Where’s the money?


Where’s the money? Know the financial differences between mobile and fixed site franchises

Mobile franchises have become very popular over the last few years. Some people wonder whether you can make decent money from them, and certainly you can… if you choose a good franchise and work smart.

Years ago, mobile franchises were mainly about lawn mowing, home services and dog washing. However, you can now go mobile with bookkeeping, accounting, renovations, drug testing, photography, HR consulting, building services, aged care and a host of others. And if you do things well you can make a decent income.

There are good reasons for the boom in mobile franchise offerings. One is the cost of rent, which means a franchisee in a retail location may need to cover annual rent of $100,000 or more. Mobile franchises don’t have this burden, neither do they have to pay to fit out the store or  ffice. And they don’t have staff to pay – at least at the start!

All of which means that mobile franchises are typically less costly to start and to run. However, this doesn’t mean that you’ll instantly achieve a $100,000 income, or that you’ll be able to spend every cent you make. It will take time to build up your customer base, and there are costs to pay. But if you are self-motivated and money smart a good franchise can be a great option.

Here are some of the differences between mobile and fixed site franchises and some suggestions for how to respond to them.

Lower cost to get started

A mobile franchise usually won’t cost as much to set up as one in a fixed location, but it might cost more than you think. Work out the full costs before you commit.

Start up costs for mobile franchises tend to be much lower than those for fixed location businesses. With no fitout costs and (usually) minimal equipment, it’s likely that the main costs will be the initial franchise and training fees. For many mobile franchises this will probably come to less than $50,000. However, these headline numbers won’t be your only costs. So, before you borrow the money or invest your redundancy pay, take some time to properly understand the costs to get into business.

For instance, to get your mobile franchise started you’ll need to buy or lease a vehicle, and purchase any equipment needed for your business. You’ll also need advice from a lawyer and franchise accountant and the costs to set up your business trading structure.

Lower running costs

Mobile franchises tend to have low expenses whereas the owner of a fixed location business has significant monthly outgoings. But even in a mobile franchise you have expenses to pay.

What will it cost you to run your mobile franchise? Whilst there will be costs, you won’t have the weekly and monthly expenses of rent and staff wages. Still, it’s important to have a good think about what it will cost to keep the business going.

And it is a business, so you’ll really should run it like one. This means cleaning and maintaining your vehicle, wearing a uniform or appropriate work wear, equipping yourself with necessary technology to get the work done, paying for advertising and marketing, and proper bookkeeping and accounting help. There’s also the royalty fee!

It’s a very good idea to work out these expenses before you start off in business. That way you know what sales you’ll need to achieve in order to pay the bills.

Time is money

In a mobile business, your business income will largely be determined by the hours you are able to charge people for. Be realistic about the hours you can work and the amount you can charge.

In most mobile businesses you are selling your time. Time really is money! Your income will be dependent on two key factors: how many hours you work and what you are able to charge for that time.

Contrast this to a location based business where – in most cases – what you sell is a physical thing or a service delivered by other people. Your wages and profit are not directly related to the hours you work. This business model means a mobile franchisee must think carefully about how they use their time. Questions such as “How many hours can I actually charge people for?” and “What hourly rate is appropriate?” become really important.

Let’s say you think you can charge $80 an hour as a bookkeeper or handyman. If you bill 38 hours a week, 52 weeks a year, that’s more than $150,000 in business income. Sounds great!

But how many hours will you actually invoice in a month? What about the time you’ll need to spend on marketing and sales, and business management? What if you are sick?

This should lead you to consider questions of how much money you need to make, what is realistic, and how you’ll need to operate the business to achieve these goals. These are important considerations when you’re mobile and working alone… because your time is money!

It takes time to build up your sales

When you start your mobile franchise you probably won’t have any customers. In contrast, most fixed location franchises have some income from customers from day one. Be realistic about what you can make from your mobile franchise at the start.

When you buy a mobile franchise you’ll need to accept that the first few weeks or months may not see much revenue. This stands in contrast with retail business where there is almost always good revenue from the start – but remember the owner has a lot more debt, wage costs and overheads to pay.

In almost every mobile business we know, it takes time to build up a customer base and start generating sales income. In fact, in some franchises it can take six months or more to start to see revenue coming in.

This is one reason we think mobile franchisees need to enjoy the thrill of the sales chase! Which then raises two really good questions to ask the franchisor: “What will you do to help me get customers?” and “How long has it taken existing franchisees to reach $X in monthly sales?” ($X is your initial monthly sales goal).

This leads to this last point…

Self-motivation is vital

Without self-motivation, you’ll really struggle to make your mobile franchise work. If you don’t put in the effort, there won’t be many customers.

Almost everyone in franchising will attest to the importance of the owner working in the business. But a retail business can (and should) tick over if you’re not there all the time. However, in a mobile franchise you are the product. If you’re not working, there’s no income.

So, in a mobile franchise you need a high level of self-motivation. This is the internal drive that comes from wanting to build a business and the desire and commitment to put food on the table.

It’s you who has to talk yourself into pulling back the covers and getting on with it each day. And if you’re not that kind of person, it’s likely you’ll find your franchise business quite a challenge.

Even if you are highly motivated, we think it’s important to have clear goals to work towards. This means financial targets and plans for your sales and marketing activity. Add to that a way of checking your progress against your plans and you’ll be well on your way to creating a solid business.

Kate Groom is a co-founder of The Franchise Accountants Network and Smart Franchise. Kate spends her time understanding the accounting and bookkeeping needs of franchisees and developing practical, affordable ways to help them.

Contact Kate via: