WHY USE AN ACCOUNTANT?

Think you're capable of winging money matters? The risk can be expensive.

Some people invest thousands of dollars, their precious time and energy, and sacrifice a career to buy a franchise – without taking sensible precautions. Why would you risk your future by not consulting experts, such as lawyers and accountants, ahead of making such a major life decision? Here are some explanations we’ve heard, and some of the reasons why a decision not to consult the professionals doesn’t add up.

1. I can read the figures myself. If you have business experience, you might be able to read profit & loss accounts and balance sheets – but how well do you know this specific industry? What costs and margins are normal? How does this particular franchise compare to other businesses? What do other franchises in the same sector achieve? Find out – use a franchise-experienced accountant. (See our Westpac Directory of Franchising on page 60 for advisors.)

2. The franchisor has provided all the information I need. Franchisors may provide example figures from existing franchisees or pilot operations, but there is no guarantee you will achieve similar results. You need to have all figures checked, know how they relate to what and where you are proposing to operate, and what the effect of sales underperformance would be.

3. What could an accountant possibly tell me about a business that doesn't exist yet? They can tell you what to expect and how to measure your progress. The franchisor can advise on the profitability of the franchise itself; an accountant can relate that to your borrowings, tax, cashflow and personal expenditure. They can advise on working capital, help you prepare a presentation for your bank and structure your finances in the most effective way.

4. If it wasn’t OK, the bank wouldn’t lend me the money. A bank will certainly want to know you have every chance of success and will give you all the help they can. They will want some form of security to reduce their risk, however, such as your house. This means most of the risk is yours – not theirs. Why wouldn’t you keep the risk as small as possible?

5. Other franchisees have said they’re doing well. They may well be, but that doesn’t guarantee that you will do well too. Others have likely had more time to get established. The market may have changed considerably since they set up. They will be in a different area, and have different competition. Are costs comparable? An accountant can tell you.

6. I want the franchise, no matter what anyone says. If you are prepared to ignore professional advice, you should question if you should be going into business. Yes, you need to balance the information you get from your accountant with that which you get from the franchisor and do your own research. But making the right decision, means making an informed one.

Be smart – use an accountant.