Whether in good times or in bad, keeping an open eye for saving money will always be a good strategy.
This means checking all processes and recognizing inefficiencies or redundancies. Once removed from the equation, this will create a more effective and profitable franchise business for you, your partners, and your employees.
But what is the right approach? And where do you start?
An Opportunity for Growth
Franchising provides autonomy and freedom to franchise owners without the feeling of going at it alone. There is a constant flow of guidance and support from your franchisor, brand awareness, and training for growth and success.
Franchise123 has previously covered in-depth the business growth stages you can experience as you progress with your franchise.
Partnership with a franchisor can be a win-win move. To own a franchise means that the franchisor believes in your capabilities to grow your business and, with that, the franchise brand.
These benefits of franchising can offer an opportunity for a faster break-even and return on investment.
Franchisors assist solo entrepreneurs in building a strong business. Clients win from this relationship as well, as their services are supported by a professional and already demonstrated way of managing a business.
But no matter the support you receive, nothing stays constant. The market changes, consumers leave, and many other internal and external changes can occur.
This is the moment when cost optimization must be in place.
Top Strategies for Expense Reduction
The cost optimization process for each franchise business model is different.
Below are some of the proven strategies for expense reduction. If implemented correctly, they can greatly change the look of your balance sheet.
Expense Review
The very first strategy you should implement from the moment you start your franchise is examining all expenses your business has.
You would be surprised how many people forget to start here. It doesn't matter if it's a big or small expense. Over time, everything matters.
No franchisee can be successful without proper expense management. Give a close and thorough look at the business budget, and make sure to eliminate any unnecessary expenses that could be hurting your bottom line.
If you are good with numbers, and you can do this by yourself, you will benefit from additional savings. But, if numbers are not your strength, or your business is already on a bigger scale, using accounting software or hiring an accountant would be your best approach.
Introduction of Telecommuting
If there is one thing the COVID-19 pandemic taught us, it’s that a great percentage of jobs can be done remotely.
If your business allows it, providing the telecommuting option to your employees can change the work environment and reduce business spending.
Once the strategy is introduced, you will see that you may not need to rent that huge office anymore. Utility expenses will go down, as well as any expenses related to office maintenance.
Work Smarter, Not Harder
The purpose is to discover the little things that produce the best results.
For example, follow the 80/20 approach. 80% of your business usually comes from 20% of sources/clients. Efforts to reward loyalty or encourage referrals can go a long way and may be a better use of your marketing budget than only going after new customers.
Don't get stuck on the number. 80/20 is just a baseline—it is normal for businesses to have slightly different numbers.
The 80/20 approach is not about producing or working less, but prioritizing and working smarter.
It is about delivering better value and results.
Cutting costs is never easy. Many times, you will need to be creative. Go beyond the "it's been always like this" approach, and check the alternatives.
While your marketing may be covered on a national level, the local playing field is yours to grab. Find a marketing avenue that will effectively reach your specific audience.
Learn the benefits that Google AdWords and Facebook Ads can bring to you. Discover the benefits of newly created content. LinkedIn and TikTok ads are undervalued as well, so the organic reach there is a must for any business.
Last but not least: word of mouth. Encourage this powerful approach and make your loyal customers part of the marketing circle.
Outsource
Independent contractors and freelancers are cheaper and easier to hire compared to traditional employees.
If you can set enforceable freelance agreements and set your expectations early, your benefits can extend beyond just the costs.
By outsourcing any non-core work, you eliminate the need to provide health insurance, pre-tax retirement accounts, time off, sick days, or any additional costly benefit. You will have to pay only for the completed work.
You should be aware that contractors and freelancers will not be as loyal to you as regular employees, as, after all, they tend to have other jobs and obligations parallel to the work they do for you.
But for any one-time project or non-core activity, outsourcing can be the secret move that will keep your business labor expenses under control.
The Time for Action Is Now
Based on your location and franchise type, different cost strategies will have different outcomes.
While some are perfect for your business model, some will not work at all.
While we have described a few of the top approaches you can take towards expense reduction, many other strategies await to be tested.
One thing is certain: you have to start now. Don't wait for your business to experience a drop in sales or a difficult period. Plan ahead to avoid finding yourself in a bad place financially.
Stay tuned for more tips on budgeting for your franchise business!
