Today's Top TipOnline business plan scams are alive and doing very well. There's even a new wrinkle: the "crowd funding". Trust me, no one makes money but the promoters in this scheme.
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The Two-Step Tango With Franchise Financing
Franchise businesses can be exceptional businesses, and they hold a great deal of credibility in tough economic times. Hey, here's a business model that works!
But not all of them do work.
Before ever contacting a franchisor, do a good deal of due diligence on your own. You have to know that it is a good franchise, and is worth the franchise business loan you will be getting. No. YOU have to know that it is a good franchise. The franchisor sales people are well trained to convince you that is a great business. Don't let them do that. Make up your own mind first.
So the first business plan you need to research is the one you do for yourself. Do it critically. Be tough on yourself, on the franchise, and on your specific location.
Go talk with other franchisees and see what they have to say. If you can apprentice yourself to a franchisor for a few weeks, great! Learn the franchising business. Learn the pitfalls. You are going to be investing a lot of money in someone else's franchise, so make sure it is a good for your skills, and that it is on solid footing.
And look at all the other aspects of the business plan: targeting your market area, promotional costs, employees costs, franchise fees, supplier costs. That last one is important if the franchisor requires that you purchase from them. Just how much are you going to be paying them, in comparison to what you could buy the product for on the open market? It is a very serious consideration.
When you are satisfied that this franchise is a good business, then you are ready to begin the next phase.
Begin putting together a solid business plan for a franchise business loan. You already have a lot of the information from the business plan that you created for your own use. But focus this one for funding. Be realistic, yes. But also be upbeat and positive in your approach. [If you find it difficult to be upbeat and positive at this stage, you probably have the wrong franchise.]
Having this business plan in hand before ever approaching the franchisor puts some big plusses in your corner.
It puts knowledge in your corner. Smooth sales pitches will fly right by when you know what the real scoop is.
It puts franchise funding options in your corner. There are a number of strong funding options for franchise businesses. The stronger your business plan, the more options there will be. For example:
Concessions from the franchiser itself. While the basics are set out in the offering that the franchisor puts out, there are a million ways they can help you if they see you have real potential.
Access to SBA loans. The SBA puts out a list of franchise companies that it has pre-approved. This pre-approval does NOT mean that the SBA has investigated the franchiser's finances or stability, only that the SBA has the background documents for that company.
Access to Franchisor Recommended Loan Sources. Many franchisers, especially large company, set up franchise lending with a number of banks that they work well with. Having your business plan in hand opens the door to these banks, and may even get you a lower interest rate.
Finding the right franchiser, and the right franchise business loan, is every bit as challenging as identifying a non-franchise business financing option. Put in your time, do your background work, and you will be rewarded.
As you discover that you don't know it all, force
yourself to address the things you forgot, ignored, overestimated, or
glossed over. Write them down for some doubting stranger who doesn't
come with unquestioned confidence in the project's utility -- and who,
unlike your spouse, parent, sibling, or child, doesn't have a vested
interest in keeping you happy... Then tear up the paper . That's
right, rip it up ... [T]he real world throws curveballs and sliders
every day, as well as the fastballs you practice against. You will
inevitably face problems different from the ones you anticipated.
Sometimes you will have to 'zig' when the blueprint says 'zag'.
Mayor of New York City