Potential franchisees: know your finances to properly fund a franchise
There's some homework to be done before embarking on a business venture.
And for franchise accounting specialist Peter Knight there's a lot of monetary groundwork that needs to be covered, such as knowing the costs involved and the flow of your finances. He shared his insights with us for those looking at funding a franchise.
"Before signing on the dotted line to buy a franchise, it’s very important to flesh out your finances so you can give yourself a thorough understanding of the flow of your finances. To prepare to see your accountant it’s key to have as much information available as you can."
"Initially, the startup information is vital to know: what the franchise fees will be, is there a rent fee for the site, and if so what are the costs of the rent, and if there are outgoings or additional costs, what are the costs you need to pay. It’s key that these details aren’t cloudy and are entirely understood."
"Once you have gone through the start up information with your accountant you need to have a feel for on going costs such as what will the costs be once you get going, how much it’s going to cost you to keep the business going each month, and – ultra importantly – how much do you need to live on for your own personal expenses."
"This is an important one; and it’s one that most people get caught out on. It is absolutely crucial to understand your expenses at home like tuition fees, food expenses, personal expenses, leisurely expenses and rent or mortgage repayments. You must know exactly how much money comes in and goes out."
"A lot of the time people don’t really factor this into their considerations. It’s really important because if there’s not enough money to pay the household bills, it all stops there."
Knight said that on a final note when consulting with your accountant or the franchisor remember this: there’s no such thing as a stupid question.