So, you’ve decided to buy a franchise. Congratulations on participating in a large and important business model. However, it is not like the movie “Field of Dreams”—where the business magically comes to you. While a franchise isn’t like starting a new concept from scratch, it still requires a lot of effort, skill, and financing.
Reasons to Create a Franchise Budget
A franchise budget will help:
- Set targets, including the projection of revenues and spending.
- Ensure that financial resources are available and well-aimed to meet your goals.
- Support strategies, so spending is accomplished with direction.
- Communicate priorities to all stakeholders.
- Support the long-term needs of the business.
- Provide for a profit margin. If there is no profit, the business won’t last.
How to Set a Budget for Your Franchise
Creating and managing a budget are key to the success of every business. The most common reason for new business failure (including new franchise operations) is the lack of capital, so it is important to project and budget wisely. Include these budget components:
- The franchise fee (or purchase price.)
- Your initial capital investment, especially major facility, and equipment costs.
- Pre-opening expenses, including travel and training expenses, legal and consulting fees, leasehold improvements, rent deposits, initial telephone costs, equipment, and start-up inventory.
- Working capital that incorporates all operating costs for the first six months (or more) including rent payments, furnishing payments, cash-on-hand, computers, insurance, ongoing inventory, advertising and marketing expenses, licenses, payroll, office, and administrative costs.
- Determine your own living and/or compensation draw requirements.
Use your budget figures to develop a financial model. That will help determine how the business will survive as the business gradually ramps up. Use this information to guide expense decisions and to measure the progress of the business. Seek professional review to assist you. Also, it pays to expect the unexpected.
Seek Expert Financial Assistance
Contact Overhead Capital Ltd. for financial solutions to address your startup and ongoing capital needs. Our experienced financial professionals can help you secure funding to meet your business’s financial needs and goals.