to account for new products or services, new employees or markets. It is advisable to update your business plan at least once a year and a monthly review of the difference between your planned results and the actual results for your sales, profits, balance and cash is always good practice and helps keep you on track for bigger things.
The effect of a global pandemic has taught us the importance of having a plan. Plans can change but be proactive within your business, not reactive, and you will be better equipped to deal with the unexpected.
Finally, have confidence in your business plan and know your plan inside out as it’s the most effective way to crystallise your business objectives and take you every step of the way along your road to success.
So, whether you’re starting out or looking to grow, you will benefit from a plan especially designed for your organisation.
Head of commercial, Phillip Archer, at award-winning accountancy firm d&t, has a wealth of expertise within the franchise and finance industries. Accredited QFP with the British Franchise Association, Phillip is a voice of authority within this sector.
d&t offers help with business planning with a focus on adding value not just numbers. If you are keen to reach your goals this year, contact d&t for further information.