Choosing a Franchise

Many small business owners have been helped to a sound start by investing in a franchise. You may wish to consider doing the same. Franchising can minimize your risk. It will enable you to start your business under a name and trade-mark which already have public acceptance. You will receive training and management assistance from people experienced in your line of business. Sometimes, you can also obtain financial assistance that will permit you to start with less cash than you would otherwise need.

On the other side of the coin are the sacrifices required when entering a franchised operation. You will lose a certain amount of control of your business. You will no longer truly be your own boss. And, of course, you must either pay a fee or share profits with the franchisor.

What Franchising Is

Essentially, franchising is a plan of distribution under which an individually-owned business is operated as part of a large chain. Services or products are standardized. It is a system used by a company (the franchisor) which gives the individual dealer (you, the franchisee) the right to market the franchisor's product or service by using the franchisor's trade name, trade marks, reputation, and way of doing business. The franchise agreement (or contract) usually also gives the franchisee the exclusive right to sell or otherwise represent the franchisor in a specified area. In return, the franchisee agrees to pay either a sum of money - a franchise fee, a percentage of gross sales or both, and frequently to buy equipment or supplies from the franchisor - or some combination of these considerations.

A reputable franchise may be the best successful business insurance inexperienced entrepreneurs can acquire.

Advantages of Franchising

Among the advantages of franchising to you as a franchisee are that you can start a business with:

1. Limited experience. You can use the franchisor's experience which you might otherwise have to obtain the hard way - through trial and error.

2. A relatively small amount of capital and a strengthened financial and credit standing. Some franchisors give financial assistance so you can start with less than the usual amount of cash. For example the franchisor may accept a down payment with your note for the balance of the needed initial capital. Or, the franchisor may allow you to delay your payments for royalties, purchases, or other fees to help you over the initial rough spots. With a well known, successful franchisor behind you, your standing with local financial institutions and credit associations is strengthened.

3. A well developed consumer image and goodwill with proven products and services. Because the goods and services of the franchisor are well-known, your business has "instant" pulling power. To develop equivalent pulling power on your own might take years of promotion and considerable investment.

4. Competently designed facilities, layout, displays and fixtures. The franchising company has effectively designed facilities, layout, displays and fixtures prepared by experts and proven by nationwide usage.

5. Chain buying power. You should receive savings through the franchisor's quantity purchasing of products, equipment, supplies, advertising materials and other business needs.

6. Business training and continued management assistance from experienced company personnel. You can expect advance training in the mechanics of your particular business. Some franchisors will guide you in day-to-day operations until you are proficient. Moreover, management consulting service is provided by many franchisors on a continuing basis. This usually includes help with record keeping and other essential activities.

7. National or regional promotion and publicity. National and/or regional promotions of the franchisor will help your business. You will receive help with local advertising. The franchisor's research and development program will assist you in keeping up with competition and changing times. Best of all, the immediate identification many franchise operations enjoy will bring pre-sold customers to your door.

All of these factors can help increase your income and lower your chances of failure.

Say that you're the type who is beginning new small business. You Have given attention to the general opportunities for success,
and have chosen the new company you wish to establish.

What practical problems will you face in establishing your business? How Much cash will you require for beginning new small
business? Where can you obtain it? What kind of business organization will you own? Where should you find the company? (start
company tips to follow)

The first question you need to answer is: Just how much money will I need? But this question can not be answered until other
questions are answered and several choices are made.

To Determine how much money is needed to start a company, enter all Of your prospective income and all your planned expenses on a
job sheet or kind.

Though you may feel that This Type of preparation is more than You need to start a simple small business it is beneficial to get
started with this particular approach to management which puts down figures in black and white. You'll discover exactly the same
approach valuable in an established small business.

First, estimate your sales quantity. This will depend on the total Amount of business in the area, the number and ability of
competitors now sharing that business, and your own capability to compete for the customer's dollar. Obtain assistance in making
your sales quote from wholesalers, trade associations, your banker, along with other business-people. Several business and
statistical publications could be useful in making sales volume quotes.

In reaching your final estimate of sales do not be over-enthusiastic. A new company generally develops slowly at the start. Should
you overestimate sales you're most likely to invest too much in gear and first stock, and commit to heavier operating expenses
than your actual sales volume will warrant. Since you are just starting up you may have no sales for the first few months. At any
rate you may expect your first few weeks to be quite low.

You must also determine what percentage of your sales will be money And what proportion will be sold on credit. If you estimate
that a particular part of the sales will be on credit then you have to figure whenever you are going to get the money for all
these sales. One month? Two months? More? Never?

Next, in our guide to beginning new small business, estimate how Much money will be paid out. Bear in mind in starting a business
you may be purchasing equipment, paying fees and licenses, which makes deposits on lease, utilities and so on, several months
until you open the doorway. A few of those expenses are easy to estimate. If you have decided to lease a building (more about that
later) then you know what your deposits will be and how much you will have to pay out monthly. You are probably able to get the
cost of fees, licenses and utility deposits with a few telephone calls.

Other expense figures might take a little more work for you. 1 way Is to acquire average operating ratios for the kind of company
in which you're interested. One of the resources for such ratios are Dun & Bradstreet, Inc., trade associations, publishers of
trade magazines, technical accounting firms, industrial companies, and colleges and universities. The normal ratios for your type
of business multiplied by your estimated sales volume will serve as bench marks for estimating the various items of expenditure.
But do not rely exclusively on this way of estimating each cost item. Verify and modify these estimates through investigation and
quotes in the particular market area in which you intend to operate.

Do not forget to pay yourself too. You Might Need cash to live on if You need to quit your job. If your partner is working and can
support the family for a while you may not have to withdraw cash from the company. The longer you can go without taking money
from, the faster you will develop a solid cash position. Now that you have estimated your money receipts and expenses, write down
the amount of money you will put into the business to begin. This goes online 1 at the example below. Then add lines 2 and 1 for
your first month to get line 3. Then add up all of the expenses to get 5. Subtract line 5 from line 3 to find line 6. This cash in
the end of month then goes to line 1 to the beginning of the next month, etc.

If you continue this for the entire year, very soon you'll find You have negative numbers or even a negative cash flow. About this
time you will also understand that you ought to be operating on this kind with a pencil which has a good eraser.

In this overly-simplified illustration, you notice that by the end of June you are minus $200 in cash. Two solutions can be
attempted - reduce your buys in June by $200 or start with $200 more. You may not be able to reduce costs (they will likely go up
as your business starts). So you'll need to put in $200 more to begin with. If all you have is 4000 then the additional $200 you
will need is funding you need to get from somewhere else.

Do not be misled by this very simple illustration. Many small businesses Begin with the $200, and try to acquire the $4000 from
somewhere else. Since a Major cause of failure in the early stages of a company is Under-capitalization, be very careful in your
preparation at this stage. You can Almost always aim on some unexpected expenses and a few delays in anticipated income.

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