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 his article.
 How To Build Your Small
Business
Like A Franchise
By Tom Edge
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.
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.
60, 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.
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.
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.
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.
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.
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.
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.
Production machine
In his book "Grinding it out" Ray Crock 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 Crocks' 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"
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 expenditure.
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.
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.
© 2000 Training Projects
For 101 free business tips visit www.tomedge.co.uk
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This article may be reproduced for your non-profit
group or organization provided it is not altered in any way and
the following is attached:
©1998 - 2004 Eagle Marketing PO Box 271 Bozeman, MT
59771-0271
http://www.smalltownmarketing.com - (406) 585-0219 - Toll FREE
(888) 550-6100
email: tommail@smalltownmarketing.com
Based in Bozeman, MT, Tom Egelhoff is the author of How To Market, Advertise & Promote Your
Business Or Service In A Small Town, and The
Small Town Advertising Handbook: How To Say More And Spend Less.
He is also a seminar and workshop presenter
and trainer. He may be reached at 888-550-6100 or PO Box
271 Bozeman, MT 59771-0271
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