New Franchises and the Elusive Financial Stability

Even with all the advantages joining an established franchise brings to a new business owner, the first few years can still be tumultuous in a financial sense. You're looking to get your business off of the ground and keep it there, and it's not easy on the financial end of things in this period. However, you can do a few things to help ensure your finances are solid as you work to grow your business.

Have a solid financial foundation

Starting off on good financial footing will set the tone for the years to follow. Borrow as little as you can--one rule of thumb is to invest at least 30 percent of the total franchise costs directly, without a lender involved--and ensure your personal finances are in order. Have at least three months' worth of your salary saved, and have an emergency plan in place.


Bring in a partner

A franchise has the initial investment and other fees, and you'll be investing into the business on an ongoing basis. You can offset this financial burden by finding a like-minded business partner, if possible. Your partner will alleviate some of the financial strain on you and help you with the business. In a partnership, one person usually focuses on daily operations while the other works on boosting sales and cash flow.


Begin improving efficiency

Make sure you are being as efficient as possible from day one. This includes hiring the right employees--if you have them from the beginning--and making sure you are getting the most out of them. Waste in staffing and your internal processes can add up quickly and become an unnecessary drain on your business.


Take it slow

Becoming a business owner is exciting, but you need to avoid taking on too much too fast as this can lead to financial over-extension. Play the long game here; look for ways to set your franchise up for financial success over the long run, which may include bringing in partners or making investments aimed at inspiring customer loyalty.

The first years of most franchises have ebbs and flows, but you can protect yourself against any downturns by starting off on the right foot and thinking about the long term. When you are able to head off early financial headwinds, you'll be able to take advantage of the full benefits your franchise has to offer.