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How To Build Your Small Business
Like A Franchise


by Tom Edge

This article is by my good friend Tom Edge from England. Learn from his words of wisdom and visit his web site at the end of this article.


Introduction

It is common knowledge that a franchises stand more chance of surviving than any other business format.

Over 95% of franchises will still be running five years after start-up while only 15% of traditional businesses will still be trading.

Most of us do not have the capital to buy into a franchise but in this article Tom Edge examines how we can profit from what franchises have learned.

He shows us how to use business building tools like operating manuals, organization charts and budgets to safely build your businesses just like a franchise.

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Do You Own A Business Or Do You Own A Job?

Many people who start their own businesses start with some skill that they have learned in a previous employment then they take this skill into self employment.

Instead of a boss or firm now employing them they employ themselves. They are literally Self Employed.

They do not own a business - they own a job. In fact they are the job - often even naming it after themselves.

Sixty, 70, 80 hours a week are not uncommon, neither are divorce, heart attacks or bankruptcy.

As the economy improves or the work gets even tougher within 2 years over 80% close their doors and take a "proper job" working for an employer.

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They Focused On The Wrong End

Because most people are used to doing work they focused on their product or service and not on building a business to supply that product or service.

Most small business owner/managers are product led when all successful businesses are customer driven.

Most business people are too busy doing work to make any money. Most business people are too busy doing work to build a business.

Most business people are too busy doing work in the business to work on the business.

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Back To The Basics

My definition of a successful business is: "A money harvesting machine" I often give the analogy of a business being like a three legged stool having a marketing/sales leg; a production leg; and a financial leg.

These legs need to be in balance if your business is not to tip over.

So a successful business is really three machines all working harmoniously together with one aim; to delight profitable customers.

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Build It To A Drawing

Draw an organization chart showing what the business will look like in, say, 3 years time when you have finished building.

The most powerful tool for building a business is an organization chart.

Initially it will have three legs but a fourth may be added later when you build the franchising "machine" to duplicate your prototype.

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Marketing Machine

All businesses start and finish with the customer. What can you do to delight a specific group of people?

You must get to know this group better than they know themselves. You must know their psychographics I.e.

What makes them buy? What colors enlist what reactions? You must do market research. This is an on going function.

Once established you will be forever asking "What is the one thing we can do better next time?" Then you do it. You must build this into a system with a questionnaires or suggestion boxes.

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Sales Machine

You can be the best in the world at what you do but if you can't sell, your business is dead.

Advertising does not get you customers - it gets you shoppers so you must build a sales machine firstly to get shoppers then to turn shoppers into customers.

How many adverts or letters or leaflets (contacts and leads) do you need every month to sustain your business?

Recently while in the USA, I stayed with a Sales Director who was a master of information. Every evening by 6.30 PM all of his 100 sales team would fill in a report form on the intranet.

The report form detailed their days activities. Letters sent, appointments scheduled, fact finding visits undertaken, verbal quotes given, proposals written and value of sales made.

The system statistically compared one salesperson with the others showing who was "on system" and where improvements needed to be made by which salesperson.

My friend had spent the first six months of his job experimenting and finding what worked with his customers and what did not.

He was recently recruiting more sales people and inducting them into his system. The sales manual has become the training manual for new sales people halving their training time.

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It Works In Small Businesses Too

In my own seminar business I send 87 direct mail letters every month. These get me ten fact finding visits which in turn get me four proposals and two new customers - average every month.

In the early days I made the mistake of relying on word of mouth only. Never learning how to advertise and sell my sales hit a minor down turn and I was in deep trouble.

Experimenting at each level I have since optimized my sales machine and can turn it on or off at will.

I use direct mail and always have a hand written PS because with a hand written PS I get an 11% better hit rate.

I always wear a blue suit for customer visits because again I found, through experimentation, I get a 19% better success rate wearing a blue suit than a brown or gray one.

And of course I have experimented with the best questions to ask in order to close the sale.

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Production Machine

In his book "Grinding it out" Ray Kroc describes his amazement on discovering how the MacDonald brothers had built a hamburger restaurant like a "machine" giving consistent food products and a high sales volume.

Ray Krocs' genius of course was to take the next step and produce a "machine" for selling McDonald franchises all over the world.

If you buy a McDonalds franchise you will go to Hamburger U for six weeks where they will teach you how to run a McDonalds restaurant using an operating manual.

Running a McDonalds is a performance. Running any business can be reduced to a performance with a script and stage managed events.

An operating manual with a simple checklist means you can hire almost any labor and they will perform exactly how you want.

At this many of you will exclaim "What an order, I can't go through with it." "Besides my customers need me, personally and my business is different!"

At this stage I will ask you to keep an open mind. Every business I have ever seen could be run this way if the owner took the time to do it.

Failure to run a business on these lines condemns the owner/manager to a lifetime of work with little or no chance of ever having time off or making serious money.

Probably the most important statement I can make to a new business owner is " You are not the business and it is not you. See it as separate.

Something you are going to build that is independent of you. Build it in such a way as it will work when you don't."

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Finance Machine

Most people hate doing the books and would rather do work. Yet I did not start to make or keep any real money until the day I started to do my own books.

Only then did I start to control my expenditures.

The trick here is to have a simple computer program that turns the numbers into pie charts and graphs so you can "see" where the money is coming from and going to.

The human brain works on pictures so an A4 color chart is much more likely to be acted upon than a spread sheet or print off containing hundreds of numbers!

A really mature business works to budgets. These can be fed into a simple program and a print off should show targets and measure how much is left until the end of the period.

Most people cannot control what they cannot see so simple control information is vital to your businesses success.

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The Fourth Leg - Duplicating The Business

Once the prototype business has been built and the bugs ironed out it is time to replace yourself with a system. Build the business from the bottom of the organization chart upwards.

Each position on the chart will have an operating manual/checklist and now fill each box with a person until the last job of Manager is filled.

Remember that one of the managers tick lists is to daily check people below are all working to their lists too.

Now move to the next location where there are enough potential customers to support the business.

Calculate this number.

Then look for the location. Duplicate EXACTLY the color scheme, process, layout, themes, forms, systems and so on so the second business is a clone of the first.

Then decide if you are going to franchise the second or get a manager to run it while you build your third and so on.

There are definite financial advantages to franchising your prototype but the biggest advantage is that a franchisee will be more motivated than most managers to make the business grow.

Your cut from the business may be smaller but your efforts will be considerably less.

Get further advice from the US Small Business Administration or the UKs Small Business Service before deciding.

© Training Projects

For more on Tom Edge visit www.tomedge.co.uk

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