HOW TO FRANCHISE?

Before investing your time and money into becoming a franchisee, create a detailed business plan that specifically defines your business, identifies the goals of the business, and includes a balance sheet and cash flow analysis.

As soon as you decide what type of business you want to get into, even before signing a franchise agreement, sit down and create your detailed business plan. For the financial portion of this plan, work closely with an accountant. Ultimately, when you begin applying for small business loans or searching for investors, you’ll need to present this document. Your business plan will also force you to look at the big picture and analyze the viability of the business opportunity before you actually launch it.

A business plan is like a resume for your business, as well as a road map for how you’ll operate and manage it. This is a professional-looking and comprehensive document that combines text and graphics (charts, graphics, pictures, and so on), as well as a spreadsheet with projected financial information.

As you begin formulating your business plan, do extensive research. Analyze the demand for the products or services your business will offer. With the help of your franchisor (and information included within the UFOC, for example), you should be able to accurately predict start-up costs, operating costs, revenues, and profits (keeping in mind that revenues and profits are two very different numbers). By speaking with existing franchisees, you should also be able to gather enough data to anticipate profits. Keep in mind that accurately predicting initial traffic to your business and customer demand for your products or services may be a bit challenging. The more you know about your target customers, however, the easier time you’ll have putting together this element of the business plan.

Creating a well-thought-out business plan is an important first step for any small business owner or franchisee. This document will help you determine whether or not your idea for a business is viable, and can later be used to attract potential investors or help you obtain loans from financial institutions.

The more detail your business plan offers, the better your long-term chances for success will be. Once your business plan is complete, make sure that you have it reviewed and critiqued by your lawyer, accountant, and/or someone who is an expert in business before submitting it to potential investors or financial institutions (to apply for a loan). One of the biggest reasons lenders initially reject small business loan applications is because the business plan submitted does not contain enough information or the right information to properly educate the reader about the business or its projected financials.