In my role as a franchise advisor, I’ve been able to work with a lot of really smart people over the years. I’m talking MBA’s, PhD’s-even a rocket scientist from NASA. I would guess that some of them were qualified to be members of MENSA.*
But, even smart people make mistakes, and I’ve seen some real whoppers take place at various stages of the franchise buying cycle. Some of them include:
· Not calling 10-15 current and former franchisees to ask about their experiences as owners
· Not visiting current franchisees in-person as part of the franchise research process
· Not having enough money set aside for the start-up phase
· Not using a lawyer who specializes in franchising
There’s one other thing that’s always baffled me about potential franchise owners, and it’s this:
How do some franchise buyers (after doing a lot of right things during the investigative process), manage to just about ruin their chances of ever becoming their own bosses towards the end of it?
I’m going to use a specific example that I’ve seen take place on more than one occasion, and my hope is by sharing it here, you won’t do the same.
The Business Plan
Some potential franchise owners don’t put enough time and energy into writing a powerful and convincing business plan for their new business.
Admittedly, it gets me a little aggravated when I learn that one of my clients isn’t taking their business plan very seriously. I won’t admit to losing sleep over it, but I know in my heart that my client’s chances of securing a small business loan diminish greatly if the business plan they submit to their bank is weak.
One person that may lose sleep over something like this is Tim Berry. He lives and breathes business plans. *
Here’s what Tim says about business plans:
“When a bank asks for a business plan, the bank wants a document that’s a convenient summary of the key points of the business. That includes highlights like what you sell, into what markets, through what channels, with what sales and marketing strategies. Also who’s in charge of this business, and what experience the people in the team have. “
But, banks want a lot more, especially today. So, you just have to give them more.
Tim goes on:
“Most of all, with a business plan that’s being submitted to a bank, they are looking for stability, reliability, and responsibility. They want to see a good credit history, both business and personal, and assets to cover loans and reduce risks.”
You’ll also need to tell your story by adding a human dimension to your business plan.
If you’ve never written a business plan, don’t sweat it; there’s plenty of help available:
1. Business Plan Software
You can purchase software that provides step by step instructions and includes templates with blank fields that just need your numbers added to them.
2. Small Business Development Centers
Administered by The US Small Business Association, SBDC’s provide no-cost services for future and up and running small businesses. Programs vary by location, but here’s an example of one that’s focused on helping entrepreneurs create solid business plans.*
3. SBA.Gov Online Tutorials
Watch a collection of useful how-to videos on business planning, including an introduction to the planning process, strategies, sales forecasting, and more. You can view them at your leisure, 24/7.
You don’t have to be a rocket scientist to know that in today’s lending environment, you shouldn’t even think of going into a bank to apply for a small business loan without a strong, formal business plan in your hands. The lender is going to want to see your projections and read your story. Use one or all of the resources I shared with you to make your plan shine.
It’s a smart thing to do.
Have you ever written a business plan? Do you feel that’s it’s crucial to have one?
Written by: Joel Libava