Franchising to Unlock Business Value | Business Growth through Franchising

Use franchising to unlock business value

Early preparation in terms of business exit planning is crucial if a business owner is going to maximise their earning potential. Often when looking at the value of a business a typical model will be to look at annual profit and then multiply by 1 to 2 times its value. In reality, the business will traditionally only sell at its lowest calculation. One key area of unlocking the true business value is through the route of franchising.

The reasons why franchising can be so profitable are:

  • You will continue to run your well established and profitable business. This ensures you maintain a healthy cashflow and of course have a sellable asset when you need it.
  • When you undertake a franchising exercise you can take your existing business model and open up new facilities in new locations but without damaging the profitability of the main business. Complete this multiple times and you now have an even larger business asset.
  • Every time you open a new franchise area you get a fixed fee along with an ongoing percentage which you have agreed with the franchisee. As soon as this franchise is established you can start to include your new revenue levels in your overall business valuation.
  • When you have an established network, the next step is to look at further expansion. You know the model works and is successful so you can growth further by opening even more franchisees. The other benefit is even if you don’t open more, you have a proven growth model which ultimately adds extra value to your business.
  • Another area which is often overlooked but can generate good income levels is with your supplier network. For example, if a new franchisee needs new business premises and a full kit out with machinery then you can recommend a supplier and in turn you can set up an introductory commission.

As you can see there are many benefits for franchising your business to assist with your exit strategy. Of course, as with anything it won’t be right for everyone and is a more of a longer-term strategy so won’t be suitable for somebody looking for a quick exit.

If you are seeking a little bit of help or guidance with your business planning or any area of franchising, feel free to call us on 01993 706403 or e-mail hello@ngifranchisefunding.co.uk.

750 400 Lorna Slee