How To Create a Budget for Your Franchise
Opening a store that’s part of a franchise can be lucrative. Your enterprise has the advantage of brand recognition, which makes marketing easier and gives you access to an established customer base. You’ll also have the support of a larger corporation in terms of policy. However, there’s one area where you’ll be on your own: the budget.
If you’re a first-time business owner, it can be difficult to figure out just how much it’ll cost to run your business. However, it’s essential that you calculate costs as accurately as possible. This allows you to obtain the correct financing to meet your needs and ultimately helps your enterprise be successful.
So what should you consider when creating your first budget? Here are three things you must do to make your budget effective.
1. Pay Your Own Salary
You may be an employer, but you’re also your company’s employee. That means you have the right to a salary. When you’re first starting out, it may be tempting to skip giving yourself a paycheck, but this simply isn’t realistic. While making your franchise location a success is important, you still need to take care of your personal living expenses.
That said, as the owner, you have some leeway when it comes to your salary amount. For example, you can pay yourself less in the beginning, as long as it’s a reasonable amount to meet your basic expenses. Once you’re turning a profit, you can raise your salary in accordance.
2. Look at Startup Costs
It’s a fact of business that opening a store costs a lot. You have to rent or purchase property, finance equipment and pay employees to get an enterprise ready for the public. It’s crucial that you look at these expenses to get an idea of what your debt is going to be. If you’re lucky, investors may be able to mitigate some of the cost, but know that you’re likely going to be in the red before your doors open.
3. Calculate On-Going Costs
It takes money to run a business, especially to do so well. You’ll need to know your monthly expenses and have a contingency budget for repairs and other unexpected incidents. Make sure you don’t underestimate, or you could end up scrambling to find funds in an emergency.
The best way to make your franchise location a success is to be prepared. Be thorough in your budgeting and know that it takes time to turn a profit.