Something To Call Your Own
Owning your own business is the dream for many people, but the reality of the situation can mean you end up confused and alone, responsible for everything from dealing with staff personnel matters to issuing and chasing invoices.
You really do need to be a ‘jack-of-all-trades’ and that isn’t easy if you don’t have the appropriate experience, training and / or support. That’s why more and more people are turning to franchising; if you choose a good franchise, you will get plenty of training, support and achieve your goal of being the boss of your very own business.
You will be given all the tools you need to run a successful business and, providing you follow the model and put your energy into the process, you are likely to be successful. That is as long as you don’t run out of cash! In order to ensure this, you need to be aware of what is happening in your business – how much money you have and how much you need. It is your job to find a way to ‘balance the books’.
To start with, you need to be aware of the fundamental points. You are about to set off on a business journey; you need to be clear in your mind what your destination is and then plan your route accordingly.
So what are your business objectives and how are you going to achieve them? You need to set out your business strategy. The next step is to create a financial plan around this strategy. Your financial plan should have three main parts to it:
- The projected profit and loss account, as the name suggests, tells you whether you are likely to make a profit or a loss and, subsequently, whether it’s worthwhile doing what you want to do the way you are planning to do it!
- The cashflow forecast tells you how much cash you will need each month in order to stay on course and whether you can actually afford what you are planning to do.
- The projected balance sheet tells you in advance what your business will look like in the future in terms of its assets and liabilities, ie what your business owes and what your business owns.
Having properly planned and started your business journey, you then need to make sure you are staying on track. You cannot really manage your business performance properly unless you regularly measure how well you are doing. This is the next important point – you need to monitor your business performance as you go and take the necessary corrective actions to ensure profitability and that you don’t run out of cash. Using your bookkeeping system to create monthly (or at least quarterly) management accounts will help you to do this.
You can then look at trends to spot problems before they become too serious (eg negotiate longer credit terms or increase an overdraft facility). Trend analysis will also help you to change your plans or route along the way; you will soon learn that your business will be influenced by many external factors beyond your control.
Your plan, therefore, should be flexible and not cast in stone. From a positive perspective, be prepared to take advantage of any unexpected opportunities that crop up – such as a competitor closing down or a sudden upturn in the economy – but make sure you have worked through the cash consequences of your actions, as there can be a big difference between potential profit and actual cash.
So, in conclusion, if you want your business to be successful, you should start with the right mind-set and remember the following:
- Invest in some appropriate training (such as the ‘Understanding Business Finance and Accounts Course’ run by Franchise Finance) to ensure you have the skills you need
- Decide on your business objectives and plan your strategy
- Build your business and financial plan around this
- Make sure the business you do is profitable
- Measure and monitor your progress against your plan
- Always keep in mind: ‘turnover is vanity, profit is sanity and cash is reality’
Chris Roberts is a director of Franchise Finance, which runs various financial training courses and workshops and also prepares business plans and business health checks for franchisees and franchisors. See www.franchisefinance.co.uk for further details.
