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Alternative Franchise Funding - Check it Our Service Franchises!
| Guest post by: John R. Wilson, Sr. |
Article Overview: The proliferation of B2B franchises - service based franchises - coaching and consulting franchise opportunities has created a whole new category and level of need for financing. It's been hard enough if you were a capital based franchise (we need build-out, equipment, vehicles, etc.) For a time it seemed all small business capital had dried up. It is a bit better but not a lot. Today, non-capital intense businesses whose primary needs are working capital, capital for growth (more territory, expansion of marketing efforts, etc.) and only minor capital expenditures compared to manufacturing and retail types still may require capital in addition to their candidates capabilities. Where do they go? Where does anyone go? Are there alternatives?
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Alternative Franchise Funding - Check it Our Service Franchises!
Before you run out and begin your search for capital, you may want to
consider an approach that many businesses — particularly start-ups and
small businesses that may not yet qualify for loans or be able to
attract venture capital — have used with more than a little bit of
success. It's called bootstrapping. Bootstrapping or
booting refers to a group of metaphors that share a common meaning, a
self-sustaining process that proceeds without external help. The term
is often attributed to Rudolf Erich Raspe's story The Surprising Adventures of Baron Munchausen,
where the main character pulls himself out of a swamp, though it's
disputed whether it was done by his hair or by his bootstraps.
Today
we refer to bootstrapping and it means finding money and resources by
any means possible, including begging, borrowing, bartering, sharing,
and leasing everything a company needs.
In short, bootstrapping is guerrilla financing.
So,
who bootstraps? Many companies do. In fact, some estimates put the
total at 75 to 85 percent of all start-up businesses. Three fundamental
rules for effective bootstrapping are
• Hire as few employees as
possible. For many companies, employees are the greatest expense. When
you add up salary, benefits, overtime, and other employee-related
expenses, it doesn't take long for any budget to feel the pinch.
Bootstrappers avoid this pinch by hiring (and paying) as few employees
as possible.
• Lease, share, and barter everything you can. No,
you don't have to pay cash for everything that you need for your
business to run. Many companies share facilities, equipment, and even
employees with one another to spread out their respective costs. An
increasing number of firms also have discovered the wonderful world of
bartering, the trading of goods and services to other companies in
exchange for the goods and services that are needed.
• Use other
people's money. Why use your own money when someone else will let you
use his or hers? We're not talking about getting a loan, we're talking
about convincing a vendor to allow you to pay 30 or 60 or even 90 days
after you receive your goods from them. Or, on the other hand,
obtaining payment from your customers before you deliver their goods or
services. In each case, you have an opportunity to use someone else's
funds to your advantage — for a while, at least.
Some of the more common approaches to bootstrapping are:
• Seeking funds from friends and family.
• Getting a home-equity loan.
• Offering equity to employees and vendors in lieu of salary or cash payments.
• Bartering for goods and services.
• Tapping your credit cards.
• Convincing vendors to accept extended payments.
• Starting your business part time while working a full-time job.
• Getting an extra job.
• Working from home or in your garage.
• Sharing offices with another company.
• Encouraging customer financing (deposits and early payments).
• Looking for angel investors.
• Pooling founders' savings.
Although
the need for bootstrapping tends to go away as a business grows and
becomes more established — and therefore becomes more attractive to
conventional lenders and investors — any company, no matter how big or
how small, can benefit by applying bootstrapping techniques in its
day-to-day financial activities.
One of the greatest dangers as
businesses become more established is the growth of overhead — the
costs of facilities, administrative personnel, equipment, utilities,
office supplies, furniture, and so forth — at a rate far faster than
the growth of a company's sales. This is a recipe for poor profits,
sluggish growth, and loss of competitive edge.
Bootstrapping can help keep your company lean and mean while keeping overhead in check and profits high.
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how much for a franchise fee?
- Dear Colleague
There is no easy answer to this question. Things to consider:
[list=]
The sizeof the Franchise
Clent base
Expected Turnover
Intellectual Property costs (recoup)
Number of Franchises
Number of employees
Original Set up costs
Franchise admin costs
An example: A franchise that I was involved in setting was to a simple "lawn mowing/home repair" franchise. The Franchise included national/local advertising - preparation of client lists - general admin - central accounting etc
The Franchise involved 300-500 clients - and an annual turnover of about $300,000 . The annual franchise fee was $30,000.
Hope that this gives you some idea
Take care
Ian[/list]
franchisebrief.com good clean design
- I actually really like the design - it's clean and not busy. The information is easy to find.
You mentioned you didn't want to monetize from the site thru the use of adwords but what about JV'ing with all or most of the Franchises you are referring people to.
Is that possible in the Franchise industry?
Re: Service Or Product?
- I agree with starting a Service-based Business in the economy. Here is what I think is critical:
1. Researching that your Service business has a market.
2. Marketing the Service with as much leverage as possible.
3. Product-izing the Service (aka Package Expert Knowledge). This will only help elevate you as "the" expert in your niche and make you accessible to people in different price points.
Re: Enticing Franchises - Top 9 List
- All Franchise listed above are in millions of dollars. Do you have the list of Franchise in thousands
Re: Info for would be franchisers...
- [quote="Sebastien":1d29sdv1]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to. I just want to mention that all these magazines are NOT franchisee oriented. I mean these magazines are for franchise professionals. If you're looking to buy a franchise, you won't find much information in there.
To answer your question, getting published in Franchise Times was fairly easy. I don't want to brag too much but I think I am known in the franchise industry. I was the marketing guy at Franchise.com for a few years before joining my new company, the World Franchising Network. So people know me and I have a very good relationship with Nancy Weingartner, the Managing Editor at Franchise Times. I was talking with her at the last Franchise Expo South in Miami and she mentioned she'd like me to be profiled. I was like "ok, sure!". I like this franchise executive profile thing in Franchise Times as it is rarely BS. People are usually really natural in there.[/quote:1d29sdv1]
Thanks for the follow up Sebastien! And I can't say that I'm surprised that networking with the right people and managing your relationships with them properly are the keys to being published.
I guess the old adage holds true of "it's not who you know, but who knows you" that's important.
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