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The following excerpt is from a book by franchise expert Marc Siebert multiplier model. buy it now.
Once you’re ready to grow your business, your next decision will be choosing a format for that growth. You can add corporate locations, add franchises, partner with third parties in some form of capital tie-up.
Whatever decisions you make, your business should be a means to an end, both personal and financial, and has no end in itself. So choosing a growth strategy requires looking back at your goals.
Related: Here are the top 200 franchised brands in the world by 2023
It’s okay to conflict
Your business may already offer the standard of living you’ve always wanted. So if your goal now is to spend more time with your family, ask yourself if it’s worth the effort to spend more time away from them and the financial risks associated with expanding your business. In reality it may not. In that case, you may need to focus on your existing business model to maintain and reap the benefits.
Destinations help you grow your business
Decide on a destination at some point in the future if you want to expand. If you have partners in your venture, reach out to them. Don’t focus on issues such as ratings or what you think you can achieve.
Instead, set goals that reflect what you want out of your business. Perhaps he wants to sell the business for X by day Y, or maybe he wants to work only 10 months a year and earn Z every year. Whatever your goal, be specific about the financial reward you’re looking for and how long you want to achieve it.
Related: 9 Clauses Required in Every Franchise Agreement and What They Mean
It’s time to model
You know your destination, but how do you get there? Next, we need to develop a financial model to determine if we can achieve our goals through organic growth. Consider the amount of capital that must be invested, the amount of risk assumed (in terms of debt financing or leasing), and the conservative case of returns and profitability to increase feasibility.
A sensitivity analysis may be performed to see if these goals can be achieved even in the worst case scenario. Assuming that the goal can be achieved through company expansion, the analysis could end here.
Enterprise Expansion Doesn’t Work in All Scenarios
While there are other reasons to opt for franchising, joint ventures, and third-party capital injections (mainly risk mitigation issues), most people will opt for a corporate growth strategy. But if you don’t have enough capital, you’ll have to consider other options or change your underlying assumptions. For example, you can do something like:
- Extend your timeline to give yourself a longer way to reach your goals.
- Change your assumptions about risk. Perhaps you could invest more of your own money or leverage more leverage in the form of debt.
- Reduce the target range to something more achievable given your risk tolerance and capital position.
- It’s dangerous to rely on best-case scenarios, but change assumptions about the foundation of your business model.
- Consider alternative sources of equity, such as external partners. However, the target range should be changed to offset the dilution.
- Consider third-party distribution channels (such as franchising) to fund your growth with someone else’s money.
If the company’s growth does not meet its targets, perform a second round of financial modeling in terms of other expansion strategies. These may include raising capital, conducting joint ventures at the divisional level, licensing intellectual property, manufacturing and selling products, or (my personal preference) franchising.
Related: Tips and strategies for using the balance sheet as a franchise scorecard
Franchising with a third party
Please stop “deciding to franchise” absolutely. The reason I tell people not to decide to franchise is because the word franchise is an emotionally charged word for many people. Whether they decide to franchise or avoid franchising is often because the word has a specific connotation to them. So when choosing a third party channel, start by asking him three questions about the nature of the contractual relationship with the third party.
- will they use your name?
- Will they use your system?
- Can I get paid for using my name and system?
be confident in your decisions
Once you’ve made a decision, hold it up in the open and show it to a lawyer (or consultant) to determine what you’ve created. It would be great if it was a franchise. If the ideal structure for your business is something else, that’s great too. Make the decision that’s best for your business, then let our lawyers and consultants handle the paperwork.
Related: Is Franchising Right for You? Ask yourself these nine questions.
let’s start multiplier model
From small business to successful startup to scalable growth, it takes more than just luck. I need a system. Over the past 34 years, Franchise consultant and growth expert Marc Siebert has been scouted by more than 70,000 of his executives looking to expand their companies. Of these 70,000, only 5,000 of them had a suitable system in place to transition from a successful system to a scalable one.of multiplier modelSiebert discusses the factors that determine whether an entrepreneur is ready to scale their business and the best ways to get started. read more.