How to save on franchising expenses this Savings Month
Franchises come with many built-in advantages. But there are also some real extra risks that you wouldn’t encounter with traditional small businesses. These include more start-up debt as upfront franchise fees add substantially to your start-up costs. Franchises usually come with a bigger payroll bill too due to full staffing from the start, whereas many small businesses start out as sole traders and add staff as they grow.
There are also other extra overheads before the revenue grows, so you’ll need to manage cash flow carefully, while making the most of the franchise advantages. That means you’ll need strategies for: dealing with debt; managing employees; and staying on top of cash flow.
Dealing with debt:
Debt is one of the biggest enemies of small business and most franchisees start with a big one before you earn a cent. There are dozens of finance options these days. Your franchisor may even have provided yours, or maybe they guaranteed your loan. If you’re just getting started, and thinking about how to structure your finance, make sure you:
- have the flexibility to refinance if better debt options emerge
- regularly review your debt with an expert to look for lower-cost options
- have the necessary cash flow to service the debt
Make sure you include loan repayments in your budget and ring-fence that money so you won’t be tempted to use it for other things. Set up automatic payments so you don’t miss any by mistake. Missed payments attract late fees – which can add up – and they extend the length of time you pay interest.
Most franchises are based in customer service industries, which means you’ll have staff. Just when you’ve got them trained and motivated , your best employee will take a new job. To limit your costs here, use systems and business software to automate as much of the work as possible:
- payroll software will calculate pay and tax for each employee, automatically fill out tax forms, and pay money directly into their bank accounts
- scheduling apps allow you to create staff rosters and share them straight to everyone’s phones so employees can see when they’re due at work
- time-recording software will clock the exact time worked – making it easy to calculate pay. You can install it on employee phones, so they can clock in using their device.
Staying on top of cash flow:
The first step to good cash flow is a budget. You must know your recurring expenses so that you can plan around them from day to day, so you can make decisions as you go. Your best bet is to use a cash flow dashboard to track all your transactions. The smart ones will even show what income and expenses are coming up, so you can see how cash flow will look in the future. Cash flow dashboards work by combining data from your bank account, POS system, payroll, and invoicing software to tell you how much you have to spend.