Mapping Out Franchise Success
This article appeared in Issue 3#5 (July/August 2009) of Business Franchise Australia & New Zealand
It’s a common misconception among new franchisees that business plans are purely a means of securing funding. However, a clear, concise and realistic plan will not only help franchisees win confidence and funds from their banker, it will also act as a roadmap for ongoing business success.
Compiling a strong business plan can take time, but, according to Rod Nuttall, National Executive Manager, Franchising, Commonwealth Bank, it is worth the effort invested. Rod shares some tips on how to pull together a good business plan that will impress a bank and why it is so important for franchisees to get it right from the start.
What is the purpose of a business plan?
Not only is a business plan critical for securing the necessary financing for the business, a well researched and detailed business plan can be a blue-print for its ongoing operation. Even after funding is secured, the business plan should be reviewed, updated and adhered to.
Where to start?
Conducting thorough due diligence (a detailed background check and inspection of all aspects of the business) will provide franchisees with the knowledge and information they need to compile a business plan. During this process, prospective franchisees should seek out people with expertise in franchising – the franchisor, other franchisees, their banker and also a lawyer – to find out as much information as possible about the business and potential challenges.
What should be included?
Formats and content can vary greatly, but there are certain elements that are required as standard to demonstrate franchisees have the necessary knowledge and have performed due diligence before seeking funding from a bank. These include:
- Overview – Give a high level overview of the business plan, including strategies for ongoing business success.
- Financial status – Detail the total cost of your investment. This needs to include all start-up costs, required working capital, profit and loss sheets, balance sheets and realistic cash flow forecasts.
- Business profile – Provide information about the product and service offerings, business objectives and ownership details.
- Market position and business strategies – Demonstrate knowledge of the industry, the system, competitors and anticipated market share.
- Conduct a SWOT analysis – Outline the business’ strengths, weaknesses, opportunities and threats and discuss how potential weaknesses will be overcome.
- Implementation plan – Develop an action plan defining who is responsible for what and key dates for the completion of major objectives.
How detailed does the plan need to be?
The more detailed and credible the plan, the more confident the bank is likely to feel. Don’t forget that banks will undertake their own due diligence as a matter of course, so accurate cash flow projections and a clear demonstration that the plan has been thoroughly produced is a great way of proving a solid understanding of the business’ potential. Be sure to assign care and attention to producing realistic and accurate figures.
What use is a plan once the business is up and running?
If used correctly, a business plan can add real value to the business long after the initial financing has been secured. Developing the plan should not stop once the doors open – it should be continually evolving. It is important to update and regularly review the plan to reflect the changing business environment, growth plans and ensure the franchise is meeting its targets. If the business goals change, the plan should be amended to reflect this.
The Commonwealth Bank has a dedicated team of franchising specialists who can assist prospective franchisees in the business planning process. To speak with a franchising specialist from the Bank, call Rod Nuttall on 0420 946 013.