Two months ago, I bought two online startup franchises, in cash. Franchises give me the benefit of working with an already established business model, without the legal hassles accompanying starting a business on my own. It’s easier, it’s fiscally sound and it’s a business already bought and paid for – no credit needed. In my book, that’s a trifecta of winning.
However, franchises are just like any other business in the monetary sense of the word. Having nationally recognized branding doesn’t guarantee me a money tree. As a business owner, I have to make, manage and stick to my monthly, quarterly and annual budgets like glue.
Using trial and error and subsequent analysis, I have figured out what works – and what doesn’t. Thankfully, doing what works is easier than you might think.
Choosing a Business that Was Recession Proof
I am (and have always been) a numbers kind of girl. I did a detailed financial analysis on my franchises before investing a red cent in either one. I chose virtual franchises because I knew my budgeting would be easier with an online organization than it would ever be with a brick and mortar establishment.
For me, it’s simplistic brilliance. I only have three to five budget line items each month and I manage operations from my desk at home in my pajamas, via email and Skype.
Drafting My Budgets Backwards
I draft my budgets backward. I look at what I need to spend in order to make my business prosper, I account for the growth I want to see and then set my earnings goals accordingly. I do this monthly, quarterly and annually, and I adjust these figures as needed.
From there, I create a secondary budget as a contingency, or a “Plan B.” For me, having a “Plan B” is as necessary as breathing. Having this plan keeps me from falling into the credit trap. I prefer to run my business on a cash only basis, and avoid using credit whenever possible.
When it comes to tools, I’m an anachronistic kind of girl. I’m not abacus aficionado, but I am a stickler for Excel.
Excel conforms to my needs, does basic mathematical calculations and keeps me aware of any potential shortfalls. Having to pay extra money just to have a tool to write (and keep) my budget for me makes no sense to me. I prefer a bare bones, no frills kind of operation.
Prioritizing What I Need
Even with a simple, straightforward cash budget, I still have to prioritize expenses from time to time.
For instance, if an advertiser for my deal website drops out at the last minute, I need to know that I still have the money to fund my franchise fees, fulfillment fees and commissions. If the worst happens, I might have to drop some of my variable monthly costs (like advertising) to make up for those expenses.
I make up for any shortfalls in the next month’s backwards budget, and update the quarterly and annual budgets accordingly. This keeps my company budget and me on the straight and narrow, and keeps me on top of the capitol I’m saving for my expansions.
While my franchises are still fledgling companies, my goal is to have them cash flow positive by Christmas time. And, so far, thanks to a lot of research and smart budgeting, that goal looks like it’s in the bag.