You can make a lot of money as a franchise operator. However, before you do, you’ll have to make some adjustments in how you manage your personal finances. That’s because starting a franchise requires a significant investment, and it could take several months before you break even.
During this franchise startup period, you will want to keep as much money in the business as you can in order to overcome any unforeseen franchise obstacles. As a result, you probably will not be able to take home the amount of money that you are used to in your paycheck.
So how can you adjust to your new financial situation while keeping your franchise and your personal finances afloat? By following these tips:
Pay Down Your Debts
Outstanding personal debt can weigh heavily on your shoulders, and they can sink a new franchise before it gets off the ground. That’s because you will feel pressure to take money out of the franchise before economically viable, and the larger your debt, the harder it will be for you to obtain franchise funding from third parties. Thus, plan to pay down your debts before you sign your franchise agreement and approach a lender.
Make A List Of All Of Your Expenses
The first step toward saving is to find out exactly what you are spending. Examine your bank accounts and credit card statements to ascertain your current monthly expenses. Get as detailed as possible, and write everything down.
Separate Personal Funds From Business Funds
Many first-time business owners fail to separate their personal and business accounts. However, doing so is of vital importance — it makes it a lot easier to gauge the success of your franchise; it makes organizing and managing your bills a whole lot simpler; it can reduce your personal liabilities if something were to happen to your business; and it is essential to avoiding government scrutiny when it comes to paying your taxes.
Don’t Stop Planning Ahead (Or For A Rainy Day)
When investing in a franchise for the first time, many people elect to forego disability insurance and retirement planning in order to save a little money. However, this can be a big mistake.
As the head of your own franchise operation, you’ll need the financial security that disability insurance can provide if anything were to happen to you. This is especially true if you have a family that is depending on your income. After all, if you get injured, you do not want to take money out of the franchise that you’ve put so much into building.
As for retirement, starting your own business is the perfect time to explore the benefits of different retirement options, such as Roth Individual Retirement Accounts, individual 401(k) plans, and SEP IRAs. Find out which option is right for you and start investing as soon as you can.
Cut Out The Luxury Items
With visibility into all of your expenses, it will be easy to identify those items that you can do without or that can be replaced with more affordable options. For example, try cutting back on dining out; swap your daily latte with a home-brewed cup of coffee; shop around for a cheaper cell phone plan; and put off any planned vacations until after your franchise is off the ground.
If money is still tight, consider raising deductibles on your home and auto insurance policies in order to lower your premiums. In short, look for any opportunity to cut out unnecessary expenses.
Of course, if you and your family are used to living a lavish lifestyle, this change can cause a lot of friction between you and your loved ones. That’s why it is important to properly prepare your family for your new franchise.
Get Financial Tips For Starting A Franchise
In addition to gaining control of your personal finances, we can help you gain control of your franchise’s finances, too. Download our complete financial guide to operating a franchise today!