Tips on writing a business plan for your franchise
One of the most important steps to go through in the start-up of a franchise is the creation of a business plan. Many entrepreneurs deride banks for being unwilling lenders, yet banks in turn say they are more than willing to finance any sound business idea backed by a solid business plan.
Long before you look at financing a business, you have to do your homework professionally. The discipline of preparing the business plan forces you to anticipate and think through the issues and challenges you’ll face, as well as the opportunities and expectations you have. If you’re not prepared to do that, you can scarcely expect any financier to back you. The creation of your business plan is essential if you need third-party financing. It will be their very first question.
What a franchise business plan should look like
Drafting a business plan is substantially easier in a franchise business. The franchisor probably has a template already prepared.
Typically, a business plan should include:
- Executive summary: a high-level overview of your business plan. It should include a synopsis of the business, the product or service involved, the size and competitive nature of the market for the business, a description of the operational approach used to take the business to market, and the challenges and risks associated with the business start-up.
- Company overview: the legal details, form of company, address.
- Products/services: a complete description of what products and services you aim to sell and its role in the market.
- Market analysis: best estimates based on thorough research of market size, competition, comparative strengths & weaknesses. A franchise will often have this already, but if you’re putting your livelihood at stake, you might want to do your own research.
- Marketing strategy: how you plan to reach customers, promotion, pricing. Again, this is often part of the franchise’s plan, but you would want to have your own ideas as to how you’re going to attract customers over and above what the franchisor will do. This includes detailed marketing and advertising plans for the business.
- The team: if it’s more than just you running the business, include information on key employees and background information on these people. Include resumes stressing prior experience relevant to potential success in the new business.
- Documents: Pro forma financial projections, including income statements, balance sheets and cash flow statements that project the anticipated financial performance of the business when it begins operation. Prepare extensive notes concerning all material assumptions used to prepare the projections.
Tips to write a successful franchise business plan
Entire books have been written on this subject, but here are some tidbits that may help your efforts in writing a business plan:
- Write the executive summary last – even though it goes at the beginning, you will find it easier to summarise your business plan once you’ve put it all together.
- Ask someone else to read it – it’s hard to pick up errors in your own writing (which is why book and magazine publishers have editors), so have someone else go over it with a view to actually finding errors rather than simply flattering you.
- Review it regularly – this is a dynamic document, so it should be flexible and capable of being updated as your business adapts to market conditions. Don’t consider it set in stone.
- Learn the numbers – if you’re seeking funding or a loan, your numbers need to add up. Know your revenues, profit margin, and sales forecasts. You want to sound like a professional that third parties would be confident to back. The first thing you should be aware of is there’s always an upfront franchise fee. Also, franchisors often have specific financial requirements of their franchisees – make sure it’s within your price range.
Remember, your franchise business plan is an essential document not only to launch your franchise business but to grow it.