Business owners gain leverage by borrowing money, enabling them to expand operations, increase the worth of the business, and increase profits far beyond what they could have managed on their cash flow alone. A manager gains leverage by delegating tasks to employees, thus multiplying his personal efforts many times over. 'I would rather have one per cent of the efforts of a hundred people,' said billionaire oil tycoon J. Paul Getty, 'than a hundred per cent of my own efforts.'
Consider a business case where branches are rapidly becoming something of an anachronism. For decades, major bank bean-counters considered branches a cost and closed them wherever possible. The banks didn't understand then that branches potentially were a great marketing tool.
Wizard, a home mortgage originator, now backed by Kerry Packer, moved into the bank void and developed a major home-loan business. Another non-bank home mortgage provider, Mortgage Choice, opened a string of franchises that sold the banks' home loans products to customers. While most bank branches close at the weekend, that's when Mortgage Choice branches do most of their business.
Harvey Norman may not be a small business but the Gerry Harvey story is an excellent model for growth, and one that adopts franchising as a premise.
After a career spanning 43 years, Gerry Harvey knows more than most about how to build a successful business. His instinctive marketing skills enabled him to build the Norman Ross chain of electrical goods stores with very little capital; now they are driving Harvey Norman and, more recently, Rebel Sport.
Purists may be disappointed for there does not appear to be a single strategy that explains the Harvey phenomenon. Instead, Harvey's approach to business is characterised by a quest to do things better. Since the days of Norman Ross, Gerry Harvey has continued to do much the same thing but, as he experiments, he improves the way he operates.
Harvey's basic formula for starting and growing large is simple. The skill and will with which he applies it is compelling. Harvey's key approaches to business are fairly clear and are based on a thorough knowledge of the retailing business and a framework to help his people develop in order to get the most out of them. But most important in his company's growth was his adoption of the franchise model.
Harvey says he changed from the company-operated stores in Norman Ross to franchisee-operated in Harvey Norman because he was not getting the most out of people. It's a case of people suddenly reaching new levels if you give them a piece of the business. In his franchises, the franchisees employ the people and buy the stock, but they have the wisdom and strength of a head office structure.
Gerry Harvey has shown franchising is the best way to sell his goods. It leads to a much more flexible way of thinking. And, with individual store owner-operators being divorced from head-office politics, there is an enormous advantage if you want to expand a business.
One of the logical exits for clients of our Business Autopilot Advisory services is to franchise.? We have an association with The Franchise Institute (www.thefranchiseinstitute.com.au), whom we highly recommend if franchising is what you want to pursue.
