To what extent do you think that Tom’s cashflow forecast will help guarantee the success of his “Joshua” franchise?
Location differences means that his cashflow forecast may not be an accurate overview of cash inflow in his area. As well as this, the predictions are made for a city-centre salon, which will have a higher level of sales than a town-centre one.
+ Tom had vast experience in that area of business
+ He was able to make changes to his business depending on the forecast to prevent any difficulties.
+ The forecast gave an indication of cash
- Toms business aims are different to Josuas
- Figures provided by Joshuas may be bias as they want people to be franchisees.
Tom had been running a hairdressing business for five years
 the first draft indicated cash flow difficulties for Tom and so he was able to make three changes that would overcome these possible difficulties - renting the premises, taking out a bank loan and increasing his overdraft
 Tom’s forecast gave a clear indication of improvement in his cash flow over the three years.
This would have encouraged him to establish the business.
Possible reasons for cash flow forecasting process being of limited use to Tom:
 Tom’s existing business targeted a very different market segment to the Joshua franchise, limiting the relevance of Tom’s previous experience
 Tom’s estimates of costs were based on figures provided by Joshua. These figures may not be unbiased
 the sales revenue forecasts were likely to be optimistic as they were based on two of the most successful Joshua