(Sponsored Post written by Josh, from Profitwise Accounting)
When you open up your first franchise, you’re essentially buying into an already successful business model. This can be highly beneficial because it cuts down on the time and money you’d otherwise have to spend to get your business up and running.
However, while there is a necessary standard to reach, there are also many financial responsibilities to meet.
Opening up your first franchise means becoming a business owner and having the ability to run a business under a pre-existing brand name. Understanding the financial implications of doing so is important. It includes the costs associated with starting and running the franchise and what you can expect to earn in terms of profits. Franchises can be great, but it’s essential to understand the financials before taking the plunge.
So to understand and, most importantly, do everything correctly, you should hear an expert’s advice on this topic. Here are a few tips and tricks accountants often share with clients interested when they open a franchise.
Make Sure You Understand All The Costs
Before you take the big step and open up your first franchise, you must do your homework. First and foremost, consider what your industry of expertise is. As you want to be a new business owner, picking a franchise from an industry you already know about is much wiser than starting from ground zero. That way, you will learn how to start, and most importantly, you can check other employees’ work and know what to look for in future employees, partners, and franchise businesses.
Understanding all costs means looking closely at the company you’re considering franchising with. Then, research online and see what other people are saying about them.
Have they been in the news recently? What do their financial reports look like? It’s also important to review the franchise agreement carefully before signing anything. Then, once you understand the details, including royalty fees, marketing requirements, and restrictions, you can start thinking about running your franchise business.
It’s important to have a clear picture of all these costs before you make any decisions, because they can quickly eat into your profits if you’re not careful.
Once you’ve researched and spoken with a few accountants, you should know what it’ll cost to open and operate your franchise. From there, you can decide whether it’s worth moving forward or if you’d be better off pursuing another business venture altogether.
Once you’ve done your due diligence, you’ll be better positioned to decide whether franchising is right for you.
Have A Realistic Budget And Be Mindful Of Your Expenses
“No business owner likes creating a budget, but all of them like the results of having one,” says Dave Heistein, the co-founder and managing partner at Profitwise Accounting. “A small business budget is a guideline for deploying resources to attain sales and profit objectives. In order to maximize profit, sales are generated from the optimal use of money for staff, equipment, marketing, and other expenditures.”
So, having a realistic idea of how much money you’ll need to spend to get your business up and running is essential. It’s also important to remember that franchising is costly – there are often fees associated with joining a franchising network.
Some of the basic expenses include the following:
- The cost of leasing or buying a property for your franchise business
- The cost of fitting out and equipping the property
- The cost of marketing and advertising your business
- The cost of training your staff
- The cost of providing initial stock or products for sale
- Ongoing costs such as rent, rates, insurance, and utilities
As you can see, a lot goes on in the books, so make sure you have enough money to cover these costs before you consider owning your own business.
You ARE using Quickbooks, right?
If you need more money to cover the initial investment costs of opening a franchise, don’t fret- there are plenty of options available. You can contact family and friends for loans or investments, apply for small business loans from banks or credit unions, or even look into SBA-backed financing programs. In addition, some franchisors offer in-house financing assistance to qualified candidates.
If you have trouble with too much work, you can always seek the expert help of a certified public accountant who knows franchise finances to the core.
Accounting Tips And Tricks: Remember Taxes!
There are special tax considerations for businesses like franchises, so you’ll want to ensure you’re fully prepared before moving forward. So, when opening a franchise, the best way to reduce your tax liability is to be strategic about timing your income and expenses.
For example, you may delay receiving some of your income until after the end of the year so that it can be taxed at a lower rate. Likewise, you should front-load some of your expenses so they can be deducted in the current year.
It’s also important to remember that not all expenses are created equal. Some expenses, such as advertising and marketing costs, are 100% deductible in the year incurred. Other expenses, such as rent or payroll costs, are only partially deductible and must be allocated over several years.
Choosing an accountant familiar with the franchising industry can significantly help this process. They will be able to advise you on the best way to structure your business for maximum tax efficiency. In addition, experienced accounting companies can help you save a lot of money down the road and use future deductions to have more peace of mind while running your successful franchise business.
Open Your Franchise Business!
Finally, once you’ve secured funding and finalized all the paperwork required to open your franchise, it’s time to start prepping for opening day! Order supplies and promotional materials, hire staff and begin training them on your procedures and systems. Then open up shop and enjoy being your own boss! It’s hard work, but it’s highly rewarding.
Be prepared for long hours and some bumps in the road, but remember to savor the moments when everything comes together perfectly.
Congratulations on taking the first step toward business ownership! Best of luck.
(Note: Sponsored Posts are paid posts. The companies or individuals featured are either paying me to write them for publication on The Franchise King® website/blog, or are paying me for the opportunity to write their own content and have it published here. And if what they offer is a good fit for you, I encourage you to support them, although that’s not to be taken as an endorsement.)