One of the oldest adages regarding starting and running a franchise is the answer to a common question; “What are the three most important aspects of a successful business?” and that answer is – “location, location, location.”
Which is great when you are just starting out and 소액결제현금화 want to ensure that your business – your franchise – is located where the largest amount of your potential customers are (or, where they are most likely to find your business).
A retail franchise has to not only ensure that it has the inventory on hand to meet customers needs but it also has to continuously reinvent its inventory mix to meet those same customer’s expectation – bringing them back over and over again.
A service franchise business not only has to offer services that customers are willing to pay for (not just do themselves) but has to have the supplies and labor on hand to meet that demand and be flexible enough to service each customer’s individual needs across any level of demand.
And, a retail manufacturer has to ensure a ready and constant supply of raw materials to meet the demand for its products – regardless if that demand is up or down.
In essence, this means that the franchise has to ensure that its operations are flexible enough to overcome and eventually satisfy any and all customer needs.
How this is done, however, is by asking another question; “What are the three most important aspects of running a successful business?” and the answer is – “working capital, working capital, working capital.”
What Is Working Capital?
Working capital is essentially the life blood of a business – any business including franchises. If you compare your business to a vehicle (car, truck, motorcycle, big rig, etc), it is one thing to buy or own an automobile but it is the another to make that vehicle go down the road – getting you from point “A” to point “B”. To do this, you need a form of fuel – gas, diesel, electricity, bio-fuels, etc. Without that fuel, your vehicle will just sit around collecting dust.
In business, in order to make your company operate efficiently, you also have to add fuel to it – in the form of working capital – to get it from point “A” to point “B” or from start up to growth or growth to expansion or expansion to success.
Working capital can come in many forms from acquiring (financing or obtaining) inventory or raw materials to obtaining or having the cash on hand to pay needed labor, utilities and even rent.
Image a franchise (let’s call it “Any Time Tools and Machines”) lands a new, big customer that wants to buy $1 million dollars worth of the services it offers (providing tools and machines for huge construction projects) – but it doesn’t have enough of those tools and machines on hand for this job and cannot afford to get more right now to complete that job – which would take some $100,000 in additional rented or leases equipment. The franchise cannot consciously agree to that job and thus that customer takes that $1 million elsewhere.
Or, a residential blinds installation franchise gets a contract to install blinds and shades in a newly constructed apartment complex that needs to be completed in the next 30 days but will not get paid for the job for another 60 days when the apartment complex does its final closing. However, the franchise has to turn down this $250,000 job because it does not have or cannot afford the labor needed to complete the installation in the next 30 days (because that new labor will need – by law – to be paid before the 60 day apartment closing and subsequent payment for the franchise’s services).
Since the beginning of time, businesses have faced working capital short-falls that have essentially destroyed their companies. These businesses have done everything correctly up to that fatal point. They have driven customers to their companies and provided the products or services those consumers wanted. Yet, because of poor working capital management, they get more customers than the have the capital on had to service and are forced to turn those patrons away – not only losing that business but creating a negative impression in the community that keeps other, new customers at bay (not to mention the business that agrees to a job or order and cannot fulfill it and consequently gets sued to death for it).