Edmonton Accounting Firm | What To Remember When Purchasing Franchises
Franchises can be very appealing to people who have never owned a business before according to Edmonton accounting firm. Not only because it comes with a system, and processes to follow. That can help business owners follow a proven path to success.
But also, because franchises are a known brand. That have a built-in customer base. Who are already familiar with their products and services.
And also, according to studies, franchises have a lower failure rate than typical small businesses. With only 14% of franchisees going out of business within five years. As opposed to 50% of small business owners in Canada.
However, before people run out and purchase any franchise they hear about. Edmonton accounting firm cautions that not all franchises are created equally. And not all are the great business opportunity that they might appear to be at first glance.
One of the first things that people need to keep in mind. Is that the person that they are talking to about buying a franchise. Are not a business advisor, no matter how knowledgeable they might seem about business matters.
But instead, they are a paid salesperson working on commission. That are not in it to help a person make the best business decision for themselves. But a salesperson who is trying to sell as many franchises as possible. To increase their pay day.
Because of that, they often misrepresent financial information. And often apply sales tactics such as pressure and a false sense of urgency. To get a person to make a snap decision more quickly than they normally would. To make the sale quicker.
Because of those sales tactics, finding an Edmonton accounting firm that can help them make an objective decision is incredibly important. Their accountant can help them ask for the right information.
And then help them look at that information objectively. In order to decide if this is the right decision for them or not. They will look at information that is often overlooked in order to make this decision.
For example, business owners will be prompted by their accounting firm to ask for accountant prepared financials. Instead of plain paper statements.
The reason why this is important to ask for. Is because most franchises give plain paper statements. But this is not complete or correct financial information. That can misrepresent the financials of the location.
That could end up with the business owner making one decision. When that is not most advantageous decision to make.
They will also prompt the person to ask the franchise for accountant prepared financials for different locations. Because it is most common for the franchise to hand out the financial information of their best locations. But a person should look at the financials for an average location as well.
Because while a business owner will do their best to have an extremely high producing location. This is not always possible. And they should see what an average location is capable of. To decide if that is something that they are interested in doing.
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When business owners are deciding to purchase a franchise, they should contact to their Edmonton accounting firm to help them decipher the information the franchise gives them. The reason why, is because the franchise does not always give the best information.
And even if they tried to give the best information, having an accounting firm help cipher the information. In order to make an objective decision. Is very beneficial In helping people make a decision on whether this is a franchise they would like to own or not.
One of the first words of caution that accounting firm has. Is if people are not interested in following the systems and processes created by the franchise. They are not going to be very happy owning a franchise in the first place.
And can often save their money, because franchises often cost more money. Not just in the franchise fee when they initially by the business. But in the royalties that they will have to pay on an ongoing basis every month. In order to keep the name.
However, for people who are interested in following the franchises system. It can be a great way to own a business. And hit the ground running, as soon as they purchase the business. By letting business owners know exactly what they have to do. In order to follow the franchise system and succeed.
However, not all franchises are the same. Some have significantly higher franchise fees than others. As well as different royalty agreements. That can and up making the deal look significantly less advantageous. When they look at the franchise agreement.
This is why it is important for business owners to hire and Edmonton accounting firm. In order to help them figure out the financials of the franchise. To decide if this is the right business opportunity for them or not.
One of the things that their accounting firm is going to do. Is help them see if the owner’s time is accounted for fairly in the payroll numbers that they get from the franchise.
If the business owner is working significant hours in the business. But not taking a huge salary. They might not get the best idea of how much it is going to cost them to fully staff business. And keep it running, without having to spend a significant amount of their own time in the business.
And if the business owner had put their spouse, and their children in the business. In not fairly paid them either. The financial information may be very misrepresented.
Which can end up being a dealbreaker for a business owner to purchase this business. If they are not going to be able to make money while keeping it staffed.
This is why it is very important for business owners to get their Edmonton accounting firm to review the financial information with them. So that they can ensure that there taking everything into consideration. And making the most objective decision but whether to buy the business or not.