Do Business Well

Even if you managed to obtain adequate finances for your business, one of the biggest traps is cash flow. Cash flow basically means the movement of money into your business (from the sale of your goods or services) and the movement of money out of it (to suppliers, the bank, other creditors and employees). The relationship of these two flows is very important. Many businesses go under because although they are owed a lot of money they do not have enough in hand to pay the bank/their own debts. There is nothing more frustrating than knowing you are owed 0,000 but not having enough cash in hand to pay for the weekly shop. Continue Reading »

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Every bank and lending institution will require a business plan before they commit themselves to lending you money. A business plan basically shows that you have established that there is a market for your product/service and that having established sufficient demand, you have a good estimate of what your costs will be, as well as your sales volume, cash-flow and likely profit (although the last is often optimistic). Continue Reading »

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For ‘clicks and mortar’ companies, one of the key debates about Internet strategy concerns the implications for organizational structure. The question is whether it should be ‘a detailed strategy that is part of the broader strategic marketing planning process . . . or a separate strategy for a company for which the Internet is a significant communications or sales channel’ . Continue Reading »

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Some companies, particularly in the financial services sector, have established new online brands rather than use the Internet to reinforce existing brands. In the UK, examples include Egg (www.egg.com), which is owned by the Prudential, and Smile (www.smile.co.uk), which is owned by the Co-operative Bank. Egg has been particularly successful in attracting customers, and enjoys high levels of brand awareness, but the attractive rates of interest that it offers to savers and the high level of advertising expenditure have resulted in a perilous financial position. The bank hopes to achieve profitability by cross-selling more lucrative products to its savings account customers. Establishing new brands for online activity offers traditional banks — which often have a rather staid image the opportunity to ’start again’ and develop a more modern style to appeal to new customer segments online. However, one drawback is the increasingly high cost of establishing an online brand as the marketplace gets ever more crowded. Another is the increasing tendency for customers to expect a choice of channels, and not be forced to conduct all their banking online. Consequently, it is rumoured that Egg is now looking to set up a physical branch network. It has also been suggested that in the early days of the Internet, the strategy of brand creation was a ’safety net’ so that if the online venture failed, the established brand would not suffer by association with it. Continue Reading »

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In the ‘post-dotcom’ era, one of the most important lessons learned by the survivors is that it takes more than a flashy Web site to succeed. It depends on a good business plan, promotion, focused customer service and an efficient distribution system. It also helps to be connected to a strong and trusted brand. When famous designer Ralph Lauren decided to launch his Polo brand on the Internet (www.polo.com), he joined forces with NBC (the National Broadcasting Co.), NBC.com and ValueVision Fulfilment services. Each of the partners brought its own specialism to the venture: Ralph Lauren supplies the product and the name recognition, NBC provides promotion on its networks and the Internet, and ValueVision handles distribution and customer service. The new venture went from birth to fulfilment in nine months and distributes a wide range of products, including clothing for men, women and children, as well as Ralph Lauren’s home collection. The state-of-the-art distribution centre was designed with versatility in mind, down to the last detail. Even the packaging design has a strong emphasis on customer care and branding. As explained by Howard Fox, Senior Vice President of ValueVision, ‘This isn’t just a normal pick-pack operation; Ralph Lauren takes a lot of pride in its packaging. It’s part of their imaging and branding.’ An efficient returns system is an important component to any dotcom. Polo.com is recognizing that the returns process is an extension of its customer care. Only about 10 per cent of all ordered items are actually returned. This is about half the average industry percentage for clothing-based distributors. It is also less than Polo.com originally expected. Continue Reading »

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On the positive side, a well structured franchise concept will elevate the business to the status of a national or even international player much sooner than he could realistically have hoped for, had expansion been attempted through traditional channels. Experience has shown, too, that although it takes time and patience, the synergies created through franchising have the potential to make the business extremely profitable over time. Just think of McDonald’s.

Along similar lines, the second hurdle every prospective franchisor will have to negotiate is the need for utmost realism when initial and ongoing fees are calculated. Given the long-term nature of a typical franchise agreement, this decision can make or break the new franchise operation. Set fees too high and few people will join the network. Those who do are likely to struggle to make ends meet, thus virtually ensuring that the long-term prospects of the network remain poor. And if the franchisor acts as the main supplier to his franchisees as well, he must take care to ensure that prices for goods are set in such a way that the franchisee’s competitiveness remains intact.

Franchisees must be secure in the knowledge that their franchisor offers them the best possible deals at all times. Although profit generation at unit level remains the franchisee’s responsibility, the entire franchise package must be structured in such a way that it offers those who follow the franchisor’s instructions to the letter a realistic chance to achieve above- average returns. Franchisors who overlook these important points are almost certain to fail, and deservedly so.

Typical financial transactions

The financial transactions that occur in a franchise arrangement can conveniently be grouped as follows:

Franchisor’s investment

At the outset, unless the franchise is the offshoot of an existing business that has been operated successfully for years, the prospective franchisor will have to make an investment into the development and testing of the concept. And even if the basic business concept is in place, the step of franchising it will necessitate certain modifications. The next step will bethe creation of the franchise package, followed by the setting-up of the franchisee support infrastructure. Continue Reading »

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A certain mystique has surrounded banking for centuries and some of it has managed to survive to this day. Considering the fact that we live in a time when old bastions of authority have crumbled and cynicism rules, this is rather surprising, but it is a fact nonetheless. Many people continue to see bankers as creatures with almost supernatural powers, in a position to decide the fate of a small business at a whim. To them, bankers are the custodians of piles of cash that they will lend only to a select group, with thedecision to grant a loan being based solely on old affiliations and personal preferences.

They tend to overlook the simple fact that in a banker’s hands, cash is practically the same as the merchandise a retailer offers for sale. Bankers accept money from depositors who expect to receive interest. They in turn lend this money out to borrowers whom they charge interest, obviously at a higher level, and the differential between the two interest rates enables them to generate profits for their shareholders. Although this may be an oversimplification, it illustrates the point that bankers are practically forced to lend out money. If they fail to do that and keep the money in their vaults instead, they will soon go out of business. Continue Reading »

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By becoming a franchisor, you enter a new business environment. It is f longer hamburgers or exhaust parts you are selling, but a business system that will put others into business and help them to become successful their own right. And the mere fact that your core business runs like clockwork does not mean that you are ready to start selling franchises. significant amount of preparatory work will have to be done before you a ready to introduce the world to your franchise offer.

Revisit franchiseability

Should you wish to reassure yourself that your business is inde franchiseable, it may be a good idea, where franchiseability is discussed, with specific reference to Figure 5. At this point, the condensed description of franchising that forms part of t Consumer Code for Franchising may shed additional light on the matt We have reproduced it as the following.

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