The importance of updating your business plan
Your business plan breakeven point
Business plan for family businesess
The standards for family business success aren’t only focusing on Achieving business goals but also on keeping the desirable family status. This ‘mission’ is a strategic challenge for them. As family problem may hold back business intentions, wrong move of the business may harm also the family relations. So while writing the business plan, be aware of those
unique strengths and weaknesses and act accordingly. Here are several highlights:
|loyalty||high expectations from each other|
|coherence||influence on family relations|
|family values strong||exposed to criticism|
|commitment||commitment to employ family members|
|the ability to influence||resistance to change|
|flexibility||complex relationship and thus, complex decisions|
It is very important to maintain flexibility of thought, not to lose Critical vision and ability to judge
Business plan for the retail industry
An app is worth a thousand words or a few million dollars in a better case
How to make profit off an application
A Step Before Searching for Funding Solutions and Writing a Business Plan
Important things to know before searching for funding solutions for your business and writing a business plan.
Newsletter guest: The Israeli Center of Finance.
The Israeli Center of Finance is an organization that assists businesses and individuals in finding potential fund sources and in addition, assists in the capital raising process.
Loans for Businesses:
Throughout the years in which they operate in, many businesses are required to raise funds by taking loans due to various reasons, such as establishing a new business or expanding an existing one, or in times of financial difficulties when there is a decline in cash flow. In Israel, there are three main options in which a business can receive a loan – bank loans, private loans (non-bank) and government funds. Each option has its advantages and disadvantages. However, there is no doubt that the best option would be funds that are given by the government, since their sole purpose is to assist business owners without any additional return. The best kind of fund aimed to assist small and medium size businesses, is the state guaranteed loan fund.
Private Loans for Businesses (Non-Bank):
In private (non-bank) loans, the terms and conditions are more flexible than in a regular loan from a bank, including in higher risk loans. Amongst the private loan providers there are credit companies, factoring companies, insurance companies and private funds and the process of receiving the loan from one of them is considerably shorter than the process of receiving it from a bank, this type of loan does not affect the banks’ credit limit. However, it is important to understand that a loan from a private provider usually involves higher interest rates and faster payment programs.
Bank Loans for Businesses:
This type of loan is currently most popular in Israel. However, this option isn’t most feasible for businesses, since the banks’ loan conditions are extremely strict, which make the process much more difficult and in many cases the bank will refuse to grant a loan to a new business or entrepreneur, since they are perceived as high risk clients. In addition, banks demand complete guarantees for the entire amount of the loan and in many cases the interest rates are extremely high as well.
Government Funds for Business Loans:
The government owns funds which are aimed specifically to help fund small businesses and thus encourage economy growth. As mentioned, one of the most recommended options for small and medium size businesses is a loan provided and guaranteed by the state, which offers relatively convenient terms and conditions such as long term payment programs, a small personal guarantee and low interest rates which are usually thirty percent of the entire sum. However, it is important to advise a professional in order to apply correctly for a loan and include a business plan, a correct application is at times key for its confirmation.
It is important to remember that a professional business plan is almost always a basic condition in receiving funding of any kind.
About the Israeli Center of Finance:
The Israeli Center of Finance, Grant and Investment, provides advanced advisory services for companies and organizations while focusing on capital raising processes from government sources, bi national funds, public bids, encouragement grants, venture capital funds and private investors.
Writing a Business Plan for a Franchise – part 2
( Writing a Business Plan for a Franchise (part 2
The advantages of a franchise:
- Data exchange within the company chain – data exchange amongst the different branches provides all branches with a competitive advantage over business opponents that are individual and not part of a chain. An important point to mention, is that the more thorough the research is, the more difficult it will be to transfer the data amongst the different branches, since in most cases, the research is fitted specifically to the local market in which it operates in. Therefore, the concluded local data is less relevant to other branches and vise versa.
- An efficient work method in heterogenic markets – company chains handle production, distribution and marketing. The geographic distance exposes the company to various, local market conditions which require an adaptation to the maximized performances, which vary from one branch to the other. Since there is no one standard operating procedure that can maximize all performances in heterogenic markets, a franchise is a suitable and efficient solution.
- A solution for difficulties in monitoring and supervising – A franchise offers an effective solution for big companies that are dispersed over a large geographic range, this makes the monitoring process much harder since they are located a distance away from each other and from the company headquarters. A lack of monitoring might increase employee absences and directly effect business profits.
- The maintenance is operated by the franchisee – The franchisor dismisses itself of all responsibilities that have to do with maintenance and upkeep of the different branches.
- Utilization – Franchisees are characterized by a high motivation and a great will to succeed, due to a personal interest that’s involved in the business.
The disadvantages of a franchise:
- A limited control structure – The more the Pure Control method is used, the harder it gets to supervise.
- A franchisee using the Research Method – The research method characterizes franchisees and exposes them to great risk, since it is considered to be innovative, experimental and sometimes precedent.
- Lack of experience – In many cases, the franchisee lacks management experience.
- An attempt to harm the brand name – The franchisee purchases a branch from the franchisor. The brand has its name and reputation which were established over the years. A risk might rise in a Pure Control Structure, since this structure strengthens and empowers the franchisee, giving it complete control over the branch. In such case, wrong decision making or an inadequate management performance, might harm the brand name.
- I will conclude with a few main emphasized points that were brought up in different researches that show a correlation between the different franchise structures and the success/failure rate of businesses: The total amount of cash invested in the franchise system by the franchisee, increases the trust of the franchisor in him, and increases the involvement and dedication of the franchisee in the branch, due of the capital that was invested in it. As a result: New franchise systems that require a personal, high capital investment have less risk of failure.
- Experienced franchisees are most likely to have good management abilities and sometimes have a great deal of knowledge regarding the local market. As a result: Franchise systems that are run by experienced franchisees have less risk of failure.
- When the geographic distance between the franchisor and the franchisee is greater, there is a bigger chance that the franchisee may deviate from the pre-signed agreement and might create a difficulty to the monitoring process of the manager. As a result: Franchise systems which are relatively close geographically to each other have less risk of failing.
Writing a Business Plan for a Franchise – part 1
Writing a Business Plan for a Franchise (part 1)
The Wonders of a Franchise:
A franchise is a trading method in which a certain chain or brand, meaning the granter of the franchise, allows a company or an individual to purchase and use its brand name, its ideas, plans and its established reputation in order to sell products and services to the public.
In many cases, the franchising agreement includes assistance of the company in establishing a new branch, staff training and additional assistance and even after the branch is up and running, the company granting the franchise, which is also known as the franchisor, stays involved and supervises over the management and maintenance of the branch.
In addition to the investment costs which are involved in establishing a new branch which are take into consideration during the business plan writing process, the company or individual that purchase the franchise are also committed to pay a franchise fee of USD50,000 and more, monthly royalties that amount to between 4%-6% of the monthly revenues. The local franchisee will sometimes have to also co-pay between 1%-3%, in local advertisements.
In many cases, the franchisee will be committed to operate its branch in accordance to the franchisor’s rules and regulations and business plan, which creates in a mutual dependency between the two. This dependency must be considered by the entrepreneurs who wish to own and operate a franchise. In certain cases, the franchisee will be allowed to operate the branch as he pleases without a commitment to the company’s rules and regulations. In such cases, the dependency between the franchisor and the franchisee is reduced and he can operate more freely in his business.
The contribution of a franchise, to both sides involved, varies: For the companies that grant a franchise, this method is part of a business strategy as part of the business plan aiming to expand the company brand. This is stated very clearly while writing a business plan. Such business plan will display a business scheme which is based, amongst other things, on royalties paid by the franchisee. For individual entrepreneurs, the franchise method is the fastest way to ensure them an ownership of a business of high standards and minimum errors.
There are two different kinds of franchises: A partial franchise or a complete franchise.
A Partial Franchise: Enables its owner to use the brand’s trademark, without complying with its maintenance and management rules and regulations.
A Complete Franchise: Enables its owner to use the brand’s trademark but also includes a commitment to complying with its maintenance and management rules and regulations.
Both types of franchises can be implemented in a local, multiple branch franchise, or in a single branch franchise. A local franchise refers to the option of purchasing and operating the brand throughout a certain geographical range and selling the individual branches in this range.
What are the reasons that might cause a company to grant a franchise?
The will to expand – A company that wishes to expand its business might choose to use the franchising method. The high investment costs that are involved in establishing an individual branch, are many times considered to be an obstacle for a company, and prevents a quick expand of business. When these costs are imposed upon the franchisee instead, the franchisor easily overcomes this obstacle.
Monitoring remote managers – The process of supervising all management techniques of the various managers located further away from the company’s headquarters, is difficult. Without proper supervision, the company might find itself investing in acts that do not match local branch performances. Granting a franchise can help overcome this difficulty. The franchisee operates his branch in order to increase revenues, due to the big investment that was made by him. This is obviously a great consideration to the franchisee. In addition, the success of the business will directly effect the franchisee’s cash inflow, which is not an issue for a standard branch manager who is a paid employee.
When a company decides to grant a franchise or not, it must select a structure of control. There are two types of such structures in a the franchise method which are different from each other in the source of investment, this is a critical issue in the process of a building a business plan:
Pure control: The franchisee is the sole investor, the franchisor receives a certain amount of its profits.
A partnership-based franchise: A partnership between the franchisor and the franchisee. The company is involved in the investment as well as in the profits.
Each structure of control is characterized by different business and organizational conduct. Let us distinguish between the two:
Utilization – improvement of existing routines: Experience based re-organization. Companies learn from the experience of their present resources and use the gathered information for future improvement. This learning method usually characterizes a structure of control that is not a franchise, but an actual ownership. When a branch is owned by a company and not by a franchisee, the operator of the branch has less motivation to research and develop new, more successful methods since he is a paid employee and doesn’t directly benefit from an increase in inflow, therefore, the company’s profits in the long run, are less relevant to him. In such case, renovation is usually rare.
Research – development of new routines: This allows the company to adapt to versatile markets. This learning method characterizes the pure control method. When one is in complete control of a branch, it is certain that the present and future success of the business is his number one priority since the more successful the business is- the greater the profits will be. The Research method is popular amongst coffee shop franchises. In some branches of a coffee shops chain, the menus vary and are creative, in order to meet the local customers’ preferences and tastes. Different menus might also include a certain gimmick or added value which match the branch’s design, service and are fitted to the branch’s design, atmosphere and clients.
So which option is better?
Neither one of the options is better when used separately. A company that implements only the utilization method, will not be innovative enough and sometimes even be considered old fashioned and ultimately find itself behind on business. At the same time, an organization that implements only the research method might fail to view the changes that have been taking place around it and ultimately find itself operating a routine that is not optimal business wise. Therefore, a combination of the two options should be implemented.
Interesting linksHere are some interesting links for you! Enjoy your stay :)
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