The Pillars for a Sustainable Small Business: Technical and Competence


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Sustainable Business

Think about the last time you hired a plumber or an auto mechanic, or a lawyer for that matter. Without asking, you probably knew that the person you hired could perform the job in a competent manner consistent with the standards of his or her profession; they made a profit from doing so; and the bright person answering the phone suggested a good team backing him/her. That encompasses the three pillars of a sustainable franchise business.

Each of these works both ways in franchising: You as a franchisee need to have technical competence; to be business savvy; and to surround yourself with good people. You have a right to expect the same from your franchisor – or what are you paying your royalty fees for?

Technical competence

All franchisees bring a skills set to their work. This skills set typically consists of a combination of both technical and business skills that the people can use to do their job and contribute to the overall success of the company. One area of struggle for some company owners and hiring managers is determining the appropriate mix of these skills, and determining which areas of skill development are worthy of company resources.

The attraction of franchising is that it can be purchased by someone with no technical expertise: you don’t need to be an electrician to own an electrical franchise – but you better quickly acquire some skills and hire others directly possessing those skills. Technical competence is a given in any specialist field. Franchising is again unique in that the franchisee can either be hands-on (in which case technical skill is definitely required, unless the business can afford to hire it in) or a multi-unit investor (in which case they need to know enough to hire someone, though often a franchisor can help out here). Either way, the success of the franchise will depend on the level of technical skill.

Commercial competence

This is the area that most franchisees expect the franchisor to step in. It does to a large extent with systems and marketing – though the franchisee will likely not succeed without knowing the commercial side of his business, or how to make a profit from his technical competence.

Running a franchise requires financial knowledge, including how to figure out profit and loss, labour and materials costs, and do accounting for the business. Financial acumen often needs to be demonstrated before you can purchase a franchise. Successful franchisees have a propensity for handling finances both personally and business-wise.

Although a franchisor helps franchisees to be successful by providing the systems required to get a business up and running, there is no substitute for management and financial skills. If you don’t understand financial documents and the human resources, marketing and other disciplines required for business, acquiring them should be your priority.

Your knowledge about business skills should be constantly updated. There are business schools and specialist consultancies that offer courses on financial management for non-financial managers. There is also a range of professionals and small business owner mentors who can be consulted with and will share their awareness about essential business skills.

Being smart about business requires knowledge about several fields. The most essential, especially in these tough economic times should include:

  • Understanding and implementing a franchisor’s system: Running your business ‘by the book’ means that you are following tried-and-tested systems that have been developed by specialists for your operation;
  • Working to your business plan: It’s a great tool for getting you back on track if you have taken a wrong turn;
  • Watching your cash flow: It is essential to know what your assets are, and how they compare to your liabilities. You should check cash flow every day and ensure that there is also money available for the unexpected, so that you have cash available if it is suddenly needed. Pay attention to the following:
    • Watching and limiting your capex (capital expenditure)
    • You should examine the costs of an asset or an expansion against its expected benefits. Evaluate financing options before taking the plunge
    • Invoicing quickly and regularly
    • Your debtors book: If you offer customers credit, you must have a process that accurately assesses their ability to pay as well as their payment history with your business
    • Your creditors: It pays to know who you owe money to and who you can negotiate better terms with. When times are tough, suppliers will often offer extended payment terms to good customers
    • Your stock: Knowing what you have and just what you need is good business practice

Surround yourself with good people

One thing about franchising that will never change is the need to surround yourself with great people. As a business grows, so does the importance of having trusted people at different levels and identifying leaders early. One ought to start looking deeper down the line for future leaders, and spending more time and effort today on the development of entry-level managers than ever before.