People say that starting from scratch is never easy. This is an especially vocal concern when you are starting out on your own as a new business owner.
Franchise ownership will help you build on an existing business model as well as interact with a known and trusted brand. Rather than starting from scratch, which would make you responsible for setting up a reputation and a business, a franchise would deliver these crucial business aspects to your fingertips on day one.
Starting a franchise business can be a daunting endeavor which probably won’t result in instant success. Your first year operating a franchise can be the most challenging as this is the time when you would get acclimatized with the business model and functions, build and retain a customer base as well as recruit employees.
However, in the first year, you will more likely than not stay in business. Your long term success, in fact, will depend on how well you plan out the goals and your ability to execute them in a timely manner.
As stated before, you should try to achieve a set of franchising goals in this crucial period that could set you up for even more success in the coming years. Usually, it is best to have goals specific to your business and personal needs, with a good mix of short-term and long-term checkpoints to help you stay on track. Most importantly, the goals need to be realistically achievable. Of course, you can try pushing the boundaries but setting an unattainable goal will just set you up for failure and add undue pressure in your already hectic first year in business.
The myth that is quoted most often is that up to 90 percent of new businesses fail to survive their first year in operation. However, In a 2017 study Best4Business reported that (per the Small Business Administration Office of Advocacy) almost 80 percent of new businesses successfully completed their first year of operation. According to Best4Business’s infographic, out of the 406,000 new businesses that came into existence in the US in 2017, the year one survival rate was the highest in 10 years! Small businesses also help the economy grow by creating 62 percent of new jobs in 2017, per the report.
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In this article, I would like to discuss three broad based franchising goals that account for financials, resource fufillment and personnel allocation as you navigate through your new franchise business.
3 Essential Goals You Need To Hit In Year #1
Here are the 3 goals you need to hit in your 1st year in business.
Become Cash Flow Neutral (Monthly) by Year End
Cash flow is different from profits. Even if you have a profit, your expenses and investments could cause your cash flow to be negative, leading you to borrow money to continue to be in business. A neutral cash flow would indicate that the profits coming in are just enough to cover your expenses. In a franchise setting, cash flow is best measured on a monthly basis as most small business bills are due monthly.
The advantage of being cash flow neutral is that your business has the ability to sustain itself in the long run. Once you achieve neutrality, you can target positivity in the subsequent years to start earning actual income on your business. The best way to achieve cash flow neutrality is to increase the profits. This can be done by driving more customers through advertising or by decreasing the overhead costs and overhead expenditures like . accounting, Infrastructure and travel expenditures. Cash flow can also be controlled by reducing business expenses like electricity and water by being more conservative in usage.
Eliminate Inventory Overflow and Wastage
Inventory is important for any franchise business, regardless of the industry. From consumer products to dining to retail, it is necessary to have a backlog of items that can adequately satisfy consumer demand without causing a hitch in their usage cycles. However, many small business owners and franchise business owners often overstock their storage in their initial months of operation.
The main reason is that owners are generally optimistic about the number of consumers that are going to interact with their new business. The reason behind this is that a franchise store already has the backing of a well established brand, so it is easy to assume that a higher than normal number of customers will be driven through the doors thanks to the brand identity. However, this is not the case, resulting in inventory overflow.
The best way to achieve this goal is to observe and adapt. This means that as you become more aware of the number of clients, you can anticipate a growth rate and therefore calculate the exact amount of inventory that is going to be required. With some calibration, it is quite possible to achieve the goal of zero inventory overflow within a year.
Retain a Stellar Business Reputation
A good business reputation is perhaps the most crucial goal in terms of business outlook. Your business may have had record breaking profits in its first year. However, if you chased profits at the expense of reputation, your subsequent annual incomes would fall in a steep downward trend. This is because customer retention is the cornerstone of operating a franchise business successfully over multiple years. Hence the importance of this goal.
The goal can be quantified by two important factors. First, you can track your business’s rating on websites such as Google and Yelp that are often deciding factors for new customers in favor of your store. The other indicator is the customer retention rate. This is the percent of customers who would visit the store a second, third, fourth time and so on. This metric indicates whether you are able to establish relationships with your clients to continue receiving their business.
This goal is something that is not specific to your first business year but in fact should be targeted on a constant, almost eternal basis. An active customer support system is a good tool to help share a positive business reputation. While this could be provided by the franchise brand, it is always good to have a personal touch by employing an in-house service system. Another helpful tactic is to invest in employee-customer relation training. If your staff approaches each customer with a friendly and helpful demeanor, then the client is satisfied. In case a client is dissatisfied with any aspect of the product or service, “the customer is always right” attitude will help resolve the issue and heep the client happy too. The short-term loss will be easily written off by retaining the client’s business and relationship.
Finally, we value your input! What other goals did you use to have a successful first year? Please comment below and share your own thoughts and experiences with us.
(The author of this guest post, Marsha Kelly, sold her first business for more than a million dollars. She has shared hard-won experiences as a successful serial entrepreneur on her Best4Businesses blog, where she also regularly posts business tips, ideas and suggestions, as well as product reviews, for business readers. As a serial entrepreneur who has done “time” in corporate America, Marsha has learned what products and services really work well in business today. You can learn from her experiences to build your business.)