Top tips for making as much money as possible from your franchise

22/07/2018 17:00 | Start a business

Tips to make money from your franchise

If you're considering investing in a franchise and want to make as much money as possible from your business venture, there are several things you need to consider. Here, we take a look at how you can maximise profits as the head of your very own franchise unit.

How to make money from franchising

1. Think in terms of Return On Investment (ROI)
Its tempting to think of success in terms of how much money youve made, but its not always the best approach. After all, if you invest large amounts and only receive a little extra back, you may not be doing as well as you think. Instead, focus on maximising your ROI. If you start by investing a small amount and manage to increase that amount substantially, it's a lot more accurate means of judging success than pumping fistfuls of cash into a franchise that doesnt offer great ROI. Rather than taking profit as your metric of success, calculate your ROI.

2. Choose a franchise that suits you
The best franchise opportunities are those that suit your managerial style and involve work that youre passionate about. If you sign up to a franchise that operates in an industry about which you know nothing, its going to be a steep learning curve. If you join a franchise in an industry that you have no passion for, youre going to find it hard to motivate yourself. However, it's also vital that you select a franchise with a good chance of generating a healthy ROI.

3. Develop a coherent plan
The franchise system is at its most efficient when your franchisees craft a coherent plan and stick to it. This plan should cover both the short term and long term and should not just be a set of goals and objectives but include actionable steps that will help you achieve those goals.

4. Youre going to have to reinvest
As you grow and expand the franchise, youll find yourself in situations where you can decide to either reinvest your profits or pocket them. While it might be tempting to try and minimise the amount of reinvestment in an attempt to maximise profit, this is often a dangerously short-sighted attitude. To grow your franchise and take as much as you can from it, you'll need to reinvest a large percentage of your initial profits. If you try and minimise reinvestment, your business will soon begin to stagnate, youll fall behind the competition, and your profit margins wont grow as quickly as you would have liked.

5. Follow the business model
It is generally accepted that the most profitable franchise unit is the one that follows the franchisors business model to the word. While there are notable exceptions to this rule for example, when a fledgeling franchise hasn't quite perfected its business plan and needs more time and experience to refine it franchisees shouldn't be diverging from the operations manual if they want to maximise profits.

6. Think about financing
When starting out as a franchisee, it's essential that you carefully consider how you're going to finance your investment. Generally, franchisees will balance their cash investment with loans and other types of borrowing. This is perfectly acceptable, but you do need to be aware of how the service costs on these loans may affect your profit margins in the future. Borrow too heavily, from the wrong source, and you may find that your hard-earned profit is eaten into by debt repayments.

7. Choose the right advisors
No successful franchisee runs the entire businesses on their own. High earners make money because they recognise that its important to surround yourself with other talented individuals. From your legal advisor to your accountant, it's vital that you work with others who know what theyre doing and how to save you money.

8. Talk to other franchisees
As well as building a trustworthy team of aides and advisors, its a good idea to talk to other franchisees about their journey. You're not the only one to attempt to build a successful franchise empire, and there's an enormous amount of useful information out there to help you along your way. Network with existing franchisees, ex-franchisees, franchises that work in your industry, and those that work in others. Dont limit yourself when it comes to learning from others and try to glean a lesson from everyone and anyone that has something insightful to say.

9. Have a clear goal
Making as much money as possible,' is a fairly vague goal. If youre going to satisfy your urge for financial success, its necessary to clearly define what you want from your franchise. Weve already mentioned the importance of ROI, but you may also want to think about what you want the process to look like. Do you want to build an extensive franchise network consisting of multiple units? Do you want to take it international? Do you want to build up a single unit and sell quickly? The devil is in the detail, so think long and hard about what you want from the experience, as well as the financial reward.

10. Put the work in
Finally, its important to remember that all this advice is worth nothing unless you put in the work and dedicate yourself to the franchise. In the beginning, this will mean long hours, stress, and little rest. It will get easier as time goes on. However, no franchise succeeds without the franchisee giving themselves wholly to the project.

Conclusion
To maximise your franchise profits, youll need to think carefully about what you want, how you're going to achieve it, and whether your success means what you think it does. A reasonable profit margin isn't as impressive if you've had to pump vast amounts of money into the franchise in the first place. Take your time to choose the right franchise, follow the franchisor's business model, put in the work, and you'll give yourself the best chance possible of turning a good profit.

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