Smart people consider many factors when checking out Australian franchises, some more obvious than others. This article steps you through some of the personal financial issues that are relevant to which franchise or business opportunity you eventually select.
1. How are your finances generally? Do you have the cash to purchase the franchise or are you going to have to borrow? Can you afford to repay the loan even if the business fails? Will you have to fund working capital or expenses and overheads before the business moves into profit? How will you do that? These factors influence the maximum amount you should be prepared to invest so that your purchase is not merely a dangerous gamble with the family finances.
2. Survivability. It's not unusual to wait months or years in order to enjoy any decent kind of profit on an Australian franchise. If cash flow is on a knife edge for all that time, how will you and your family survive? Will someone have to get a second job? What will you do if it becomes obvious that your new business needs a major cash injection to keep going? What additional sources of financing might be available to you? Is it worth it to have this increasing debt?
3. What do you need or hope to earn from this franchise business? This is maybe the single most important thing to check out because after all your lifestyle depends upon it and for most people lifestyle is the reason they're looking at buying an Australian franchise in the first place! Don't be blinkered about what type of franchise, it won't necessarily be in an area where you have any background or experience at all.
4. What financial management experience do you bring to the franchise? The more hands on you have to be in your new franchise, the more experienced you do actually need to be. Where there are senior, experienced staff to do the hands on work, you can move into an overseer role guided and supported by the franchisor. If you have broad managerial experience this may be relatively easy for you, but if you are new, expect an uncomfortable "J" curve that will challenge and develop you as a person, and professionally.
Of course there are many other issues you need to consider before even beginning to look at what Australian franchises are even out there for sale. Once you've worked through these personal financial issues, move on to the 6-Step Due Diligence Process in order to quickly and easily cull out the trash. Then take your final short list to your accountant and solicitor for comprehensive review and reporting.
