HSBC franchise unit shares their top tips for writing a business plan
Thursday 30th August 2018
We thought we'd share some tips to help franchisees present a strong business plan and help them to raise finance.
Other sources of income
It is vital for a new franchise to provide enough income for the owner to live on, in addition to servicing any borrowing they have, particularly in the early years. Many franchisees have a supportive partner behind them who often continues to earn a regular wage. This additional household income reduces the franchisee's dependence on the profits of the business. It is therefore important that a franchisee provides a summary of all their domestic income and expenditure, demonstrating just how much money needs to be taken out of the business.
Understand the figures
We see many examples of franchisees simply presenting figures given to them by their franchisor, without really understanding what they mean. As franchisors it is essential that you encourage your prospective franchisees to take ownership of their figures, particularly the cash flow forecast. If they are unable to explain these to the lender in a convincing fashion, they could be turned down for the finance they need to get their business off the ground.
Cash flow forecast
In contrast to the above, we are sometimes presented with a cash flow forecast and little else. The bank won't just focus solely on figures. The business plan needs to demonstrate the franchisee's business skills and experience and that they have fully researched the local competition and understand their market etc. Whilst the cash flow forecast tells a lender what should happen, the business plan explains how it could be achieved.
It's not just about the franchisee
It is important that Franchise Unit hold up to date information on your franchise to share with lending managers. It would therefore be helpful if you forward your audited accounts to us on an annual basis and provide details of any management changes, franchise cost increases, modifications to the franchise model or legal agreement. These regular updates will provide the franchise team and the lending manager with a good understanding of the franchise.
Whilst the majority of business plans we receive are perfectly suitable, we hope these few pointers will help make it easier for franchisees to obtain the finance they need.
Additional help and assistance on writing a business plan can be found at HSBC's Knowledge Centre, an online resource to help small business owners whatever stage their business is at.
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