Franchising requires an understanding of financial principles. While you don’t need a background in finance, it's a good idea to arm yourself with financial skills.
Here's a breakdown of the skills you'll want to possess or develop.
1. Checking Numbers
Your accountant can do the heavy lifting, but you need to be able to vet their work and monitor the financial health of your business.
You should be able to...
- Make quick, back-of-the-envelope calculations for on-the-spot decisions.
- Read and understand a P&L (profit and loss) statement.
- Grasp concepts like profit margin, capital expenses vs. operating expenses, and debt service.
- Comprehend franchise-specific financial obligations like ongoing revenue shares and marketing fees. These often involve percentage calculations.
2. Financial Maintenance
Ongoing financial maintenance will keep your franchise healthy. While your accountant or bookkeeper can take on many responsibilities, certain maintenance tasks will invariably fall to you or your designated manager. These tasks include:
- Keeping diligent records of expenses
- Monitoring business bank accounts
- Managing day-to-day financial transactions, from receiving payments to purchasing supplies
- Paying bills accurately and in a timely matter
3. Financial Accountability
Financial accountability focuses on purposeful spending and revenue generation. This includes:
- Setting and adhering to profitability goals
- Making informed decisions on expenditures, prioritizing essential over optional costs
- Encouraging your team to meet financial targets through incentives
- Planning for financial challenges
- Overseeing budgeting and the financial health of your franchise units
As a franchise owner, you're accountable for your success, as well as the success of your employees.
Addressing Financial Skill Gaps
If you're concerned about your financial acumen, here are a few steps you can take:
- Find the root of your apprehension. Are you uncomfortable with numbers? Do you just lack experience with business finances?
- Collaborate with someone who complements you. Many franchise candidates I work with choose to partner with someone. Often a financial partner provides capital and/or assistance with a few key tasks. A partnership is a great way to cover your weaknesses. You simply work with someone who is more comfortable in those areas.
- Educate yourself. You can learn all you need on YouTube and Investopedia. Of course, if you prefer, you can also get a book or online course.
- Reward yourself. For example, when you do your bookkeeping for the month, take your partner out to dinner to celebrate.
Wrapping Up
By honing your skills in number crunching, financial maintenance, and accountability, you'll help assure a successful franchise journey.
Remember, these skills are within reach. With the right mindset and resources, you can master them.
If you’re ready to dive into the franchise world but feel uncertain about your financial prowess, don’t hesitate to reach out for a quick chat.