Hey everyone, Giuseppe Grammatico here, your franchise guide. On today’s podcast episode, we tackle some really common pitfalls many new franchisees fall into, specifically that crucial first year! These are mistakes I’ve made, and seen many others make along the way. Whether it is setting yourself up for a solid start, making mistakes is common when opening any business. You must learn how to navigate that initial journey to minimize issues and achieve maximum profitability! If you’re a first-time business owner ready to dive into franchising, listen up – I’m going to share my best advice, with no fluff, from someone that’s been in the game a long time!
Before I jump into those mistakes, If you are ready to speak about how franchising may change your life, book a call with me directly or you can send an email. Don’t have any shame, book a call and let’s chat or we can help point you into the direction. No pressure! We are here to help you through the process.
Okay, now that’s out of the way, let’s jump right into these mistakes!
1. Paying Yourself Too High a Salary (and Killing Your Business)
One of the first mistakes I consistently see and have also been guilty of when I started my franchising business, is paying yourself too much, way too early! It’s great that the money’s there and it’s extremely tempting, trust me, but that can suffocate the rest of the business. You will always need working capital to ensure the business stays profitable. Many want to match their previous job salaries right away but I am here to tell you this usually ends in marketing efforts failing or important staff not getting hired and needed equipment getting delayed.
What’s my advice here? Pay yourself a reasonable salary, for sure, but prioritize re-investing back into the business during that initial crucial first year to lay that strong foundation to expand your profit margins later. There are great systems out there like “Profit First” which essentially uses the ‘bucket’ method for organizing and protecting profits! This system also keeps the money protected by reducing access so you don’t fall into the trap of overpaying yourself and leaving nothing for overhead, like the often forgotten marketing costs. It all must be aligned, if one pillar crumbles, they all crumble! I actually discussed all this with the one and only, Rocky Lalvani from Profit First, in three different episodes, so make sure to check those out! I linked them below!
- Franchise Financial Freedom with Rocky Lalvani
- Profit First with Rocky Lalvani
- Making Sure Your Business Pays YOU
2. Not Giving Enough Time to Marketing
Franchises often call themselves marketing and sales companies first, before the products and services, because marketing is just that important. One rookie mistake is rushing the process. Your marketing should be a constant strategy, you cannot try something once or twice and give up when results are not what you want right away. There’s many moving parts, especially if you want those HIGH QUALITY LEADS that turn into HIGH VALUE CUSTOMERS. I was also guilty of this because I too want to see the results NOW, but we have to be patient, it takes a minute to see the plan come to life. The process always must start before you are ready and sometimes well before that grand opening and those numbers and tests all help paint the story and allows you to pivot strategically in the direction that needs tweaking or improvement.
Many great franchises offer ongoing training to give you and your staff a proper set-up, I will recommend tapping into these valuable tools to gain as much insight and guidance and keep you ahead of any major bumps in the road to long term growth and success.
3. Not Budgeting (and Underestimating Costs)
Budgeting in business means budgeting and understanding not just start-up costs, but a financial awareness over every element within the operations for long term success. The Item 7 in the Franchise Disclosure Document offers an estimate, but these numbers are from past trends and can always be outdated given current economical issues and trends. In those situations, many times new builds will require even more for materials and equipment, which can affect construction and even staffing cost (especially skilled staff!).
Therefore you want to not just be frugal but plan to the higher end in costs because a business start and grow strategy also must have unexpected surprises, personal lives or a delay can slow down a grand opening or affect your operational timeline. In these cases you need that working capital that was discussed in tip one. Be mindful in your finances but keep aware, that in times, things may also increase in costs, planning ahead always creates a much greater environment of ease for all elements, not just numbers, I’m talking mental bandwidth too! If there is anything I will say that has helped me and all the successful people around me: Prepare and Plan in All ways that you can possibly think of. It really allows you more breathing room as you progress.
4. Straying Away From The System
Why do we buy into a franchise business? A system right? Well some many rookies start tweaking the process right away because maybe they want more of their control, adding services that do not follow brand’s core structure, adding distractions to core service or they will often have different reasons for starting and making changes within a perfectly set up environment. By the time this type of franchisee does all of this changing, things are off course and often times cause issues or roadblocks to major areas that can jeopardize the franchise model as a whole, especially in year one. It makes you not only take your eyes off the bread and butter which often creates an area for lower numbers and performance overall.
Remember this! Any system has flexibility but with any brand there’s always set standards and boundaries that keeps that whole operation, a profitable machine. When starting it will require trust and adherence that you are trusting to create in this partnership, a long term profitable business, a system that keeps it efficient! Take your energy and any ideas, jot it all down then connect to your coach or leadership for possible opportunities down the road as those come up or as your experience and performance also moves along its unique journey to business ownership and freedom.
5. Doing Everything Yourself (To Save On Costs)
I am also very guilty of this in my past as many other people and franchises because it’s extremely natural for a new business owner to think of every cost especially in year one. It’s only natural, especially when trying to reduce costs where we could. If you don’t see value and results at first it can affect an owner’s mindset in this regard, it can be the difference between sinking or soaring and when we focus on costs too much it effects many elements within the operational process like training, and sometimes all parts are so diluted it doesn’t create focus. You are just basically taking small steps instead of those big jumps for scalable revenue.
We, must instead prioritize delegation for core aspects within business development and understand what it’s going to cost when paying experts to get things handled well to support the growth at a much quicker level, allowing the owner to focus solely on higher dollar tasks instead. So what if it costs a little bit more now, if you increase revenue by the tune of double or triple or tenfold! This should be something always re-visited! When starting any business you really must become more business savvy instead of focusing on what I call “penny wise but pound foolish.” Make sure you hire staff as you are growing to manage other important areas like social media management and sales if those are not areas that provide your ideal strength to shine and to make money, your core focus MUST BE in YOUR areas of influence.
Final Thoughts
I’ve been in franchising for 20 years. When I reflect, I did not just ‘stumble on’ any great achievement; every great achievement involved learning the steps of someone who also achieved before me, making changes in systems, or simply focusing on a goal. Avoiding these 5 mistakes early on could prevent you from costly errors along your path to building the freedom you always wanted! Make that smart decision today to learn before starting because knowledge and wisdom really help a business become extremely sustainable. If I can change my business by reflecting back then you too can also have it! The right strategies plus guidance from coaches/mentors = WIN!
Are you ready to take control of your future and really find the right franchise fit? Visit https://ggthefranchiseguide.com/right-fit and let’s connect!
