Franchise expert Derrick Simpson reveals nine steps to success
During my 22 years in the UK franchise community, I have seen and worked with some very successful franchisees. I have also, unfortunately, met many who have not been so successful. What is interesting is that the reasons for these successes and failures can be distilled into a few key points.
By taking a little additional time at the outset and resisting the temptation to go with your first choice, it is possible to reduce risk factors. By following some simple guidelines you can ensure that the franchise you are taking on is right for you - and will enable your business to grow and develop in the future. Occasionally ‘gut feeling’ can pay off, but in reality a considered, planned approach is much more likely to achieve success overall.
These are my top tips for establishing and operating a successful franchised business.
DECIDE ON YOUR INVESTMENT LEVEL AND STICK TO IT
Do not overspend on a business venture. Invest to the level you can afford, always include some negative ‘what if’ planning in your calculations and keep some money back for the unexpected events that may come along later - which often happens. It is very easy to be carried away with an opportunity, so a clear focus on the realities of finance is essential. Naturally, there must be a realistic balance between prudence and excessive caution. A business venture is an investment after all, just don’t overspend or over commit at the start.
MATCH YOUR INCOME REQUIREMENT TO YOUR INVESTMENT
While the ideal opportunity is to be able to invest £10 and earn £100,000, reality isn’t like that. So ensure the business you are looking at can realistically provide you with the income you require. You can usually only generate large levels of income with a large level of investment. A more modest income can however be achieved with a smaller upfront pay out, which also offers the opportunity for a lifestyle choice.
Check the franchisor’s projections. Are they based on actual average figures or potential earnings? The ideal situation is for the standard projections provided to you by the franchisor to represent the average performance for the existing businesses in its network. Some franchisors, however, may project the top performers’ results, while others may try to illustrate what could or should be attained. Make sure you know what the figures being presented represent and that you understand how they fit with the reality of the network’s performance.
Small or new franchisors may, however, have to rely on projections rather than actual figures simply because they haven’t been in business long enough to be able to present meaningful averages. This isn’t wrong or dishonest, you just need to be aware what the projections mean, where they have come from and be comfortable that you are able to generate them using the franchisor’s system.
PLAN YOUR LONG-TERM GOAL AT THE OUTSET
Part of the planning for your franchise is to establish how you will get out of it. Consider what your final goal is, for instance, whether you expect to sell your business, pass it on to an offspring or run it until you drop. Each of these criteria will have a major affect on how you structure your business plan at the outset, whether you buy equipment and vehicles or hire them, and if premises are involved, the terms and length of the lease. If you start out with an exit strategy in mind, you have a good chance of achieving it.
PLAY TO YOUR STRENGTHS
Different types of franchise require differing skills. Some are direct sales-based, some are retail service while others may have a consultancy approach. Ensure you match your skills set and personality to the style of business you are investigating. While taking on a franchise means being able to move into a new business sector, because the franchisor will offer training and support your basic personality traits and skills set will remain with you and influence your performance.
RESEARCH THE MARKETPLACE FOR THE BUSINESS YOU ARE CONSIDERING
The internet provides countless pages of information on virtually anything, so ensure you have looked thoroughly at the environment and marketplace for the business you are considering. Look for cyclical trends, regulatory changes and market intelligence. Speak also to current franchisees; all ethical franchisors will provide you with a list of current owners. Speaking with existing franchisees and investigating the industry may take a few extra days, but balance this against the expense of getting it wrong and you will see the wisdom of this approach.
SIMPLE IS GOOD
A business that is simple to operate with structured systems will be easier to run than one with nebulous concepts where you are left to your own devices. A simple business will also be easier to sell on to a new owner when the time comes for your exit for exactly the same reason - it will be more attractive to a buyer.
CONSIDER AN EXISTING BUSINESS (RESALE) INSTEAD OF A NEW START-UP
An existing business will provide you with that vital cash flow from day one, a local market presence and, if appropriate, staff who know how to operate the business. It may cost a little more, but the benefits usually outweigh the cost. Franchise Resales will be able to assist in identifying the correct opportunity for you.
BRITISH FRANCHISE ASSOCIATION
While not a guarantee against all risks, a franchisor that is a member of the bfa has at least gone through a thorough vetting process to attain the standards required and should, in theory, adhere to the bfa policies for ethical franchise operations. That doesn’t mean you can dispense with the other checks, but it is a good place to start.
DON’T TALK TO NEGATIVE PEOPLE
For me, this is an important point. You are going into business with your money, effort and at your risk. Stay away from negative people who drain your self-confidence and cast doubts on your dreams, efforts and abilities. To be successful in business you need to be constantly positive and forward looking. Avoid anyone who is going to be a dampener; they are probably jealous that you have the drive and confidence to take such a step.
This world has a tendency to see the glass as half empty, so remember: it is you who has to drive your business on a daily basis, motivate your staff and reap the rewards of success. Don’t let others take that away from you with negativity and bad advice.
Follow these few simple guidelines and you have a good chance of making the right franchise investment decision and growing a successful business. I wish you good fortune.
Derrick Simpson is managing director of Franchise Resales. www.franchiseresales.co.uk
