Buying a Franchise – Planning Your Financials
If you are looking to make a plunge into the world of entrepreneurship, buying a franchise can be a smart move if you aren’t interested in creating a new business from scratch. In principle, franchisees purchase a tried-and-true model that works on every level of the business, from pricing to branding to marketing.
The chances are that you have rounded up funds to meet build-out costs, and pay an initial franchise fee and other startup costs such as licenses & permits, insurance premiums, professional fees, inventory & supplies, advertising fees, office equipment, signage, and lease. On top of that, you’ll need additional funds to keep your franchise afloat for at least three months. But, are you forgetting something?
That’s right – you also need to figure out how much additional cash you’ll need to cover your living expenses while you get your franchise off the ground. This is one vital aspect most new franchisees fail to consider.
You see, once you become a franchise owner, there is a considerable gap in time before two critical things happen: (1) your new franchise becomes operational, and (2) the bottom-line turns from red to black. In fact, you might end up making net losses in the first few months. No matter how you look at it, you need to wisely plan and budget your living expenses to determine how much you’ll need on top of business expenses until your franchise breaks even.
With that said, you need to ask yourself: is your bank account ready for these living expenses? Do you have enough savings to tide you over until your new business turns a profit? Here are some tips to help you weather the realities of living expenses:
Get Outside Income
If you have a full-time job, consider holding onto it for a little while. This way, you can make do while you get your new franchise off the ground.
Consider Working in Your Franchise
It’s not uncommon for franchisees to work in their new businesses. It is a great way to oversee things as well as bring down operating costs. This way, you can pay yourself a small wage to cover a few personal expenses.
When all’s said and done, it is paramount to include what you need for your living expenses in your franchise budget. If the budget is tight enough, don’t be afraid to source outside income.