It's all about the numbers. Or is it?

It’s All About theNumbers—Or, is it?

By Tim Church

Picture this: Barney, the former CFO of Big Energy Corp (BEC) is forced into early retirement. He decides to buy a franchise. He has a nice house and nice cars. Barney is successful. He’s proud of his aptitude with numbers. He enjoys analyzing and forecasting, along with finding strengths and weaknesses in businesses. He’ll be great at researching franchises. There’s no way he’ll buy a business that doesn’t succeed. For Barney, it’s all about the numbers—and he knows numbers.

Barney narrowed his search down to a service company. The numbers were straightforward and impressive. He just needed to determine when the business would break even and when his previous income would be replaced. Those were the important things: income predictability and timeline. This franchisor had it all figured out.

1 day of sales activity = 12 written estimates = 1.5 customers

1.5 customers X average customer revenue = $X annual revenue at Y% profit margin

This was easy math. Barney knew he’d achieve break-even in 46.5 sales days. After 111.52 sales days he’d cover his household expenses. After 427.333 days, his previous income would be replaced.

A year has 261 work days. The first goal would be met in 70.5 calendar days. Then, he had a CFO-level idea. Hire two salespeople: 1 work day = 2 sales days = timeline cut in half.

The franchise agreement was signed, training completed, and business started. His sales team beat the goals and the average customer revenue was higher than predicted. Barney’s income had been replaced in five months!

Then, something happened. He called the corporate office to tell them that he must sell his business as soon as possible.

“We were at a barbecue with other retired execs from BEC when someone asked Amy what business we were in. She said we were opening a boutique shop in Hipster Town on Main Street. She was too embarrassed to admit we owned a service business.”

It wasn’t about the numbers, after all.

The business was a terrible fit. The franchisor found a buyer for Barney’s business and the chapter was closed. Barney didn’t get the ROI or selling price he forecasted. It was a financial loss.

Seven months prior, Barney told the franchisor, “This is my business. Amy will support my decision, as long as I take care of the family and our bills.” No one challenged him. Barney and the franchisor were thrilled to make the deal happen. No one delved into finding out what mattered to the couple beyond the numbers.

Of course, the numbers matter: ROI. Investment. Timeline. Break even. Income. EBITDA. But, there are other factors—culture, status, image. If you are myopically focused on the numbers, bring in another set of eyeballs. There’s always more to see. And, that other stuff might matter.

Education and collaboration are how you can stack the deck in your favor. Learn more by contacting Tim Church. Email: tim@thefranchiseconsultingcompany.com or call: 727-222-8485.