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Dealing with the bankWhen you’re thinking of buying a franchise an accountant can help you assess the business opportunity and get you off to a good start. This article provides useful tips to consider as you work with your accountant. It also covers some things to bear in mind when you deal with your bank.

Why do you need an accountant?

Buying a business is a big financial commitment and there are risks associated with it. Talking to a franchise accountant at the start will put you in a stronger position to make the most of the opportunity and manage your risk.

The key role of the accountant is to:

  1. Test the assumptions behind any financial projections and look at the downside of the business. This is important because you need to assess your risk in order to manage it.
  2. Provide you with an independent assessment of the business opportunity. As the accountant is not caught up in the emotion of the decision they are more able to provide an objective view. This will help you make a more balanced decision.

How to choose an Accountant

When choosing your accountant, it’s important to check on their experience and how much work they have done with the franchising industry. Clearly it’s better if they have. This means they won’t be learning as they go and practicing on you.

Franchise accountants have particular expertise in working with franchises. They are familiar with the special characteristics of franchising, which are not found in every business. These can affect business and tax planning, as well as general business operations.

If you’re new to business it’s a good idea to choose an accountant who has experience dealing with ‘start-up’s’ and first time business operators. Be sure to discuss this with the accountant you are considering.

Working with your Accountant

Two of the most important areas to get ‘right’ at the beginning are your ‘start-up’ costs and the ongoing costs to operate the franchise. Ask your franchise accountant to help you identify these costs as they are critical to the success of your business.

There may be specific franchise obligations which must be met, particularly in regard to the purchase of supplies and equipment, fitout and refurbishment. These all need to be considered and factored into the projections and cashflow forecast.

If you are seeking bank loan finance, budgets and cash flow forecasts are particularly important.  Your accountant will be able to assist with preparation of your loan submission and advise an appropriate structure for your finance.

Financial projections

Financial projections are one of the most important tasks for the accountant to help with. You need to get a solid estimate of the ongoing profit of the business. To do this, certain assumptions will be used and some estimates will be made. Part of the role of the accountant is to assist with these estimates and challenge them to ensure they are well founded.

The accountant will need facts and figures to work with. That means you need to take them some well thought out numbers.

If it is an existing business it’s likely your accountant will use recent trading figures as a guide to future performance. If it is a new business, they will work with you on realistic estimates of both revenues and expenses. A starting point is the Disclosure Document combined with your own research.

Having done this work, your accountant should also be able to outline the financial risks of the franchise you are investing in.

As you can see, it’s important to get advice from an accountant when preparing your projections and cashflow. This will help you have a clear idea of what’s ahead and the targets you need to achieve to reach your goals.

Dealing with Banks

Banks are an essential part of being in business. When you start your business you’ll need to establish a business banking relationship – even if you’re not borrowing any money. That’s because you’ll need a business bank account, merchant facilities, online banking and other business products they offer.

If you are seeking finance there will also be other factors to consider. Banks like dealing with customers who are prepared and have a well-considered business plan. They want to know that their loan will be repaid and there is sufficient security to cover their risk. They will want to see the basis for any financial targets and that you have done your homework on the business.

Here are some questions bankers commonly ask:

1. What have you got at stake?

As one franchise banker told us, banks want you to have some ‘skin in the game’. They like to see that you’re confident enough to invest in your own business. This means having some equity in the business as well providing security for the debt. This will typically be your home.

2. Can you afford the loan repayments?

The bank will want confidence that you will be able to afford the loan payments. This means approaching them with a well-considered budget and cashflow forecast with realistic assumptions.

As part of this you will need to estimate all of the costs of the business. In addition to the initial set up costs, you will also need to identify the on-going costs of running the business. In your cash flow forecast, make sure you take into account the seasonal ups and downs of trading.

You will need to show that there will be sufficient income to pay these running costs and enough to make the loan repayments. These costs should include your personal living expenses.

3. Should we have confidence in you?

When a bank makes a business loan, they will be assessing you and the opportunity. They will consider your understanding of the business and ability to succeed. They will also look at the viability of the business and the track record of the franchisor.

So, it’s important to show how you’ll make a financial success of the business and how the franchisor will support you.

How to choose a business bank

There are a number of ways to establish a relationship with the bank, and it’s helpful to find somebody in the bank who is familiar with franchising. The best way to find one is to:

  • Contact the bank’s state franchise development manager
  • Ask for a recommendation from the franchisor, or an existing franchisee
  • If you already have some banking products, ask your customer relationship person to put you in contact with their franchise specialist.

This article has shown the importance of getting input from an accountant at the early stage of assessing a franchise. As we discussed, they will help you understand the costs and risks of starting and operating your business. It will give you a clear idea of what’s ahead and the targets you need to achieve to reach your goals.

We also discussed what a bank will require as they assess an application for a loan and the best way to establish your relationship with them.


Peter Knight, is a Chartered Accountant and co-founder of Smart Franchise. He is a rare breed of accountant! Peter understands franchises and can communicate to business owners in a way they truly understand.  This helps them make better business decisions.



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