This article appears in the Mar/Apr 2015 issue of Business Franchise Australia & New Zealand
‘Business Rigour’. It’s a strange sounding phrase but it’s vitally important in business. It’s about the discipline of ensuring your business stays on track.
We’ve found that many businesses lack this discipline and that’s why they get into trouble. So, it’s a good idea to know what the fundamentals are and apply them.
“Many business owners are flat out with day-to-day issues. But they have no structure for actually running the business!”
Many franchisors assume their franchisees know how to manage the business and financial side of their franchise. But we have found this is mostly not the case. As one client said,
“I’m good technically at what I do, but I don’t have any experience running a business.”
While franchises typically provide operational and marketing support, it’s often a bit light on the business side. The reality is most people simply don’t know how to run the management side of business. It’s not their fault. You see, when people work for somebody else, business management happens around them; there are a whole range of people who look after things like finance, HR, planning and health and safety.
But when you run a franchise, it’s up to you to look after all these things, and more..!
There are two fundamental disciplines of business rigour which every business owner should apply. These are monthly business meetings and a regular review of financial performance. Here are some suggestions for these two areas.
The Monthly Business Meeting
The monthly business meeting is the foundation for a well-run business. The key to a good one is to have structure and format.
“One of the fundamentals that helps a business go well is the discipline of a monthly business meeting.”
There are some essential components that can really help give structure to business meetings. These include:
• Routine. It’s important to hold your business meetings on a regular basis. Monthly works best.
• Agenda. Have a standing agenda to provide structure and certainty as to the matters that will be covered.
• Financial review. Review the current performance of the business.
• Operations review. Discuss operational issues that have arisen in the last month.
• Marketing activities. Outline marketing activities coming up in the next month and how to make the most of them.
• Action plan. Identify actions from each agenda item and decide on follow up.
“For a business meeting, an agenda is crucial. So too is making a summary of the action points before a meeting ends. Without those things it’s a chat, not a meeting.”
The essential components of monthly business meetings are always applicable. However, you may need to adapt them for your business. For instance, for a new business there should be more focus on sales and building a strong customer base. For an established business the focus turns to maintaining sales and building profitability.
How to review financial performance
Regular review of financial performance is fundamental to good business management. The first step in reviewing financial performance is to have an up to date Profit & Loss Statement. This should be for the month just finished, and also show the results for the year to date.
Once you have this information there are several important numbers to look at. These include sales, gross profit, operating expenses, and net profit. Compare these against your targets.
Check whether you’re on track. If not, work out what you will do to get back on track. Note these actions on your Action Plan. Also check your bank balance at the end of the month, calculate the amount you owe suppliers and review any amounts outstanding to be collected. These inquiries will prompt actions to address any cash flow issues that might be looming.
Peter Knight and Kate Groom are co-founders of Smart Franchise and The Franchise Accountants Network. They help people learn how to manage the business and financial side of running a franchise.