So, you want to buy a franchise?

In part 2 of Chris Dunn's blog on franchising, he talks about the importance of having a plan for your business.

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Have you ever built a house or done extensions? I have, and I can tell you that it can be one hell of a job, especially if you don’t have a decent set of plans. Plans for this, plans for that. No matter what one does in life somewhere along the line you will have to make a plan, excuse the cliché.

Planning is part of life, whether to be single, married, have children whatever we do as humans needs to be thought out. So why is it that I come across so many people who want to be in business but have never thought of the importance of having a plan, a business plan?

In days gone by before GPS, or OK Google, we used maps. To get to A to B we would look at the map to work out the best route for our journey, otherwise we’d get lost. Coming from London a massive city, there are maps for the underground (tube train), maps for busses, maps for car journeys. Anyone from that time can tell you to find an address from one side of London to another would be just about impossible without a map (A to Z).

Think of a business plan as a map. It will tell you where you are starting from and assist you to get to a finishing line. It will no doubt be challenging as your journey will be fraught at times in deciding which way to turn but at least you’ll have a destination, a goal to head towards.

I find banks and the like make business plans a mission when in fact a business plan can be quite simple:

SWOT analysis: Strengths, weaknesses, opportunities and threats to the business

  1. Make a list of your strengths and weaknesses, be honest with yourself
  2. Determine your objectives, short term, long term
  3. Analyse the demographics of where you want to trade
  4. Make a list of competitors, visit them, spot the weaknesses, do price comparisons
  5. Know your COG (cost of goods)
  6. Look at where your business can fit in to add value to the area
  7. Determine your marketing strategy. (Marketing is one of the most important overlooked aspects of starting a new business)
  8. Financial requirements (franchise fee to business opens, landlord deposits, etc)
  9. Cash-flow requirements for at least 2 years (Don’t overlook the importance of cash-flow as most businesses fail due to lack of cash-flow)

Whilst your business plan is critical nevertheless it’s your determination to succeed which is going to make the business work. In part one of this blog I reiterated the importance of having a passion for what you have chosen. Without the passion many businesses fail simply because the owners don’t spend the time to nurture and build their business. Don’t think for one minute that a manager, employee is going to love the business as you would, it’s not going to happen.

In the movie ‘The Founder’, the first franchisees of Ray Kroc’s McDonalds were failures, why? Because they didn’t run the businesses themselves, they were investors. When Kroc turned to owner operators’ things started to look up. The same principle applies today.

Over the years I’ve seen many business owners who wonder why their business have gone broke, usually they will blame everybody except themselves, here are three primary reasons a small business can fail:

  1. Lack of owner participation, dedication to serve the business
  2. Lack of cash-flow to pay salaries, rent, suppliers etc
  3. No understanding of the fundamentals of running a business.

‘It’s like trying to drive a car without experience, chances are you’re going to crash’

My advice to budding entrepreneurs who are looking to be in business without prior experience is learn the basics of running a business first. There are many courses, on-line and others that teach the basics of Cost of Sale, Income Statement, Break-even, Cash Flow etc.

So many people jump head first into business without any basic understanding. It’s like trying to drive a car without experience, chances are you’re going to crash!

Put in the work, put in the time to learn.

Buying a franchise is not a sure-fire recipe for your success. Yes, a well-established franchise will have brand recognition, but the bottom line is how well that franchisee runs that business. Notice I say runs the business, to many times the business runs the franchisee!


Chris Dunn

Chris Dunn is Managing Director: 3@1 Franchising – 3@1 Business Centres, Joint MD: Assisted Home Nursing and MD: Surefire Franchise Developments. Dunn has more than 35 years of solid franchising leadership experience, driving success in a variety of major franchise concepts in the food, postal and second-hand goods sectors.

This article first appeared on www.surefire.co.za.


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