In franchising, as with in any business the goal is to make a profit and generate cash. Of course, it’s important to enjoy what you do, but performance is reality.

Whilst it seems obvious that profit is what we are aiming for, at the start of the financial year, attention turns the question of how much tax we’ll have to pay. And it’s understandable we want to pay as little as possible.

Unfortunately, things can become tricky if we get caught up in the idea of paying less tax rather than making more profit and cash.

For some franchise business owners, the instruction to their accountant at the end of the year is “make the profit go away”.

This approach can be a problem for several reasons:

• A benefit of being in a franchise is the ability to benchmark your franchise business with others. You can only do this if your accounts reflect true operating performance.
• The resale value of your franchise business will be a multiple of profit. To support this your accounts should show the best profit possible.
• If you need a loan, your bank will want to see tax returns which show the franchise business is profitable.
• Your franchise field manager needs to know your business results at the operating level -before your personal expenses and drawings - so they can help you improve the results.
• It’s hard to feel positive about the franchise business if the accounts don’t show a profit, even if you know there have been ‘adjustments’.

Create a plan to build profit, cash and value

Especially in this uncertain economy, profit is too important to be left to chance.

You’ll need a plan if you are to avoid profit being ‘what’s left over’, and instead run your franchise business so it delivers the cash and value you hoped for when you started out.

Planning does not need to be a complex process though it can be hard to do alone. Here are some questions to ask - perhaps in a conversation with your franchise field manager:

• What did my franchise business make last year? Look at the operating profit and the cash that was left after paying loans, interest and drawings.
• What result do I want this year?
• What are the four key indicators that will help me see whether I am on track?
• What will I start doing, stop doing and keep doing to help reach my goals?
• How will I work with my franchisor?
• What processes will help me stay on course?

While the motivations to start a franchise business are varied, if it’s not profitable it does not really matter how much we enjoy the day to day activity or the franchise relationship; in the end we’ll be disappointed.

Thinking about your business as a business, with a clear focus on building profitable sales and cash flow, will help you make money and enjoy the journey of franchise business ownership.