E28: Financial Red Flags and Exit Planning With LaMar Van Dusen
Hosts: Michael Hyam and Liane Caruso
Guests: LaMar Van Dusen, Founder of Phoenix Management Group
Franchising can be one of the most rewarding entrepreneurial ventures, but it requires careful financial planning and strategic thinking from the very beginning of the journey. On the LFG podcast, franchise financing expert LaMar Van Dusen shared invaluable insights that every potential franchisee—and franchisor—should know.
Podcast Summary: Financial Awareness, Exit Planning, and More Insights From LaMar Van Dusen
The Five Financial Red Flags Most Franchisors Miss
When vetting potential franchisees, many franchisors focus solely on whether candidates have enough money to buy the franchise and cover the Franchise Disclosure Document (FDD) fees. However, Van Dusen identifies five critical factors that deserve equal attention:
- Credit Management: How well does the candidate manage their personal credit? Banks will scrutinize this when considering financing.
- Relevant Experience: What managerial or industry-specific experience do they bring? This is especially important in sectors like food service.
- Net Worth: Do they have sufficient backing to weather tough times? Starting a business requires capital injection beyond the initial investment.
- Business Planning Skills: Can they think strategically about their venture?
- Long-term Vision: Do they understand the financial implications of running a business?
“If they’re going to get bank financing, they want to make sure that they have good credit and manage their credit well,” Van Dusen explains.
“When you’re injecting capital, you try to figure out whether they have the net worth or backing to help them if things get tough.”
Why Business Plans Are Non-Negotiable
Van Dusen compares a business plan to Google Maps—essential navigation for your entrepreneurial journey. “Imagine before Google Maps, you had that old map and had to stop every 15 minutes to make sure you were on the right highway,” he says. “A business plan is the same.”
A comprehensive business plan should crystallize:
- Staffing requirements and hiring plans
- Marketing strategies and implementation
- Product or service mapping
- Technology integration (including AI considerations)
- Financial projections including revenue, cost of goods, operating expenses, and net profit
The planning process also forces entrepreneurs to consider critical questions about profit distribution, tax implications, and reinvestment strategies—decisions that will impact the business long-term.
Canada’s Best-Kept Financing Secret: The CSFBL Program
One of the most valuable insights from the conversation centers on the Canadian Small Federal Business Loan (CSFBL) program—a financing option that Van Dusen calls “by far the best program in Canada.”
Key Benefits of the CSFBL Program:
- Coverage: Up to 90% of total startup costs (Van Dusen recommends planning for 70% to be conservative)
- Maximum Amount: $500,000
- Interest Rate: Prime plus 3%
- Government Fee: 2% (similar to CMHC insurance)
- Repayment Period: Up to 10 years
- Personal Guarantee: Only 25% in case of business failure
- Government Backing: 75% protection if the business cannot continue
“If something happened—another COVID situation—and you close the doors and can’t pay the loan back, the government steps in and pays 75% of that loan,” Van Dusen explains. “You’re only responsible for paying back 25%. It doesn’t affect your credit or future borrowings.”
This program covers everything from rent and inventory to legal fees and business plan preparation, making it an incredibly comprehensive financing solution for most franchise opportunities.
The Silent Business Killer: Poor Bookkeeping
Van Dusen’s dual expertise in financing and accounting revealed an important insight for franchisees ready to grow their business: “If you don’t have your books in order, how are you going to go to the bank to get financing?”
The Daily Financial Discipline
Rather than waiting until year-end for bookkeeping, successful franchise owners should:
- Review profit and loss statements daily
- Monitor balance sheets regularly
- Track whether they’re hitting projected numbers
- Adjust strategies based on monthly performance reviews
“I look at my books every day. I look at my P&L, I look at my balance sheet, and I want to know if I am actually on target to hit my numbers or not,” Van Dusen shares.
His company is developing software that provides business owners with report card-style feedback, categorizing performance areas as green (good), yellow (caution), or red (immediate attention needed).
Planning Your Exit From Day One
Smart franchisees think about their exit strategy from the beginning. “You should think about that exit strategy because I’m sure you don’t want to keep it for the rest of your life,” Van Dusen advises.
The key to maximizing business value lies in maintaining clean, accurate financial records that demonstrate:
- Consistent profitability
- Clear revenue and expense patterns
- Compliance with all tax obligations
- Professional financial documentation
“When you present your package to sell it, you give them a clean slate that says, here’s how much money I’m making, and this is why I’m selling it for this price.”
Beyond the Big Banks: Alternative Financing Options
While Canada’s banking landscape may seem limited compared to the U.S., Van Dusen identifies several alternative financing sources:
- Credit Unions: Often more flexible than major banks
- BDC (Business Development Bank of Canada): Federal backing with different criteria
- Specialized Programs:
- Women-focused lending programs ($50,000 lines of credit)
- Futurpreneur (up to $75,000 for entrepreneurs aged 18-39)
- Various grant programs
The key is understanding what’s available and matching the right funding source to your specific situation and qualifications.
The Integration Advantage
What sets Van Dusen’s PFG Financial Group apart is their integrated approach to finance and accounting. “I always say it’s like peanut butter and chocolate—they always go hand in hand,” Van Dusen notes.
This combination allows them to help clients not just secure financing, but maintain the financial discipline necessary for long-term success.
Final Thoughts: How To Take Action
For aspiring franchisees, Van Dusen’s message is clear: preparation and proper planning aren’t optional luxuries—they’re fundamental requirements for success.
Whether you’re evaluating franchise opportunities or already running a business, focusing on these financial fundamentals will set you up for sustainable growth and eventual exit success.
The franchise industry offers incredible opportunities, but success requires more than just passion and initial capital. It demands financial literacy, strategic planning, and the discipline to maintain proper records from day one. As LaMar Van Dusen puts it, “If you don’t know your numbers, then I think you’re dead in the water.”
Listen to the full episode now to hear more from LaMar and the LFG Podcast team!
