Operations and Lending Impact Business Value
The last installment of this series is focused on lending and operations, and their importance in driving value in the business. In the first three articles, we focused on the overall value drivers in the business and then broke them down into the first two core value drivers of leadership and relationships. There is no question that leadership and relationships are the most critical value foundation of the business. However, the other two pillars are just as important to driving value in your multi-unit franchise organization:
Banks are going to want to know how strong your business is before they choose to invest in it (and you). When it comes to banks looking at the value of your franchise operation, they take into consideration subjective conclusions of borrowing capacity based on various criteria, including the three V’s of leadership:
- Vision – Do you have a clear plan for use of borrowed capital?
- Values – Is there a positive impression of core values, character, etc?
- Victories – Is there a track record of business successes that include borrowing money?
It is important to understand that the bank’s impression of the business mission, strategic plan, character, competency, commitment of management and ownership continuity as they generally reflect on the bank’s confidence in your long-term business plan.
As with lending there are a variety of areas that impact and affect the operations of the business. At the top of the list is owner motivation and perspective because it drives the reason that you are in business in the first place. Your view, as the owner, determines the planning, direction, and future of your franchises. Therefore, there are four components that should be considered to ensure you are running your operations in the most productive and effective manner to drive revenue:
- Progression of owner motivations – these vary based upon how the owner prioritizes the needs and how the business provides/supports all those associated with the organization:
- Owner Centric: My needs and desires drive every move of the business
- Family Centric: My family’s careers and financial needs
- Employee Centric: Me, my family, and our employees
- Community Centric: Our customers, the community, our employees, my family, and myself
How an owner prioritizes needs, is how they define and prioritize success and sets a tone for organizational culture. As such, cultural undertones driven by the owner’s perspective impact operational productivity and efficiency. To figure out where you fall, consider what drives your business decisions?
- Stewardship mentality – stewardship is a voluntary, fiduciary mindset of personal responsibility for the welfare of something other than yourself, that you do not own. This mindset and leadership style allows you to recognize the mutual dependency of every person and organization interacting with yours.
- Attitude of humility – This is the part of the business that reflects your respect for all those you depend on for the current and continued success of the business. Humility allows you, as the business owner, to solicit the power of collaboration and teamwork.
- Submission to teamwork – current and long-term success of your business, and thus the growing value, is an extraordinary accomplishment only achieved by the collaboration of ordinary people.
When we look at the four pillars for business value – leadership, relationships, lending, and operations - the business cannot stand strong without all of them working together. A weakness in one of these pillars undermines business value and success. It is important as a multi-unit franchise owner to understand the four components and how they work together in unison, building value in your business.
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