Lenders always worry about the ability of a new franchise to provide enough income for the owner to live on and service any borrowings they have, particularly in the early years. Luckily, many franchisees have a supportive partner behind them who often continues to earn a regular wage.
The additional household income reduces the franchisee’s dependence on the profits of the business. It is therefore important that a franchisee includes a summary of all their domestic income and expenditure in the business plan. This demonstrates just how much money needs to be taken out of the business for them to survive.
Understand the figures
Franchisees often present figures given to them by their franchisor without really understanding what they mean. As a franchisee it is important to take ownership of the figures – particularly the cashflow forecast.If a franchisee cannot explain them in a convincing fashion, they are likely to be turned down for the finance they need to get the business off the ground.
It’s not just a cashflow forecast… read on.