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Opinions are described Entrepreneur their contributors.
Scott Greenberg Wealthy Franchisees: Steps that change the game to become thriving Franchise Superstar will be released through the Entrepreneur Press on November 17th. It can be configured through Amazon and Barnes and Noble.
“So do you business execution “.
– Well, you know, as they say, most businesses close in the first year? It’s been 18 months and stay here! “
“David” came to me for the purpose of business coaching for his trading franchise. From our meal it was clear that he had no idea how he worked in his business. He was fine. The money was in the bank. He was busy. But in reality he had no idea whether he was growing or going bankrupt.
David is not alone. I meet so many smart franchisees who feel their way forward without data. Some owners are too busy to worry about accounting. Others have bad habits in accounting. One franchise I coached was nine months behind in his QuickBooks records. He evaluated business results based on the balance of his bank account. Another franchisee I worked with admitted that she was very embarrassed to stay in the room. She already knew they would be fine, and wanted to fight it.
Ten years as a franchisee himself Edible Arrangements, I know it looks like being busy. Financial data entry is important but not relevant. It was easy to put it off. I also know that you feel bad report management and cope with poor performance. So much of my work with a franchisee goes to the emotional side of doing business. It’s easy to hide from this by focusing on operations. Hard work feels good.
Similar: Buying a franchise after a pandemic
Business development requires a transition from emotional to objective. I encouraged positivity in my clients. I urge clarity. Seeing things as they are. The numbers introduced lies. They also tried judges. You need measurable key performance indicators (KPIs) to know the truth about what is happening.
Never before has data been so readily available to franchisees. Modern POS systems, good accounting software and sophisticated data entry habits give you access to a treasure trove of information in seconds. Monitoring this data is vital for plugging holes and seizing opportunities. Pilots wait until the end of the flight, look at their devices. They regularly inspect them to ensure flight efficiency and safety. Franchisees should monitor their number with the same concentration.
Here are some KPIs you need to monitor to ensure your business is healthy.
This is the most basic dimension of business. This is of great importance to your franchisor. They use it to accommodate you and calculate their royalties. Although gross sales is definitely one of the most important performance indicators, there are many, only this number does not tell you, for example, sales trends, where sales come from and, most importantly, how much profit you make (or money you “we go out”) Gross sales mean very little, with no other KPIs to provide context.
This is a comparison of the effectiveness of your sales with a different period of time. It tells you when your business is growing, shrinking and at what rate. Like gross sales, context matters. The franchise, which goes from $ 300,000 to $ 360,000, has grown by 20 percent. The franchise, which goes from $ 800,000 to $ 920,000, has grown by 15 percent. As gross sales increase it is difficult to grow by the same percentage, even if dollar growth increases. Twenty percent more than 15 percent, but sales growth of $ 120,000 is twice as much as growth of $ 60,000. But is a $ 920,000 business necessarily better than a $ 360,000 one? You really mean it until you see your expenses.
This usual overall figure is useful only in moderation, mainly because it is based on gross sales. Who knows if these leading franchisees are making a profit? If you don’t know their costs, you appreciate how good business they are. Guaranteed you rating would look completely different if they were based on a profitable unit.
Having said that, something drives sales for senior positions. If you provide their location, not much can be done with this information. But it could be them marketing, their continuation or some other factor that you can copy. Pay attention to who is upstairs and look at their ideas.
The expense is the opposite of selling. Monitoring costs are critical to ensuring profitability. They say, “a penny saved is a penny earned.” But when franchising you pay a royalty salary. That means saving a penny is worth it more than pennies earned. But you can save only if you really know your costs.
Many franchisees exist. I recently coached a franchisee who worked without P&L. Not only was he unaware of what he was spending, he was equally in the dark about how much it cost should to spend.
I helped him develop a profit plan. We have set benchmarks for what he or she should spend on each account as a percentage of sales. He wanted to get a minimum profit of 10 percent. Our benchmarks were limited to 90 percent of what it takes. So we went down the list of expenses, determining what he should spend, and comparing it to what he was costs. Fees were fixed at 10 percent. The industry standard for marketing was also 10 percent. He was half that. We considered labor, cost of goods, rent, and all other expenses. In real time, it spent 102 percent of gross sales. That meant he was running at a loss – even though he was in the top 50% of the franchisees in his system. To achieve its goals, it seeks to spend more on marketing while reducing overall costs by 12 percent of gross sales.
Attack in sports is more glamorous, but most coaches will tell you that defense wins in games. Cost control – business protection. Make the necessary investments to increase sales and customer service, but keep a close eye on the conclusion.
Number of customers
It is important to know how many people it serves and how many times it serves them. Re-business means providing good service. New business means your marketing is working. (It can mean providing good service and your customers telling their friends.) You always need to attract new customers and turn them into ordinary people.
Average ticket / sale per employee
Most franchisees consider transactions, but they always look at how much each customer spends. Sales can be both deep and wide. More customers are great, but more sales per customer are also good. You need to focus on both. The market is more to attract customers. Sell more to increase the average ticket price. Also look at the average ticket per employee to find out who needs help and who can provide it.
The cost of living and the cost of acquisition by customers
Once you’ve learned about the number of customers, how often they come and how much they spend (on average), you can use those numbers along with the costs to calculate the value of the customer’s life (CLV). How much net profit does one customer bring to your business over time? Your CLV is an important amount to know, especially when planning marketing campaigns. This amount should be less than the customer acquisition cost (CAC), which is how much you pay to win each customer. For example, if you have a franchise with frozen yogurt and you decide that on average one customer makes a profit of $ 100 over time by consuming their CLV. If a marketing strategy is going to cost you $ 5,000, you need to attract 50 customers to bring down. (In this case, your CAC is $ 100, the same as your CLV.) If your marketing brings 75 customers, your CAC is $ 67. Make a profit of $ 33 per customer after paying for marketing.
The purpose of marketing
“How did you find out about us?” The tabularity of customers ’answers to this question is very important to find out where they come from. The only way to know if a marketing campaign is working. This question also shed light on yours Consumer service. As the service improves, more and more customers will say they have heard about you from a friend, reviews online or what they have used before.
Excellent customer service increases the number of customers as well as the average ticket price. Feared alone the best way to expand your business. Afraid how I built the mine. I have found that very well in my marketing franchisebut I have made customer service a top priority. It got us major sales.
Like other elements of your work, you can measure customer satisfaction. There are many tools for this, such as the Net Promoter Score®, the Customer Satisfaction Index (CSAT) or the Customer Effort Index (CES). You can also monitor your reviews online. Of course, the actual dimensions of customer service are repeat transactions, word of mouth and the actual increase in sales.
Satisfaction of employees
After speaking with the privilege of a fast food restaurant, I exhibited a slide that showed a digital correlation between online customer reviews and online job rankings for five different competing brands. Happy employees provide better service. This means you need to monitor and measure your team’s satisfaction level. Be mindful of assumptions, especially about your best employees. They are competent professionals. They work great and look happy looking for another job. Talk to your team and conduct surveys that measure their level of satisfaction over time.
There are countless statistics in sports, but the only one that really matters is the final number. In business, the only KPI that really matters is profit. The lie of your North Star. Fear the reasons for doing business. Other statistics are just indicators of how things are going and what should happen. You respond to these metrics to know how to set up transactions and improve margins. Each KPI needs to be looked at with profit.
These figures are just the tip of the iceberg. If you have a data manager and you like percentages and odds, numbers are missing. Most franchisees are too busy. Anxious to worry. With good habits and technology, entering data and running the right reports shouldn’t take more than a few minutes a day.
You started working hard. Keep an eye on the numbers to make sure you keep working smart.