Adventures In Micro-Business: With a franchise comes support and advice

Russell Smith answers your queries
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The Independent Online

Q. I'm quite interested in purchasing a franchise business. How does the cost structure work for franchises?

A. As a franchisee, you will normally pay an upfront fee at the outset that will vary according to the business type. After that, expect to pay management service fees - either as a percentage of your turnover or as a fixed fee. Materials or products that are supplied to you by the franchisor will also have a mark-up. However, in return for these fees the franchisor supports franchisees in a number of ways including training, advertising and promotional material, sourcing new products and sometimes clients for you. Look for franchisors that are part of the British Franchise Association ( www.british-franchise.org).

Q. What is an independent financial adviser?

A. An independent financial adviser (IFA) can recommend financial products, such as pensions or insurance, appropriate to the needs of your business. Being independent means the adviser is not tied to products from specific suppliers. Try the Association of Independent Financial Advisers ( www.aifa.net).

Q. My small business needs to secure funds in order to grow. I will need more than my bank manager is prepared to lend. Where can I find an "idiot's guide" to investment and investors?

A. The British Business Angel Association's website ( www.bbaa.org.uk) is a useful starting point; check out the "looking for funding" section. It would also be sensible to speak with your local Business Link adviser ( www.businesslink.gov.uk).

Q. I'm thinking of starting my own business but would like to learn more from people in the same trade as myself. Do you think anyone would talk to me and, if so, where could I meet such people?

A. You might think that other, similar businesses might be less than helpful if they perceive you as a "competitor". My experience is that the reverse is true - most small business owners recognise the benefit of "networking" and supporting new business. The Trade Association Forum ( www.taforum.org) might be a good place to start .

Q. My bank manager has asked for management accounts following my request for a business loan after five years of trading. Could you please explain what they are?

A. Management accounts are a bit like your end of year accounts but made up to the end of each month. Larger companies - especially ones with shareholders - often have these prepared each month but it's unusual for small businesses to prepare them. Your accountant could certainly generate management accounts for you if the bank insists. A compromise might be to supply last year's accounts together with a current cash-flow forecast. You really must have a cash-flow forecast if you intend to take out a loan since it shows the bank why you expect to be able to meet repayments.

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