There are plenty of day-to-day details that need attention when running a franchise, and how well you’re able to take care of all of them will be hugely important in determining business success.
Even amid dealing with daily operations, it’s essential for franchise owners to zoom out and track some of the big picture indicators that truly determine the overall health and performance of their business.
Ultimately, there’s no indicator more important than profit. Some franchise businesses will sell more than others, perhaps thanks to costly marketing campaigns or maintaining an expensive, high-traffic location. Ultimately, however, profit separates those with true business acumen from those who’ve spent big to sell big without making any money.
Of course, there are plenty of other things a franchisee can track and tweak in order to try and generate increased profits. Here’s a look at three components of the business smart franchise owners should track when monitoring success.
How much are you selling?
Gross sales alone may not be the most accurate indicator of franchise success, but that doesn’t mean this basic business number isn’t worth tracking. There’s tremendous value in knowing how well your business is faring compared to the same period a year earlier. Likewise, there’s lots to learn from examining month-by-month numbers to identify trends. A rise in sales could indicate that your business is poised for big things, but you’ll have to keep a handle on costs and customers, too. Tracking monthly numbers could also help you determine the seasonality of your business, and let you plan accordingly.
Know who your customers are…and how satisfied they are
Do some research and surveying to learn the total number of customers who visit your franchise every month, then drill deeper into the numbers and find out how many are returnees versus newcomers. You’ll also want to determine the average spend per customer, and average frequency of visit. Ask new customers where they learned about your business, so you’ll be able to tell which of your marketing campaigns are paying dividends, and how much you’re paying to attract new business.
While you’re surveying your customers, solicit their opinion on your business and how satisfied they are with it. It’s also wise to keep a watchful eye on online reviews to see what people think, and how well you measure up against your competitors in the court of public opinion. Needless to say, happy customers tend to be returning customers who help generate new business through positive word-of-mouth reviews that are as valuable as a paid marketing campaign.
Costs and pricing
Before you can accurately know how much to charge for something, you need to know precisely how much it costs you to provide that particular product or service. Without that information, you’re playing a dangerous guessing game that could end up eating away at your profits. Even strong sales numbers can mask serious issues if costs aren’t properly accounted for. Consider the case of an imaginary business owner who hasn’t priced her services properly. By examining her books, she discovers one high-volume client has negotiated a price so low, the contract is dragging down profits. Counterintuitively, the overall health of the business will actually improve by cutting ties with this high-revenue customer.
Though it’s easy to get caught up in the day-to-day operations of your franchise, keeping a close eye on your profits and losses will allow you to remain nimble and adjust when needed. Whether you’re using a simple spreadsheet or advanced software, monitoring your business performance is essential to its success.