If you are looking to buy a franchise, you need to produce a realistic 3 year business and cash flow forecast projection so you have a much better idea of how much start-up operating capital you really need.
My name is Michael Barbarita from Next Step CFO with the Know Your Numbers Minute.
The franchisor will tell you how much money you need and so will other franchisees, but at the end of the day, everybody’s situation is different and the #1 reason why a franchise fails is a lack of startup capital.
The forecast will also be able to tell you how much working capital you will need for multiple what if scenarios. For example, what will happen to cash flow if sales are off 20% from what the franchisor is telling you?
What is the cash required then?
Because remember, the most successful business owners know their numbers.