Finance

**For every $1 million of lending obtained by franchise small businesses, 34 jobs are created and $3.6 million in annual economic output is realized.

The current recession and credit crunch are putting the hurt on franchise businesses, says a new report by the International Franchise Association (IFA). There's no question that the franchising's economic growth and ability to create jobs has been hamstrung by the lack of available credit.

The study, Small Business Lending Matrix and Analysis, prepared by industry research firm FRANdata, highlights the relationship between lending to the franchising sector and its capacity to develop new businesses and expand existing ones. According to the findings, franchise lending will fall 40 percent in 2009...

Gross sales? Target revenue? Break even? No, this figure is more important than all those.

These days, as we're all looking at ways to cut costs, figuring out where and how to cut is extremely important. Using break-even analysis allows you to go in with a scalpel instead of a hatchet.

If we said there was one number that you (and everyone else in your company) should absolutely know off the top of your head these days to do this analysis, what number would you say? Targeted annual revenue, perhaps? Break-even sales level per month? Total costs?

While all of these are good ones to know, the key number is the amount that's left over from every dollar of sales, after paying your variable costs, to then pay for your fixed costs, and then once those are paid for, to put towards your net profits...

At some level, there's a growing realization that the current economic "decline" is not just a speed bump. The assumption that a return to the "status quo" is sure to come--that it's merely a matter of time--also appears to be quickly fading. The emerging conclusion: Things typically don't come this unhinged only to revert to what existed before.

While exceptionally unsettling, it's important to remember that U.S. economic history is littered with instances of major structural shifts that have been caused or accompanied by significant advances in technology, as well as changes in financial and social systems. (Take a look at John Steele Gordon's Empire of Wealth for numerous examples.) New industries emerge while others die. Bubbles are created as investors rush to profit from new technologies or trends...

At the end of January, following the headlines of optimism and encouragement that came with the presidential inauguration, came the harsh reality of job layoffs and plant closings in one company after another across the country. Home Depot announced 7,000 layoffs, Pfizer trimmed 19,000 jobs, and Caterpillar 20,000. In total, nearly 60,000 wage earners became unemployed, and while many enjoyed reasonable severance packages others were most certainly caught unprepared for the income loss that will follow.

They join nearly 100,000 others furloughed earlier in the month in a year many had hoped would soon show signs of recovery from the doldrums of a sluggish economy. By anyone's measure, it's a tough time that challenges every business--start-ups and small retailers perhaps more than most...

In A Bleak Economy, What Else Can Go Right?
For over a year, the headlines have been rife with dire warnings that seem to indicate the demise of the world as we know it.

For example, we learned that in June we experienced the worst percentage decline in the broad market averages since the Great Depression. We also discovered that home prices are declining faster than at any time in recorded history, and that debt levels (personal and governmental) have never been so high--nor have gas prices, even factoring in inflation. Gold is going through the roof and the dollar is falling through the floor. Corn, copper, steel, soybeans, etc. are shattering more records than Michael Phelps. And woe is us: flu season is right around the corner...

Merchant cash advance can help your business grow

Too often, franchise owners lack the cash flow needed to act fast enough to capitalize on an opportunity. As a result, franchisees are forced to sit back and watch others take advantage of the situation.

Applying for a line of credit at the bank is the first option to look at, but often the process of gathering all of the required documents is time-consuming and work-intensive. Not to mention that in today's market, banks are taking a much harder look at who they are financing and how much money they are putting out there.

What franchisees don't know is that there is an asset they can leverage today to help take advantage of those windows of opportunity as they arise...

Keeping that "trepidatious wall of worry" at bay

We are a nation of worriers. And lately, when it comes to fretting about the capital markets and the economy, it seems we have elevated worrying to an art form. Just the other day, I heard a national news announcer proclaim that investors had become "trepidatious" in response to recent market volatility. Huh?

The headlines have been especially rife with worries concerning issues in recent quarters: the credit "crisis," a potential inflationary spiral... or wait, is it stagflation? Then there are record-breaking prices for crude oil, gold, corn, copper, and other commodities; ongoing uncertainly over who will be elected president; and questions regarding what will be done with income tax and/or capital gains rates...

"How's risk management in the big bank world?" he asked the banker.
"I wish it were that," the banker replied. "It's more about risk elimination. We won't make a loan to anybody unless they don't need the money."

True story, says Bob Rodi. He asked the question. The banker was a former employee of his, who now works in a large national bank. The banker also told Rodi, who is president of franchise lender Mount Pleasant Capital Corp., that his bank wasn't making any loans right now unless they were secured by cash, CDs, or NYSE-listed stocks, or the applicant had a minimum of $150 million in sales.

Franchisees want money to grow, and bankers and other traditional sources of finance are running scared. This is driving franchise borrowers to consider alternative sources of funding...