Plan the Financing for Your Franchise Right

Plan the Financing for Your Franchise Right

All kinds of businesses require money but not all entrepreneurs gain easy access to funding. In fact, most can’t get their business off the ground because they lack adequate funding. If you plan well and approach your finances carefully, you will be able to find enough money to fund your venture and ensure it stays afloat. Here are some tips that can help:

#1 Determine How Much You Need

Before you start looking at financing options, it’s important to consider just how much you need to comfortably launch and sustain your business for the first few months. A business won’t start producing revenue or profit immediately after it’s launched so you need some financial cushion to keep it running and still maintain a comfortable lifestyle for yourself. If you don’t get enough finances to tide you over until your business is established firmly, you’ll experience a number of problems and might even see failure. You need to consider things like:

  • Expense projections for the upcoming few years
  • Borrowing requirements and conditions
  • Risk assessment
  • Financial assumptions

#2 Look at Your Finances

After you’ve determined how much you need, look at your personal finances and determine if they can sustain your personal requirements until your business is up and running. It’s important to keep your personal finances and business finances separate and not dip into your savings or retirement fund. You should consider all other options available to you before you even think of dipping into your personal bank account.

#3 Look at Government and Institutions

Local governments and institutions always encourage entrepreneurs to start new companies and set up new franchises because that creates jobs. They might offer generous loans at good interest rates to help finance your franchise. Such institutions will also offer more aid and advice on how to deal with early business finances and manage expenses.

#4 Consider Venture Capitalists and Other Such Entities

If you can’t get a loan from government agencies, you should consider private investors and venture capitalists. Of course, they’ll be more interested in a franchise company rather than just a single branch so if you intend to start your own franchise business, they might be your best bet. Some small-time investors might be willing to help you purchase a franchise branch for a share in profits, which can be a better deal for you when compared to corporate business loans.

#5 Manage Your Finances Well

Once you have your finances in place, it’s important to manage them well. Businesses often fail because they spend too much money too quickly and don’t plan for future expenses. If you can make do with 10 employees, don’t hire 12 just to make things easier. Many start-ups and franchises have failed because they didn’t control their expenses and make sure they have enough money for bad business days.

#6 Exit Strategy

While it’s good to hope and plan for the best, you also need to prepare for the worst. When you plan your finances and consider your investments, set a cap on how much you’re willing to lose for your business. You should also set a cap on how much of your personal money you’re willing to invest in your venture. If you don’t have an exit strategy, you’ll find yourself fast approaching bankruptcy.

If you want to know more about more about financing your franchise or want some advice, feel free to get in touch with us at The Franchise Institute. You can call us on 1300 855 435 or fill in this contact us form and we’ll reply as soon as we can.

Thanks for reading,
The Franchise Institute Team
1300 855 435

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