Start your franchise on the right foot with a complete business plan, detailed financial projections, and a manageable budget. Franchise financing can help you get your franchise off the ground, but you’ll need a solid budget in place to become approved for the financing you need. Here are a few easy ways to develop a compelling budget for a successful franchise location.
What are the initial costs required to get your franchise off the ground? Much of your financing will go to startup costs, so your financial institution will want to know all the necessary costs associated with getting your doors open. Whether you are operating a restaurant, storefront or service provider, calculate the franchise fees, equipment costs, marketing materials, licenses and real estate costs necessary to begin providing services to your customers.
Don’t forget things that are easily forgotten, like utilities for your storefront, your own salary and any software necessary to operate your business or handle your finances. These hidden costs often cause new franchises to go over budget, so it’s important to include them all in your initial financial estimate.
Budgeting carefully for each of these startup costs gives you an idea of the type of franchise financing you need. Whether you’re shopping for multiple sources of financing or looking to receive all the capital you need from a single loan, it’s essential to have a clearly defined financial goal before asking for a loan or investment.
Borrowing for Operating Costs
Even the most successful small businesses take time to get off the ground. Depending on your location and franchise type, you should plan on taking out a loan to supplement your income during the first few months. Don’t let your location go out of business in the first month when it could have been a successful business just a few weeks later.
From utilities and payroll to inventory and income for expanding your business, these costs should all be taken into account. Use financial projections to determine the length of operating expenses that need to be supplemented before your business is financially sustainable on its own. At that point, you’ll have the working capital necessary to operate your franchise successfully.
A clear budget with accurate financial estimates allows you to start your franchise off on the right foot. Use your budget to establish credibility with your franchise financing provider. It’s a great way to leverage a higher loan amount, better rates or a quicker and smoother application process.