The GBR Group - Buy Sell Biz Guides

Tips For Hiring An Accountant When Buying A Business

2011-08-15T11:43:00.001+10:00

Tips For Hiring An Accountant When
Buying A Business

Here are some things to think about when hiring an accountant:

1/ Ask other business owners who their accountant is. Ask your bank manager and financial advisor for recommendations. You may have a personal tax accountant; ask them for help (if they are qualified to deal with helping you to buy a business). Accountants normally specialize in different areas and industries, so you want an accountant with experience in your area. Keep a list.

2/Decide what you want an accountant to do for you. Do you want them to do the books, your taxes and give financial advice? Help you with buying a business? Maybe you just want them to undertake your business taxes?

3/ Once you know what you want from an accountant, start contacting the accountants on the list. Tell them what you are looking for and ask about their qualifications and experience.

4/ Are they easy to contact and do they return calls promptly? When you are buying a business you don’t want to be waiting around for your accountant to return your call – it could lose you the business.

5/ When talking with prospects look at how they speak with you. Are they easy to understand, or are they confusing? Your accountant needs to communicate with you easily and in a way you understand.

6/ Ask about their fees. You want to know what it is going to cost upfront.

Once you have all the information consider each carefully and take your time making a decision.

Buying or Selling a Small Business Term - "Fidelity Guarantee Insurance"

2011-05-23T11:46:00.000+10:00

When Buying a Business ensure you understand Fidelity Guarantee Insurance

What is Fidelity Guarantee Insurance?

Fidelity Guarantee Insurance is insurance against loss of goods, negotiable instruments or other property resulting from the fraudulent or dishonest acts by employee/s.

One of many insurances you must be aware of when buying a business is Fidelity Guarantee Insurance. It's vital to know how many claims have been made in the last 3 years of the business operation, why/when they occurred and by whom.

5 Business Risk Factors to Consider When Buying A Business

2011-05-11T20:03:00.001+10:00

5 Business Risk Factors To Consider Before Buying A Business

1. Are all processes and procedures clearly documented (position descriptions, supplier agreements, customer agreements, etc)?

2. How good is the communication within the organization (free flowing, honest, ‘no blame’ culture)?

3. What condition is the plant and equipment (modern, efficient – not outdated)?

4. What level of cooperation is there within the business (no silos, compartments, internal rivalry)?

5. Can the business run without the bosses for extended periods?

These are just a few areas I recommend investigating before you buy a business. You can find more business buying tips in previous articles or the BizBuy Kit.

Buying A Business - Do You Have What It Takes?

2011-05-02T12:43:00.000+10:00

Buying A Business - Buying The Right Business

Do You Have What It Takes To Buy A Good Business?

Do you have the type of personality to work for yourself?
How do you truly feel about risk?
Have you always worked for other people?

Before going ahead and buying a business, it's important to put things in perspective and really envisage physically being in a business.

Leaving the security of regular pay each week can be a big step and how you feel about this is just one of the things we look at in determining whether self-employment is for you or not.

You don’t want to quit your job just yet.

Being a small business owner can be exciting, rewarding, challenging and…your biggest nightmare; and that’s all on the same day . Many new business owners will find themselves working longer hours than before, particularly in the early stages.

The payoff is that it is under your control. You and your family will benefit directly from your efforts . As your business develops and grows, it should become less dependent on you.

Straight talk:

Businesses that are heavily dependent on the owner will have limited appeal to future business buyers.

Buying or Selling a Small Business Term - "Right Of Assignment"

2011-04-20T12:58:00.000+10:00

When Selling A Business - What Does Right of Assignment mean?

Right of Assignment - in relation to business premises, is a right given in the lease agreement for a tenant to assign the lease to another tenant when the business is sold.

Small Business Buying/Selling Term - 'Amortize'

2011-04-11T11:34:00.001+10:00

Small Business Buying/Selling Term Definition

AMORTIZE is the gradual process of writing off the cost of an asset, or paying off a liability by means of a sinking fund, over a period of time.

The period of time over which the loan will be amortized, usually expressed in months.
To write off an expenditure for (office equipment, for example) by prorating over a certain period.

Small Business Buying or Selling Term - 'VALUATION'

2011-04-06T10:43:00.000+10:00

Valuation is the process of appraising the worth/value of property according to some recognised criteria .

A Business Valuation is often sourced from a Business Broker but this is not the only option and can be a costly exercise, however necessary.

Whether you have engaged a business broker or not, it is always wise to have the business valuation calculated by a third party.

By keeping this critical element at arm's length, you will never have to second guess the motivations of your business broker

If you do not wish to engage a business broker, you have an accurate alternative with the business valuation software tool.

Small Business Owners Struggle To Increase The Value Of Their Business

2011-03-31T09:54:00.002+11:00

Small Business Owners Wanting To Increase Cash Flow - Their struggle to overcome 'themselves' being the biggest hurdle

I recently came across an interesting article written by Ari Galper, which pointed out a common attitude many small business owners have when it comes to receiving advice to improve their business and solve their problem. It got me thinking about those hard working small business owners who have their business on the market privately (for an unrealistic value) and wondering why it's not selling. Here's the article:

"David, who owns a local corner deli/grocery shop just around the corner from my studio office is a very pleasant fellow.

Whenever I walk into his little store, he’s always chit chatting with his customers as if they are his friends.

After all, he’s been in business for over 10 years in our same neighborhood so most of the local residents consider David and his store part of the community.

I probably go into his store a few times a week to pick up a carton of milk or some bagels for the kids for the weekends.

When I’m in the store and David isn’t talking to customers, he’s often asking me about my business and how I continue to grow it with very little resistance.

I explain to him that it’s a combination of having a restless entrepreneurial mindset of never accepting the status quo and a total commitment to continually making changes to get better results.

Over the past year or so he has confided in me that he is frustrated with how much income his store is creating for himself and his family.

He desperately wants to generate more profits from his store.

Being a generous person and often being accused of having a soft heart, I could feel his frustration and I offered to give him some actionable advice that could immediately grow his business, take it to the next level and of course, create more profits for him and his family.

Here are the 10 marketing ideas I shared with him…

1. Start collecting the addresses of each customer who enters your store using a raffle for a give-away of a valuable prize (e.g. Dinner on the town, tickets to the Opera House, etc.). He’s never ever collected one address of a customer.

2. Raise your prices 10% immediately, it will be unlikely anyone would really care that you did and you’ll be earning more take-home profits right away.

3. In the awning of your store (it’s plain now without just the name of his shop on it), add a large photo of yourself with your name next to it, so it’s clearly visible from at least 100 feet away. "YOU are your business I told him, not the products in your business." I explained that the close relationship that he has with his customers should be the primary message that is felt when people think of his store.

4. Create a monthly 4-page printed newsletter to send to his customers every month that shares more about him and his family, stories of his work in the community and a feature of his new specialty products he is bringing into the store each month.

5. Create a monthly promotional post-card campaign that goes out to a select group of customers with the promotion speaking to the nuances of each segment (e.g. Men, women, families, kids, men who exercise, women who are in mother’s groups, etc). The more you speak to individual needs, the stronger propensity of customers who are willing to listen.

6. Paint and redesign the inside of the store so it feels “high-end” to meet the level affluence of the neighborhood. (The store is pretty dingy with boxes laying around, it’s looks the same since the day it opened he told me), make it memorable and pleasant.

7. Create a protruding flag or sign that sticks out away from your store so when people drive by it, they can see your face as a reminder that they should feel comfortable visiting you at any time.

8. Turn the front of the store into a coffee/juice bar with stools on the sidewalk so you can create a new revenue stream of “to go” offerings that don’t require people who just want a drink.

9. Mail out coupons, not with discounts, but with value-add upsells like buy one get one free with an expiration date.

10. Create a monthly “event” in the store that brings people in just for the “event”(i.e. face painting for kids, make your own sandwich bar, etc.).

Those are the marketing tips I gave him over an approximate 12-month period.

Do you know how many he has implemented?

Only one.

He implemented #2, raising his prices.

I asked him how come he’s only done that one, and he said “Because it was the easiest”.

I was in the store last week and he shared with me his frustrations that he wasn’t bringing enough profit home to his family. The exact same conversation we had a year ago, after I gave him the above (too many, pretty basic marketing tips) advice.

Turns out he just doesn’t want to do the “work” to make a better life for himself and he continues to remain in the same spot he’s always been."

Unfortunately this is a common attitude amongst many Small Business Owners. If you want change, you must action 'change'. Getting help with your business, whether it's from a trusted advisor or other sources is one thing - putting the recommendations into effect is another. In some cases, just implementing a few small changes can make a marked difference in increasing the value of a business.

So why is great advice ignored? With many small business owners, it's as simple as pride. Nobody likes to be told what to do in their own business. It isn't easy swallowing your pride and putting in the elbow grease. Often having to do additional work can be like moving a mountain. But the simple truth is that without hard work and changes things remain the same - with not so happy outcomes. Being forced to sell isn't usually on the raidar of most small business owners either.

In the current economic climate, it is now an absolute necessity (given a business is not making a profit) to make improvements to increase the value and differentiate the business from it's competition. Running a small business with an open attitude, 'actively' working in the best possible position to 'sell' whether now or in the future is a great way to run a small business, especially if at the start of business ownership.

What Is Business Succession Planning?

2011-03-23T10:19:00.000+11:00

Business Buying And Selling Terms -

What is Business Succession Planning?

Specifically, business succession planning is the process of preparing to hand over control of the business to others in a way that is the least disruptive to the business's operations and value

This is the reason why having a formal, written business succession plan is so important from the beginning of business ownership.

For many small business owners maintaining a profit and a steady balance sheet can be a daily, never ending battle that engulfs virtually all of their time.

And often retirement can appear too far in the distance to think about, let alone plans to hand over the business.

However, establishing a sound business succession plan is beneficial, some might say vital, for most business owners. For those business owners that are at or near retirement, the issue of succession cannot be ignored.

Does Your Small Business Plan Involve Selling Your Small Business? It Should, Here's Why...

2011-03-21T11:10:00.000+11:00

You're probably aware that a small business needs the correct planning to conceptualise, start, build, and grow. But did you know that being fully prepared to sell your business is just as important? Well it absolutely is! Ideally, right at the inception of your business, your business plan should include a good strategy for selling whether through choice or necessity.

It is important to be fully prepared for the unexpected than not. Even if you have no intention of selling it in the beginning because you would want to run it for the rest of your life, a comprehensive plan right at the start of your business that includes selling your small business will be a driving force for you to strive to steer your business to success and bring in the profits.

Just as your small business needs the correct planning to conceptualise, start, build, and grow, being fully prepared to sell is vital. Ideally, right at the inception of your business, your business plan should include a good strategy for selling whether through choice or necessity. It is important to be fully prepared for the unexpected than not. Even if you have no intention of selling your business it in the beginning because you see yourself running it for the rest of your life, a comprehensive plan right at the start of your business that includes selling your business will be a driving force for you to strive to steer your business to success and bring in the profits.

There are varied reasons for deciding to sell a business but the most common are:

- Disability due to health reasons
- Retirement
- Death of the small business owner or a business partner
- Disagreement with a business partner
- Change of location
- Bid for new venture/s

Small Business Planning -

Remember, that the main goal of your small business plan is to achieve and constantly improve your bottom line and to provide you financial security throughout the life of your business as well as build your business value so to maximise your profit returns when the time comes to sell your business. Also, bear in mind that the bottom line will be the first consideration that interested buyers will look into. It is, therefore, important to understand the rationale as to why a good strategy for selling your business should be included in your small business plan.

Accurate financial records help you keep track of your small business' performance –

Many people believe that numbers generally do not lie. Accurate, complete, and factual financial records should be maintained at all times for you to be able to track the performance of your business. They should also be available for review by your financial advisors and government regulators. Serious business buyers get turned off with disorderly and inaccurate records.

Efficient systems and processes save time, effort, and unnecessary costs –

Simplifying and optimising systems and processes help avoid unwanted wastage on resources and the time needed to do certain tasks. An efficient implementation of these systems and processes likewise contribute to healthier profit margins.

A well developed work force is a motivated work force –

The right people are your business' most important asset and they are indeed key participants in the achievement of a robust bottom line. They should, therefore, be properly trained, developed, and fairly compensated to win their loyalty and raise their morale. An well managed work force means an well managed bottom line.

Cultivating relationships promote the proper connections –

Acquiring friends and fostering healthy professional relationships inside and outside your organization will help you a lot in your search for potential buyers for your small business. Interested employees, customers, suppliers, brokers, advisors, other business owners, or even competitors can be prospective buyers or can provide useful referrals.

Small Business Planning

Good housekeeping projects a good image –

All throughout the life of your business, everything should be in its assigned location. A clean and organised work place can inspire and motivate your employees to do their best to help realise a satisfactory bottom line as well as promote a good image for your company. Your company properties should be regularly maintained, repaired, refurbished, renovated, or reconditioned for optimum performance.

Several contingency plans lead to better options –

It is prudent to have on hand several business selling options to fit the requirements of the specific circumstance compelling you to sell your business. Among these are:

• Selling your business yourself
• Selling your business through stock options
• Going into partnerships or mergers or simply liquidating all your assets

Keep in mind it is always worth while having a step by step business selling plan of action at reach in order for you to sell your own business anytime and on your terms.

Another Common Business Term Explained - What Is A Cover Note? Why You May Need One

2011-03-15T09:56:00.008+11:00

BUSINESS TERM: "Cover Note"

Whether you are looking to buy a business or sell your own business, it is important to familiarise yourself with common business terms. As part of your education process in this area, understanding the meaning of a cover note may serve you well.

A Cover Note is a temporary certificate of insurance issued by an insurance company as an interim immediate insurance cover until a formal document is issued

What Is A Cover Note?

A cover note is issued usually for 14 or 30 days. During this time insurers may require additional information about you and the business or a detailed proposal form to be completed. Once this information is provided and the policy is paid for the temporary cover transfers to an annual insurance policy.

Get your FREE emag 'HAVAMAG' for Small Business Australia

2011-03-09T14:02:00.000+11:00

If you have been searching for a way to keep intouch with your Small Business Customers without having to do anything but send an email once a month, this is a solution you should really checkout. You have the opportunity to receive a free copy of the first edition of not just one informative emag but two high quality publications!

Small Business Australia - The Crawl Back From Disaster

2011-02-23T13:47:00.002+11:00

Greetings!

The new year has certainly been 'eventful' to say the least. We've witnesses horrific unimaginable disaster all over our country and now our cousins in NZ are dealing with their own nightmare, which has rocked the region.

Brisbane Business Flood Damage (pic supplied by 'Brisbane Day')

Small Business is certainly feeling the effects in a big way. I was reading some news regarding Queensland's small business owners and how they are getting back on their feet, be it slow. Not only did small business owners have to deal with the mortifying floods not seen for 37 years - but before that occurred and ongoing, they've had the odds stacked against them with high interest rates and a very competitive Australian currency. Many suburban small businesses have been forced to close. Here's what the Brisbane Times writes follow 6 weeks after the floods:

************************

"Six weeks on and it's not just the businesses that went under water who are feeling the pinch.

Enterprises unaffected or now reopened are struggling as they battle perceptions externally that the city is not yet recovered, while internally Brisbane residents cut their discretionary spending.

With 2500 Brisbane businesses losing an average of $800,000 each from the flooding, according to Queensland Chamber of Commerce and Industry estimates, business leaders are calling for residents to open their wallets to help give the city's economy the kick along it needs.

Retail

Chamber of Commerce and Industry Queensland general manager policy Nick Behrens said numerous small businesses in Brisbane suburbs had not reopened weeks after they were damaged and some had no intention to.

"Any business that relies on discretionary expenditure such as retail [and] the service industry - accommodation, cafes, restaurants, hoteliers, bed and breakfasts - they're the ones that are unfortunately doing it the toughest at this point in time," he said.

United Retailers Federation president Scott Driscoll said poor sales had lead to an "extremely high" number of job losses in the retail sector, as well as a reduction in employees' hours.

"All small businesses across Queensland are looking at ways that they can counter costs," he said.

"Unfortunately, one of the ways that they're going to be forced to go ... is to reduce staff hours or reduce staff numbers."

Spending at the higher end of the market appears to be faring worse.

Ted's Camera CBD store assistant manager Lisa Roxborough said sales had been sluggish for months.

"There's not a lot of trade," she said.

"A lot of people are still shopping around but they're more after bargains to save their pennies."

Joanne Mercer Footwear Queen St Mall store assistant manager Monita Anthony said sales were almost non-existent on weekends during the flood clean-up but had started to pick up again.

Tourism

Paul Lewin, CEO of the popular Story Bridge Adventure Climb at Kangaroo Point, said his business was half its traditional January levels.

"I think there is a perception that Brisbane is still closed," Mr Lewin said.

"There are a number of people who phone us up and say 'Are you open yet?'.

Mr Lewin said only about 20 per cent of Story Bridge Adventure Climb customers were international travellers, and that many locals were wary with their spending for either financial or emotional reasons.

"I think to a degree people don't want to be seen as having too much fun in an area that has just been decimated by the floods," he said.

South Bank Parklands CEO Malcolm Snow is facing a similar battle, with up to 70 per cent of the park's visitors from southeast Queensland.

He said it was crucial to pitch any future marketing campaigns at getting local people out enjoying their city again.

Advertising

Marketing budgets are often seen as a way of measuring business confidence.

Mitchell Communications Group managing director Kenny Stewart said the floods had caused some industries to increase advertising, while others were down.

"Retail clients are obviously spending because the [flood victims] are going to be needing furniture and other goods," he said.

"In insurance ... we're seeing advertising up because of the opportunity there.

"Tourism certainly is a massive concern in the market at the moment. Extra money has been made available [for advertising] to [get across] that we are actually open for business.

"The government ... is putting its money where its mouth is to promote the general industry. But individual tourism operators are finding it pretty hard [and are not advertising]."

Mr Stewart said property advertising was the same.

He expected legal services to begin to ramp up their advertising as flood victims sought to chase insurers.

Kevin Moreland, a partner of agency BCM,

said his agency had suffered only a logistical pain during the floods.

"The floods have been certainly a hiccup but I don't necessarily know ... [that] they have had a significant impact on the state of the business," he said.

"It's pretty much business as usual."

Hair, beauty, fashion

A forced three-day closure followed by weeks of slow trade has already cost upmarket Fortitude Valley salon Fabrik two staff and around $30,000 in lost business, according to proprietor Darcy Stratford.

While business was slowing picking up, Mr Stratford said he didn't expect to turn a profit this year.

“People are spending less when they come in – there was a period when I think people felt guilty about spending anything on themselves at all after the floods,” he said. “It went from being a slow Christmas period to staff holidays to floods to cyclones.

“It's a wonder our doors are open at all.”

Several fashion boutiques in some of Brisbane's highest-profile strips have not reopened since forced closures in January, including shops on James Street and Brisbane CBD.

Eloise Monaghan of high-end sensuality boutique Honey Birdette said while her business emerged relatively unscathed, other retailers were struggling in the wake of floods, rate rises and the absence of stimulus spending.

“We lost trade during the floods when we were forced to close all three of our Brisbane stores,” Ms Monaghan said. “But we've come back strong and feel we're well positioned for the rest of the financial year.

“However we've noticed customers in our Sydney boutique still think that Brisbane is underwater so there's an issue of perception still facing small business owners.”

Hospitality

A 15L bottle of Moet was among the $150,000 wine collection lost when Moo Moo restaurant was flooded in January.

While the power remains out, owners Steven and Autumn Adams are ploughing ahead with plans to reopen on March 23.

Others, such as CBD restaurant Barolo, the sunken Drift Café at Milton and restaurants attached to the Stamford Plaza, will remain closed for some time.

But it is good news for some businesses on the swamped Riverside complex and Eagle Street pier, with the Pig and Whistle, Alchemy and Customs House among the venues now back open for business.

However, Groove Train, Jellyfish and Boardwalk Bar and Bistro remain closed.

The flood has led to some innovative thinking, with Jellyfish temporarily sharing space with upmarket steak restaurant Cha Cha Char, at Eagle Street Pier, with a limited menu on offer.

Where to now?

Despite the tough year thus far, Nick Behrens said the future looked brighter for Brisbane.

"The fundamentals of the Queensland economy are still quite sound," Mr Behrens said.

"We have an average 2.3 per cent annual population growth - that's something that's well and truly in our favour. We also have significant infrastructure projects that are going ahead ... [and Queensland] has to rebuild following the floods and cyclone.

"Whilst the Queensland economy is going to take a hit in 2010/11 financial year, the expectation is that for 2011/12 financial year it will well and truly start to pick up."

********************

It is interesting to see how people are working out ways to overcome their business problems after such events, some have closed altogether and cut their losses, some have opened and receiving trickling business but I thought it very interesting and inspiring how others are banning together and sharing the expenses by combining their businesses...brilliant and creative! Obviously there are lots of items, both legal and operational to work through but it's a great way to face such an incredibly devastating event in a positive manner. Small business marketing is also a crucial key to ensuring you get the word out to customers that you're open for business. I will discuss this further in my next blog.

In the meantime, if you live in or close to a devastated area and you managed to get through it without the losses others did, please, please support small business and make an appointment to help our small businesses get out of the mud and survive once again.

Small Business Term 'ABN' - What does this represent?

2010-11-30T11:27:00.000+11:00

Small Business Australia

Australian Business Number (ABN) - An ABN is a unique 11 digit
identifying number that businesses use when dealing with other businesses.

For example, all types of businesses, including small business, generally
need to put your ABN on your invoices, or other documents relating to
sales that you make. If you don't, other businesses may withhold 46.5%
from any payment to you.

You also need an ABN in certain dealings with the Tax Office and other
areas of Government.

Registering for an ABN is not compulsory, but you will need one to register
for the GST (goods and services tax).

Small Business Term 'SAV'

2010-11-24T10:33:00.000+11:00

Small Business Listings Which State The $price + sav

What is SAV?

SAV = STOCK AT VALUE

When the Stock is Valued At Wholesale or Cost Price – The Price Does Not Include Stock

(Used whether buying a small business or selling your small business)

Why Small Business Owners are Choosing to Value Their Own Business

2010-11-19T14:24:00.003+11:00

Thinking Of Selling Your Business? Don’t Until You Hear This… Why Small Business Owners Are Choosing to Value Their Own Business

Selling your small business for its true value and at the very best price is definitely challenging, however surprisingly straight forward. More small business owners are becoming aware of just how simple it is to sell their own business without having to pay the large commissions.

One of the most common reasons why small businesses which are on the market do not sell is inaccurate business valuation, resulting from an incorrect selling price that may either be too high or too low. In determining business value, the mathematical expression of total assets minus total liabilities is only half the whole picture

When preparing your small business for sale there are a lot of other variables that must be considered to come up with an acceptable business valuation especially to attract potential buyers. As you are aware, no two businesses are the same, so why should they be valued the same way? That is why it is imperative to calculate your business valuation and include absolutely everything - just the 'multiple' method may not cut it.

3 Common Business Valuation Mistakes

2010-10-18T14:34:00.003+11:00

Selling a Small Business - Some Common and Scary Business Valuation Mistakes

There is a great deal of confusion when valuing a business and business sellers tend to make the same mistakes. The startling fact is that unfortunately, so-called professionals often repeatedly make these same mistakes.

Mistake # 1 – Applying a ‘one size fits all’ rule of thumb when valuing a business

For example, multiples of profit, multiples of rent rolls or percentages of revenue etc.

While a one-size fits all appraisal method is simple, unfortunately it does not result in accurate business valuations.

A study of the actual sale prices of 5000 small businesses showed the sale price/cash earnings multiple ranged from 0.1 times the earnings with a median of 1.75 times the earnings.

Therefore, it is apparent that applying the average or median ratio as a one size fits all multiplier produces misleading and unfair results, particularly to the better businesses.

Mistake # 2 – Using Contrived Methods when valuing a business

For example, Super Profit - This is one of the more unusual (silly?) appraisal methods, where the method assumes that different parts of the investment in a business have difference levels of risk. Hence, should return differnent rates of returns on the investment.

For example - The plant and equipment in a small business is far less risky than the cash flow.

In reality, when a small business goes under, all business assets lose substantial value - nothing is
protected.

The engine room and fittings of the Titanic were subject to the exact same voyage risk as the
rest of the ship!

Contrived methods were first used in the US in the early 1920's when American lawyers had trouble understanding discounted cash flow. The concept of 'super profit', while having an illogical grounding, was easily understood by lawyers and judges, and was used until fairly recently to settle equity cases - SCARY!

Mistake #3 - Neglecting To Include WIP (Work In Progress) In Business Valuations

It is quite amazing how even people who should know better often overlook WIP when valuing
a business.

WIP is a key element of the business value in both professional practices and contracting
companies. In these environments, there is usually valuable work in progress still to be
invoiced.

We recall an instance in Australia where a major public company sold its contracting and
engineering business and its appraisal overlooked a substantial amount of WIP in the business.
In effect, the lucky (canny?) buyer recouped the purchase price in less than 3 months.
Essentially, the WIP the buyer got free was invoiced and paid - WHOOPS!

7 Things To Ask Yourself Before You Sell Your Small Business

2010-09-09T12:31:00.001+10:00

Your browser cannot play this video. Learn how to fix this.

"7 Things to Ask Yourself Before Selling Your Small Business"

Selling your own business is as crucial a business decision as starting, operating, or expanding one.

Aside from investing your resources, time, and effort, it has become a big part of your life and leaving it may have some emotional repercussions if you don't carefully plan for such an eventuality.

On a happier note, if you do make a conscious effort to map out a desirable plan, you are sure to end up satisfied and fulfilled as you go through the next phase of your life, be it retirement or an entirely new business venture.

The process of selling your own business can be tedious and complex. There are questions you should ask yourself for which you should find answers.

It is critical that at this point you should give yourself sufficient time to ponder specific questions if you are to achieve your desired outcome.

Here are 7 questions to get you started…

#1 - Why Am I Selling My Business?

The reasons for selling are varied, such as:

New business undertaking
Change of career
Emigration
Retirement
Health concerns
Family issues
Business failure
Economic down trend and alike

It is essential that you examine the real reasons why you want to sell your business - because this will become part of the basis to determine the other processes necessary for the sale. For instance, if your reason is business failure or bad economy, you may not be able to command a good price and it would be best to postpone the sale.

#2 - How Prepared Am I To Sell My Small Business?
The preparation phase entails various processes.
After making a final decision to sell, the key areas and the entire work force of your business should be informed in a discreet and professional manner to avoid speculation and panic amongst the ranks.
Accurate and updated financial records of the business should thereafter be made ready – make an appointment with a Business Accountant.

A complete inventory of all the business' assets, especially the tangible ones, should be undertaken and a thorough review of existing systems and procedures completed.

Other documents that can be prepared at a later time are:

Information Memorandum containing complete information about your business
Confidentiality Agreement to prevent information leakage, and
Letter of Intent embodying the buyers willingness to buy after agreeing with the terms of the sale

#3 – How Much Is My Business Worth?

While a business can be valued in different ways…

…YOU, as the owner, are in the best position to give an honest and true valuation of your business.

After examining your books of accounts, reviewing the systems and procedures in place, consider your intangible assets, and assess the overall economic environment to include industry performance and competition.

You are now ready to give yourself a tag price that will suit your purpose.

#4 – When Is The Right Time To Sell My Business?

Proper timing is paramount when selling your own business, but there is no hard-and-fast rule as to when timing is right.
Depending on your motives for selling, anytime may be the right time…

…For instance, if maximization of price is your aim, a period of economic recession or depression is definitely not the right time.

If you are seriously thinking of retirement due to age or health, now is probably the right time - And so on.

#5 – Who Can I Sell To?

As you may or may not have noticed, demand for Small Businesses has increased considerably due to recent economic times, so most well prepared business owners can afford to be picky when it comes to who they sell their business to.

Your own family members, friends, customers, suppliers, and employees can be your first prospective buyers. Even your colleagues and competitors in the industry may be interested given the right perspective.

The public at large is of course your biggest market, but you will need extra efforts and time to reach to them.

#6 – How Do I Sell My Business?

The process of selling has greatly evolved with the advent of the computer. Reaching out to people far beyond your local area has been made easy with the click of a button or mouse…

…Selling your business through the web is the first option - It allows you to be seen by millions of readers and can be FREE!

Print advertising in newspapers, magazines, bill boards, or posters are good to do in conjuction with the web for maximum exposure.

#7 – Will I Be Happy When I Sell My Business?

Given the right price at the right time at the right place to the right buyer…do you think you will be happy in the end?

...I certainly hope so :-)

How To Sell Your Small Business Franchise Fast - Tips 5 and 6

2010-08-24T13:21:00.000+10:00

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Selling A Small Business Franchise

Step 5 - Let your potential buyers be aware of your small business. Make your presence visible so that buyers can find you.

Advertise and promote your small business franchise. Stress the good points of your small business - This will attract the attention of your potential market.

Step 6 - Accommodate questions and be spontaneous with your answers.

You will find it necessary to list down all possible questions that a potential buyer may ask during the sales process.

Being spontaneous will draw their interest to the small business.

Stick to the facts and be honest.

Most importantly...Do not oversell!

Recap:

- Sit down and negotiate
- Be professional
- Don’t appear like you are just interested to close the sale. You have to empathize.
- “Go the extra mile” to be of assistance to your buyer, build a good relationship
- Be sure that they can reach you and be ready to assist
- When all parties are satisfied and happy, your franchise business sale is successful

How To Sell Your Small Business Franchise Fast - Tips 3 and 4

2010-08-24T13:18:00.000+10:00

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Selling a Small Business Franchise

Step 3 - Prepare your small business franchise with a good sales package to target your potential buyers.

Establish the value of the franchise, set a price, include your assets and financial statements (cash flow), and include other pertinent information needed in the operation of the business.

You can include services like free assistance and training in your sales package.

Step 4 - Understand what the market is looking for. What is the trend in the market today? How big is the demand for your franchise? Are you the only small business franchise business of this type in your geographical area and/or for sale?

Know how the market works - When you know your market, you know where to find your potential buyers.

This is necessary in order to locate where to market your small business franchise otherwise you will have little impact in your target in order to sell your business.

How To Sell Your Small Business Franchise Fast - Tips 1 and 2

2010-08-23T16:23:00.000+10:00

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Selling a Small Business Franchise

Prior to advertising your small business franchise for sale -

Before you even decide to put your small business franchise on the market, review your Franchise Agreement Contract.

Focus on the terms and conditions stipulated when it comes to the transfer and sale of the franchise.

Know your rights and your limitations; the rules that you have to follow when selling your franchise.

After further review and understanding of the Franchise Agreement, here are 2 tips of a series to keep in mind to sell your small business franchise fast:

1/ Inform the franchisor of your decision to sell your franchise in writing. Keep a copy for yourself for future reference.

Sit down and discuss the Franchise agreement contract.

Confirm what you know and how you understand the agreement to avoid any misunderstandings.

Accept whatever assistance they have to offer and try to balance the financial package so as to benefit both you and the franchisor.

Know where the franchisor stands in the transfer and sale of your small business franchise.

2/ In the contract, it may state that a franchisor has the right to approve or refuse a buyer - it is wise to fully understand the transaction and have the last say.

Familiarize yourself with these rights to have a smooth flow of the sales process.

Be aware of the franchisors’ strong contractual claim over the sales and assignment of the franchise.

Even during the sales process, let them know the development of the sale - keep them in the loop for an amicable outcome.

They want to know your buyer’s background as they match them with a list of certain criteria to qualify them as a successor of your small business franchise.

More tips to come soon...

Small Business Valuation - Doing a Business Valuation on the back of an envelop?

2010-07-30T13:12:00.000+10:00

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It may come as a surprise to learn just how many business brokers price small businesses for sale and business valuation is often written on the back of an envelop.

The business valuation method following is used by business brokers to determine an asking price for a small business; it is based on the adjusted net profit using the most recent profit and loss statements.

The business broker will look at all the business expenses to see what they can 'add back to profit'. This is referred to as add backs or recasting.

The adjustment is made by adding back to the net profit all the non-essential or discretionary expenses, not necessary to run the business, to show a more accurate net cash flow for the owner.

The business may also have unaccountable expenses - in this case it would be adjusted down. Once this number is determined, the next step is to get the envelope and pen then the business broker will multiply the adjusted net profit, usually by 2.5 times and they have an answer.

As you can plainly see, business valuation, using this method doesn’t make a great deal of sense and frequently has devastating results for small business buyers and sellers............but it is easy.

Some business brokers may even mention rule of thumb, but as one very wise business valuation practitioner suggests - 'thumbs come in many sizes'.

The best thing to do is ensure you have a comprehensive small business valuation tool and step by step instuction for an accurate business valuation.

Selling a Small Business - What happens if the sale falls through?

2010-07-28T10:37:00.000+10:00

Why your small business sale can fall through without warming. Selling a small business yourself and what to do if the sale falls through.

Reducing the risk first and foremost -

One of the most important things you can do when selling a small business is establish the correct asking price in the first place. 9 out of 10 business owners have no idea what their business is worth
Provide the business buyer and their advisors with a business valuation which gives details as to how you arrived at the price
Show them why it's sound - you're taking the guess work out of it for them

This gives you the support you need to move the sale forward

It is extremely important to present your business in the correct manner to maximise your small business sale potential.

How to Sell a Small Business - Why you need a Small Business Selling Memorandum

2010-07-26T12:59:00.000+10:00

A small business selling memorandum is also called an Information Memorandum and is used to present the business buyer with a overview of your small business.

It is a business selling tool, providing answers to some of the basic questions business buyers usually have concerning the business.
So what goes into an information memorandum?

The history and purpose of the business
Outline the offer
Information about its customers and the products or services it provides
Industry information
Future plans
Financial information

Your aim is to give the prospective business buyer enough information to make the next step, so don’t forget to include a call to action - What do you want them to do next?

Small Business Selling - Important points:

Always have the potential business buyers sign a Confidentiality Agreement
When you complete your Information Memorandum I would suggest you then create a summarised version. This is then used as the first response to the buyer’s enquiry
Limit the information you reveal at the initial stage of the process until you qualify the business buyers

Selling Your Small Business - What Does a Business Broker Charge?

2010-07-21T14:17:00.000+10:00

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Selling your Small Business knowing the facts about Business Broker Charges -

Most business brokers will charge a commission to sell a business. The selling fee (commission) is usually 10% of the sale price. However, did you know, as a rule, business brokers will have a minimum fee on average - in the region of $10,000. So you would be charged what ever is greater.

In addition a business broker will charge an upfront fee - sometimes called a listing fee - to sell your small business.

It’s normally a non refundable fee and is paid at the time of the business listing. This fee is typical from $2,000 upwards.

Some business brokers may deduct the listing fee from the sale fee – that’s if they sell the business of course. Let me give you an example...

...On a $200,000 business sale, listing fee of 2,000 Selling fee will be $20,000. Commission due to the Business broker will be $22,000. This will be due at settlement and is normally handled by the lawyer acting for the business owner.

The good news is, there's no need to pay these fees when you have the right information and accurate business valuation tool to sell your small business successfully.