Savvy franchisees use a strategy called unit economics to track and manage costs and revenue for their businesses, Franchising.com writes. This helps them stay up to date on the franchise’s day-to-day operations while making it easier to be approved for additional funding, if they ever need it.
Both new and established franchisees can benefit from using unit economics to track and boost revenue. Steve LeFaver, founder of Business Resource Services, a consulting firm, told the Web site that business owners can implement this strategy by employing and monitoring six financial components - a chart of accounts, financial statements and bookkeeping, a performance scorecard, benchmarking, a cost analysis and franchisor support.
While some of these elements, such as financial statements and bookkeeping, may seem obvious to entrepreneurs, their importance cannot be overstated.
As franchisees work to drive performance among employees and managers, a “scorecard” can help keep everyone on track. These documents are one-page financial reports that allow owners to track profit and cash drivers while holding individuals accountable, LeFaver says.
Benchmarking is a similar practice. Owners should research performance levels of fellow franchisees, as well as system-wide benchmarks if the franchisor provides them. By evaluating median and top performance data, franchisees can set appropriate goals to spur performance.
Furthermore, in today’s tight economy, businesses should be performing cost analyses to ensure that they know exactly where their money is going and what it is being used for, LeFaver told the Web site. Franchisees should ensure that managers and other important business leaders understand how to perform a careful break-even analysis. “When it comes to cost analysis, you must be able to trim with a scalpel, not a hatchet,” he added.
Lastly, franchisees should utilize any financial assistance a franchisor offers. Franchisors are just as invested in making the business successful, and often offer business training or counseling to improve revenue and hone skills.
Unit profitability is about “what’s at the bottom line at the end of the day,” Neal Faulkner, a Dunkin’ Donuts franchise owner, told Multi-Unit Franchisee. The magazine says that franchisors can offer incentives such as bigger bonuses to increase profits and employee performance.
The Liberty Tax Service franchise opportunity is #9 on the fastest growing franchises list of the 2010 Entrepreneur “Franchise 500.” Our tax franchise is an affordable and viable business choice. Each office provides thorough, computerized tax preparation coupled with superior customer service. For the best small business opportunity in the income tax franchise industry, choose Liberty!