Business Franchise

The proverb says: “Tell me who your friend is, and I’ll tell you who you are”. I can say: “Tell me who your team members are, and I’ll tell you who you are”.

Think over the following questions:

Who are the team members?

Do you, the project manager, get to pick the team?

Or are you given a list of team members and expected to include them?

The next step in the Project Management process is to identify the people who will participate in the project.

Even if you have a rock-solid goal with clearly defined steps, you have little chance of succeeding without a group of people who possess the ability and perseverance to complete the steps; failure is imminent. Ensure that the project team can work together well and has the necessary skills to get the job done. Here’s a simple analogy to illustrate the point.

Suppose that you want to buy a franchise company that specializes in building bridges in remote locations. On the day of a new site survey for a bridge across a small canyon, every one of your engineers calls in sick. So, in a panic, you call the temp agency and ask to send over six of great engineers — pronto. To your delight, they arrive on time, and you fly them to the first potential site of the new bridge. When you point the engineers to the first possible bridge site, one of them pipes up, “You do realize that we drive trains, don’t you?”

Your company may have many talented people. Your job as a project manager is to identify the people who can finish tasks in the manner required and in the time allotted. Don’t consider including a technical wizard who returns from vacation the day the project is due. Don’t consider any potential team member who does not have the time to devote to the project. A great asset who can’t put the time and focus into a project is really not a great asset at all. Always consider all factors when determining whether a person can contribute to the team.

Ask questions! Remember: you don’t have all the answers. In fact, it’s extremely difficult to even know all the questions. (If you really do have all the answers, please e-mail me. I have some work for you.) Include proposed team member “interviews” as part of the selection process. You don’t have to hold a formal meeting. Sending an e-mail message or talking on the telephone works just as well. You just need to ask a few questions. Here are some questions you need to answer as you talk with prospective team members.

1. Are they available?

No one can do an adequate job if there is no time to work on a task. Overbooked, talented individuals are just as ineffective as available people with no skills. Be sure to explain what you need for your project and what the performance expectations are. Add at least 20 percent to any estimate you give. After setting proper expectations, ask for the person’s interest and availability. Make sure that each prospect’s supervisor agrees with this availability status before you make your final team selections.

2. Are they able?

Because you’ve outlined the whole project and listed all the individual tasks (don’t worry; we’ll go over how to do this later), you have a pretty good idea about what needs to get done. You know what you need from this prospect. Ask this person about her experience with similar tasks. If Stacey’s part of the project requires her to use a Dutch oven, it makes sense to find out if Stacey has ever used a Dutch oven. Ask earnest questions: “Stacey, your part in this project would be working with a Dutch oven. Tell me about your experience with Dutch ovens. What kind of dishes have you prepared with a Dutch oven? What kind of problems have you had cooking with a Dutch oven? If I asked you to cook a peach cobbler in a Dutch oven right now, could you do it? If not, what would you need to get the job done?”

3. Are they willing, eager, and optimistic?

The last thing your project team needs is a naysayer. There’s incredible momentum generated in a project when all the team members have good morale. It’s your job to keep the enthusiasm high. Don’t kill it from the start with a team member who doesn’t want to be on the team. Sometimes, you’re forced to put someone on the team, regardless of qualifications. In those cases, spend a little extra effort encouraging good morale and ensuring that any bad vibes don’t spread to other members. Simple positive reinforcement and recognition go a long way in such cases.

4. Do they have any questions?

Always remember to be quiet and listen at some point. Ask for any questions they have about the project. You can often uncover potentially damaging things you forgot by asking for input from other people. You can also get a good feel for what each team member considers important. Make notes of your conversations. Comments and questions at this phase can be very useful later in the project.

Keep in mind during these initial interviews that your purpose is to evaluate potential team members, not to select the team on the spot. Ask for any referrals and express genuine appreciation for their cooperation. Set a deadline for announcing the team and live up to it. The goal is to form a team for this project and have a pool of resources to draw from for later projects. It’s important to avoid alienating anyone during your team selection.

5. Inheriting a team

You may not have the luxury of selecting your own team. You may have the team member list handed to you. Do not skip the interviews! Even if you inherit a team, you still need to know what each member can do. The questions just covered can give you valuable insight into some cool skills available to you. You may also find that the team is incomplete. Ask to augment the team. Fill in the missing areas. Remember that you’re on the hook. If the project fails, it’s the project manager’s fault. Go in prepared.

If you do add new team members, take the time to make sure that each member feels equally important. You don’t want the original members to feel that you added to the team because you distrusted them. They were on the original team for some reason. Whether a team member made the team due to skill or being a relative of the CEO, use the skills you find.

The success of the project reflects directly upon you, the project manager, so make every effort to assemble the best team you can.

After you’ve outlined the process and set your team, you’re ready to draw the 20,000-foot view.

Don’t overlook the importance of personality to team composition. You may be spending lots of time together. Build the team with interesting and stimulating folks (as long as they fit your selection criteria) and you’ll be more productive - and have lots more fun!

I’ll speak about this using the equipment purchasing project. The company buys equipment at the beginning and to substitute the old one. So, the first thing you have to do is to determine your goals.

You could state the project goal as “Goal: To Buy a New Equipment.” That is way too general, though. Don’t stop with that. You haven’t set a deadline for buying the new equipment, you have no criteria for the productivity or capacity, and there is no mention of cost.

Hint: You need to examine the process involved in equipment buying to understand all the decisions you have to make to meet the goal.

One of the most common mistakes that can doom a project from the start is to state the goal in terms that are too general. By working through the equipment -buying process, you begin to see what you need to know before you can start to plan the project. It often helps to get some help from experts. In the equipment -buying example, there are at least two distinct steps of the process:

1. Select item for purchase.
2. Purchase equipment.

You can break each of these steps into multiple subcategories. For example, some subcategories for Step 1 might include the following:

• Identify desired productivity.
• Identify the other desired parameters.
• Identify budget constraints.
• Determine whether identified productivity and other desired parameters meet budget parameters.

After you outline your subcategories, proceed to purchase if you find equipment that meets your criteria. If not, select alternate equipment.

Subcategories for Step 2 might include the following:

• Determine payment method: pay cash or borrow money.
• If paying cash, complete purchase; if borrowing money, evaluate financing alternatives.

And the subcategory borrow money has its own subcategories:

• Find lending company.
• Think about leasing
• Borrow money from friends or family.

Your outline, or map, of the process can quickly expand to many levels. That’s okay. This process is called process mapping. You can see from this example that before you can plan the equipment -buying project, you need answers to the following questions:

• What characteristics do I want the equipment to have?
• How much am I willing to spend on the equipment?
• How will I pay for the equipment?
• By what date do I want to have a new equipment?

After you have answers to these (and perhaps more) questions, you can develop an outcome statement that clearly states the project goal. For example:

“My goal is to buy a new equipment with the productivity …., capacity …, size…, at a cost of $XXX,XXX or less, using an 80 % borrowed money by October 31, 2006.”

Businessmen write business plans for different purposes. I want to turn attention of my beloved readers that the size, structure and contents of the document can differ in compliance with the purposes. So, why do people write business plans?

-to evaluate the effectiveness of their prospective business or project;

-for potential investors and partners;

-to apply for a loan;

-to apply for a government preferences;

- they need to have a business plan according to the legislation of the country.

Let me characterize every purpose by turn.

It’s a very good idea to do some calculations and evaluations before you start a business or a project. Sometimes people underestimate the necessity of business plan “for myself”. They say: I’ll do it later, after my business reaches its capacity. Or: I don’t want to waste time for papers; I’ll better start making money. Or even: I’ve planned everything in my mind; why should I spend time for paper work. But it’s a big mistake when new business or project starts without preliminary planning. Why? Because when you do the calculations you summarize all the facts and can see the whole picture. You’ll better see all the threats and opportunities. You will see the prospective profit: maybe it’s too small for you? You will get not approximate (like $10,000-$20,000) but real amount of initial and current investment.

But the main reason why new business or project has to start with a completed business plan is hidden in the following: after you start a company you will be able to catch the moment when things go not as you plan. If you get less you’ll see it before it turns to real trouble. If the things go better you can instantly start thinking about other project and earn more money with your extra profit!

When you write a business plan for your potential investors and partners you need to take into consideration the main statement: THEY CAN’T READ YOUR THOUGHTS! What does it mean? If you want to prevent problems and misunderstanding in future present as many aspects of your business as possible in the business plan. Remember: things that are completely clear for you are not the same for all the people on the Earth. Write about conditions and terms of supply, methods of salary calculation, way you choose the materials and equipment. Spending time this way can help to avoid many problems with investors and partners in future.

Also you need to remember that the main purpose of investor is profit. Unlike creditors investors are not seriously interested in collateral and payback period. They want you to show so-called ROI (return on investment) – in rate they’ll get on their investment per months or per other period of time.

When you create a business plan to get an external financing in the form of a loan or credit you need to show that your business will be enough successful cover both interest and loan itself. Creditors are not interested about the life and results of your business after the payback period but they will be very happy to see a good collateral.

If your business plan is presented to government authorities while you are trying to get some guarantees or preferences you need not only to show the financial results of the business. Tell them about the additional taxes they’ll receive, about new jobs created, about any other positive influence your company will have on the community. And don’t forget to write about the ecological site of your business (it’s an advantage when you business improves the ecological situation in the region in any way).

Before you start your business (either franchise or not) you need to lay the foundation. I’ve found rather interesting material about project management and business planning and want to share it with my readers with my comments. The material covers impressive project management feats — including some tactics that will dazzle coworkers, whether above or below you on the corporate ladder, helps to understand your project objectives and actually know how to meet each one and many other things.
Conventional project management states that you have three general variables in a project: schedule, budget, and quality. Pick the two you like best and let the others slide. In other words, most project managers and businessmen start their projects with the goal of being only mostly successful. What if you could get things done ahead of time (not just on time) and under budget (not just on budget)? What if you accomplished these feats while maintaining the desired quality? You would be a super project manager. To achieve this you need to know that organization is the key to successful project management and business.
You need to learn how to set goals and then reach them. You need to understand how meet your goals through well-timed and well-executed communication and decision making. As a result you will have the added benefit of being able to eliminate do-nothing meetings and time-wasting distractions ! Learning these skills will help you manage yourself, your team, and your business. Using these skills will ensure that your company’s effectiveness is recognized and rewarded. And this recognition is not only words but money, real money!

The answer is NO. I spent a lot of time reading different articles about how to write a business plan and other forms of planning. I found that many authors present the information such way that new businessmen would come to a conclusion that business plan is the only important thing for their business success. But it is not so!

Business plan is not a goal but only an instrument. This instrument helps to summarize the business, marketing, technological and financial information. It is a document. Or better to say it’s only a REPORT! Yes, a report!

What do I mean? Before starting your new business (doesn’t matter franchise or not) you have to carry out some preliminary studies. At first you check the idea itself. I wrote about evaluating the business idea in my previous posts:
Even in franchise business you HAVE to think over the idea
Declining an idea
Declining a business idea: last three reasons
Are you ready?..

If you come to conclusion that idea is good it doesn’t mean that you can start immediately. Certainly, you can but it can lead to big problems in future and even to failure of the prospective company. What you need to do is to continue to study the internal and external factors that will influence your business in future. These factors usually include marketing, production, and organizational, legal and financial spheres. And after you finish with the study you a ready to create a document that contains all your conclusions. This document is called… yes, you a write, a BUSINESS PLAN!

So, the goal is not to write a large business plan with colorful graphs and long tables. The goal is to collect the correct information about you prospective business and to make correct decisions based on this information.

I’m going to write more about different surveys that you prospective businessmen need to carry out and about how to choose the best strategy. Also I plan to show the examples of good and bad business plans and to explain the mistakes. Come back to my blog .

Business plan is a short description of your present or future business. It is like a resume for your company.
The main reason you should have your business plan is to allocate your resources properly. You have to know either you are investing in the right direction.
“The business plan is a necessity. If the person who wants to start a small business can’t put a business plan together, he or she is in trouble,” says Robert Krummer, Jr., chairman of First Business Bank in Los Angeles.
Despite its overwhelming importance for a business (especially for a new one) many companies neglect it. And the main reason for that ignorance is the visible difficulty of its writing. It could be understood as most business plans should include the following information:
1   Introductory part
2   General information
3   Analysis of enterprise condition
4   Marketing
5   Organizing part of project
6   Work cycle
7   Investment project
8   Financial analysis of project.
9   Analytical part
10 Conclusions, recommendations

Are you really sure you know all the answers for the questions above?
Certainly there are easier forms of business plan writing. One of them is suggested by Small Business Administration. It includes the following parts:
              
1. Cover sheet
2. Statement of purpose
3. Table of contents
                I. The Business
               A. Description of business
               B. Marketing
               C. Competition
               D. Operating procedures
               E. Personnel
               F. Business insurance
               II. Financial Data
               A. Loan applications
               B. Capital equipment and supply list
               C. Balance sheet
               D. Breakeven analysis
               E. Pro-forma income projections (profit & loss statements)
               Three-year summary
               Detail by month, first year
               Detail by quarters, second and third years
               Assumptions upon which projections were based
               F. Pro-forma cash flow
          III. Supporting Documents
               Tax returns of principals for last three years Personal financial statement (all banks have these forms)
               For franchised businesses, a copy of franchise contract and all supporting documents provided by the franchisor
               Copy of proposed lease or purchase agreement for building space               
               Copy of licenses and other legal documents
               Copy of resumes of all principals
               Copies of letters of intent from suppliers, etc.

Anyway you have to do it yourself or turn into a consulting company. They are willing to see you there with such kind of order as it is rather expensive service.
There’s one more opportunity to write a business plan. There are different sites suggesting software that assists in business plan writing. Sometimes you could even find a freeware. But in this case you have to investigate the way the software works.
So you have to decide what way of business plan writing is the best opportunity for you.

It seems for me that I spent enough time to express my opinion that it’s necessary to evaluate an idea before investing money. This statement completely refers to franchise business. Success of other franchisees doesn’t guarantee your success because as I mentioned before it depends on a particular region and particular conditions of that region.

Now I think it’s time to say a few words about conditions that make business idea practically acceptable.
1. Technological practicability. If to speak about business ideas in general there can be a lot of reasons for inability to realize them. Sometimes it’s too expensive, sometimes there is not enough space to build the plant and locate all the necessary equipment and so on. Even one of the most outstanding producers George Lucas faced the technological problem while realizing his creative ideas. He had to start his Star Wars from Episode IV and only after many years he found a good technological decision to shoot Episodes I, II and III.

Going back to franchise ideas I think that this problem is not so important as franchisor has already created the technological system and tested it. But still potential franchisee has to check the local situation. There can be some legal restrictions for particular region or ecological situation can influence technological practicability or inability to hire personnel of proper qualification can create barriers for the success.

2. Long-run future viability of new business. Starting your business you need to be aware that it will exist for some period of time. It’s important to see the difference between a project and a business. Project can last for several days (like organizing a show or a party) or for several years (like house construction). But when you plan your business it’s a good idea to create it for years and to foresee the conditions for its growth. Maybe one day you’ll sell it and get more money than invested or hand down to your kids.

3. Acceptable economic efficiency and payback period. One survey said that only 30% of all the small businesses were started in order to earn money. The other 70% of new-born entrepreneurs presented the following reasons:
-want to be “my own boss”;
-want to realize my personal ideas;
-want to achieve something in my life and to make a business career, and to help other people… and many other “bombastic” reasons.
As I think it’s possible that people really think that way and do not consider money and profit as important factors of small business. But my experience (not so big but enough to have an opinion) says that most of them will change their minds during the first year of business operations. As the owner of a small company you’ll deal with money everywhere – paying salary, rent, public utilities, and interest for the credit, administrative costs and Internet, advertising and promotion expenditures and many others. You’ll charge prices, calculate revenue and taxes, and so on. Of course, it’ll take some time. I even insist that it takes a lot of time. And every reasonable person wants to get something for the time spent. His family also wants to see the pecuniary results not only self-realization or happiness of other people.
That’s why I suggest everybody to think about economic part of any idea even if you really believe that money is the last thing in the world you want to speak about.

4. Acceptable idea from public or community point of view. Take it seriously! Today people as never before feel very lonely. As a result they try to solve this problem participating in different public organization and community projects. I do not recommend you to start any business that may conflict with public interests. You will loose in 99% of cases…

My conclusion:
Some of these factors are limitations; the others (like economic efficiency) can be used as the main criteria for a franchise idea evaluation. Want to add something? If so, I will highly appreciate your comments.

Ok… Few more words about declining a business idea. I’ve already mentioned very important factors: demand for good or service, possibility to win the competition, capital requirements and economic results, and risks. The last I want to speak about are the following:
A) problems with raw materials;
B) ecological problems;
c) public opinion.

For most industries and businesses raw materials play a big role. They represent costs and influence price of a product. Of course, for services they are not so important but still you need to think about them:
-where you plan to buy them;
-who are your main and alternative suppliers;
-is the price for each item stable or it fluctuates;
-is there a deficit material and is it easy to find a substitute and so on.
The main thing about materials is that your customers are not interested in your problems with them. Buyers want cheap products and that’s all… And if you can’t satisfy them you’ll loose your business.

Ecological movement is growing in strength. You need to evaluate your business idea from the following conditions:
-will my business pollute the air, water, and so on;
-is there any risk of accident that can do harm to the ecological situation in the town or city, or region.
While evaluating a business idea it’s necessary to remember that ecologists and environmentalists live among your prospective buyers. They can either improve or worsen your reputation.

Public opinion is the last but not the least in that list . It’s clean that it influences demand greatly. I’m not going to explain such an easy thing but will give only and example. In early 90s the market economy came to the former communist countries. At the same time most people had not enough education and business way of thinking. But everybody wanted to live better and to earn money. Many people were involved in network marketing and….. many of them lost money. Why? There were many reasons and I don’t want to discuss them in this article. The main thing I want to bring to notice that till today many famous network companies (already successful in US or UK) face the problems to overcome the public opinion that states: “Network business is not a business but a skullduggery”.

I hope I proved that it’s necessary to evaluate your business ideas before even thinking about investment. And thank you for your patience while reading all of my thoughts!

So, in the previous post I expressed my opinion about necessity to evaluate the idea before starting a business even if you were buying a franchise. Many people forget about it. They think that if the franchise chain has many franchisees and they operate with profit the new business also will be a success. But as there no identical children there are no identical markets and businesses. Information from other franchisees is useful but not sufficient to make such an important decision.

Last post was dedicated to market demand as a factor influencing franchise idea. Now I want to speak about the others.

The second thing to evaluate is competitiveness of goods and services your business is going to sell. You need to study the market competition as serious as possible. Visit the shops or restaurants of competitors – both franchise and non-franchise. Listen to what people are saying about their products. As a result of your survey you need to become sure that you product has real advantages over theirs. If not - I suggest you not to buy this franchise for this market. Think about other idea or maybe other region.
What advantages can be considered as real and competitive? Certainly, there are a lot of them. Here I’ve listed the main:
-price;
-discounts and possibility to get them;
-quality;
-technical and economic operation factors;
-prestige of a trademark;
-convenience of packing;

-guarantee period and conditions;
-post-sale support and services;
-reliability;
-payment terms;
-credit conditions;
-advertising and other promotion activities;
-delivery services and so on.

The next factors require some economic calculations. I mean that you need to decline an idea if capital investment is too high and/or economic efficiency is too low. I plan to dedicate a special article to economic efficiency in future. Here I’ll only say that you need to be sure that future profit will cover initial investment in not more than 5 years (in general) and your personal income has to be greater than interest you could get for your personal savings.

Also the idea must be considered as unfavorable because of high risk factors. Thinking about risks you need to take all of them together and consider their probability.

Ooh! Only three more factors remained… I need to have a break… and will continue in the next post.

Today I was a witness of the dialogue between two students. They are 14 or 15 and were discussing how they would start their future businesses. I hope they will not have objections if I present a part of this dialogue here.

“I’m thinking about IT business. It’s the easiest… and the sphere is growing”
“Do you have an exact idea? E-commerce?… ”
“I don’t know. I think to take the list of franchises and will choose the one with the best program or the least investment…”

I wanted to interfere but decided to stay away and to express my opinion here.
I’m absolutely sure that it’s necessary to study a franchise program before investing your personal or borrowed money. But I think that studying the idea itself is more important. If you choose a franchise with an attractive program but the idea is not OK for your region or your country the result will never satisfy you. And it’s not necessary to be a prophet to say that to avoid bankruptcy you’ll have to invest more, to work harder and so on.

What factors can make an idea having no prospects? I found some and want to express my opinion with the potential readers of my blog.

At first I need to mention the demand for the product. You need to take into consideration as many as possible factors that influence the willingness and ability of people of the concerned territory or country to buy these goods and services. It’s not too hard if you live in this region yourself. You can spend some time listening to people’s complaints. You can ask your friends and neighbors. It’s not necessary to carry out a marketing research if you are planning to start a small business company. (Certainly if the matter concerns a big investment and large company it’s better to order a marketing research from professionals).
The factors you have to think over vary for different ideas and different markets. I’ll say some words about the most important ones as I think.

So, the first one is geographical, historical, religious and cultural traditions that prevail on the concerned market. I’ve read a story about McDonalds’ franchise in France (unfortunately it was some years ago and I can’t recall the source). It was a sad story. The idea almost collapsed because of cultural food traditions in the country. The author of the article explained that historically the French were in earnest about food. And the idea of fast-food itself was offensive for them. But if to add that the French have no special liking of American life style we’ll get the complete picture of extremely bad idea.
But at the same time the same franchise idea (I mean McDonalds’) became enough profitable in Japan. Why? Because it was absolutely uncommon for Japanese and was taken by them as something interesting, and unusual, and modern.

The next factor that influences demand is size and growth of the target market. It includes the number of potential buyers. Thinking about buyers you have to study their tastes and preferences on the one hand. Also you need to study buyers themselves: age, income, sex, life style and so on. You need to study their attitude to your idea before you start your business. By the way it will help in future while planning advertising and promotion activities.

Also it’s necessary to think about seasonality of demand. If sales change greatly during the year it means that your personal income will change too. Sometimes you’ll get nothing at all. Usually you’ll have to invest more money in inventory when demand goes down. Are you ready for this?

OK. That’s enough for demand factors for the first time. Read my next post to answer what other factors can make a franchise idea having no prospects.