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What To Consider When Investing In A B2B Franchise

Posted: 10 Jan 2018
Estimated Read Time: in 14 minutes

These are the things you need to consider when investing, Aliyyah-Begum Nasser, UK managing director of Signarama, says

What To Consider When Investing In A B2B Franchise

When investing in a business-to-business franchise, the decision making process is fraught with tough choices.

So get excited about your investment opportunities by thinking outside the box.

People skills are professional skills

I’ve heard lots of people say they prefer the thought of a B2B franchise because they don’t like the idea of dealing with the public. But that doesn’t mean you don’t need great people skills.

As someone who has spent my career as a management consultant in the B2B space, I can say with absolute certainty that while you may not be consumer facing, as a B2B owner you’re likely to need as broad a range of communication skills as someone faced with the public day in, day out.

Why? There are lots of roles you’ll need to step into and each one requires a specific kind of interpersonal skill. Will you need to interview, train, motivate and manage staff? Are you responsible for negotiations with suppliers? Will your interactions with your prospects and clients flip from sales executive to relationship manager to credit control?

Like many franchisors, we handle some of these things for our franchisees, but you should always be aware of your own strengths and weaknesses - communication and people skills included.

Unlike business-to-consumer businesses, where most customers will buy and leave, as a B2B franchise owner your interactions last for longer and, if handled well, can be repeated.

The importance of repeat business

Do you think about repeat business as a ‘nice to have’? When investing in a B2B franchise, I encourage you to think of it as a must have, so it’s important to build into your business plan the process of capitalising on repeat business.

Talk to your franchisor about such strategies from day one, because it’s likely it will have systems in place to help you.

B2B businesses are relationshipled. By that I mean as a B2B franchise owner you will operate and ultimately grow by building client relationships. Great relationships mean repeat business. If you can initiate, build and nurture client relationships, you can create a customer base with impressive longevity.

Over 70 per cent of Signarama franchisees’ turnover comes from repeat business. That’s down to great service, great relationships and adding value at every opportunity.

Head over heart purchases Business customers make rational decisions, rarely emotional ones.

Unlike B2C consumers, who often buy with their hearts, a business purchase needs to tick a lot of boxes before it’s approved - financial, efficiency, quality and service parameters all need to be satisfied.

Ethics and personality naturally come into the decision making process, but usually further down the line. This means the buying process can be longer and involve more considerations. That’s no bad thing.

Knowing this means you can take time to understand your potential customer’s needs and present a solution that’s best for the business as a whole - and show that you’ve designed it that way. Something any customer will value greatly.

Trading considerations

B2B franchises tend to be less dependent on volume of trade because value per transaction is often higher.

Along with higher transaction values tend to come slower decisions - see head over heart purchases - so your contingencies need to include provision for cash flow.

Another important point for consideration that’s often overlooked is that B2B franchises usually extend credit. This means customers will generally expect to receive an invoice for goods or services provided, payable on a standard 30-day term.

While it might seem appealing on the surface to enjoy the feeling of being cash rich, as experienced by many B2C businesses, invoiced trading makes initial planning, monitoring and forecasting that much easier and more insightful.

Operating on their level

As I’ve already said, people skills and building relationships are key in any business.

In a B2B franchise, you need to be aware that you’re likely to be dealing with other business owners as your customers or at the very least senior board or team members. Whether you’re pitching your company, your products or services or negotiating on sales and timelines, you need to be confident your own skills are up to the task.

You don’t need previous business ownership experience to run a successful B2B franchise, but you do have to possess a certain level of business acumen and communication skills that enable you to communicate confidently and effectively with other leaders on their level.

You should expect the same levels of training and ongoing support from a franchisor in the B2B sector as you would any other.

Business-to-business services is an ever growing and increasingly popular market to operate in. If you’re looking for a way to utilise your professional skills, join a network of like-minded professionals and have a drive and determination to succeed, a B2B franchise can be a profitable and rewarding venture on many levels.

Territory talk

Most franchisors will assign you a territory based on your location. Generally, territories are created by profiling the region, then selecting certain demographics and specifying minimum levels for a viable territory.

For a B2B franchise, this will undoubtedly include the number of existing businesses - eg, potential customers. It’s vital you drill down with your franchisor of choice to understand more at this point.

What constitutes as a ‘business’ in your territory? Simply saying there are 5,000 businesses in your territory isn’t good enough. 5,000 businesses that will never need or want your services may as well be zero.

For example, at Signarama the 6,000 businesses we define in every territory are measured by criteria such as how big they are and how many staff they have - in other words, things that genuinely make them a potential customer for our franchisees.

A good franchisor will anticipate and, importantly, be ready and willing to answer this type of question, so don’t be afraid to ask it.

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