Plan Your Exit Strategy Before You Start Your Business - Why?

Most business owner’s start planning an exit strategy when they are thinking about selling their business or franchise, the problem is that this is too late. By this time the owner is usually full entrenched in the business and to plan and execute an exit strategy at this time may cause drastic changes to the business in a short period of time.

This can cause a reduction in sales and the disruption to the staff through reallocation of work or employment of new staffing will notify your employees of a major change. This can cause dissatisfaction and uncertainty of their security under a new owner and could potentially cause the collapse and reduce the value of the company.

So the question is, “When should you plan an Exit Strategy?”

The answer is now, but the best answer is before you start your business, or soon after.

You May ask “Why Plan an Exit Strategy, when I haven’t even started?”

By planning an exit strategy as soon as possible, it doesn’t mean that you want to sell the business now, it simply allows you to plan ahead. This idea also means that you may eventually like to sell, or it allows you to make the business less reliant on you, so you can work on the business, instead of being entrenched in the business. Your business is always worth more if the new buyer doesn’t see you as the cornerstone of the business, where it can’t operate without you.

This makes your business more of an investment option where the business buyer has a choice to either work on the business or leave it running as it is with minimal direction or involvement from the new buyer. It also offers your employees a better sense of security for any transitions between owners, as it usually means that the business will run as smoothly no matter who is running the business.

By planning now, you can focus on where you want the business to be 5, 10, 20, or 50 years in the future. This way you can set up a plan in the future of where you want to be and plan backwards. .. Read more at: http://www.business2sell.com.au/blogs/2013/10/plan-your-exit-strategy-before-you-start-your.php

Author: Paul O'Brien works as a sales marketing manager at Business2sell.

BUYING A RENT ROLL BUSINESS - THE 3 CRITICAL THINGS

Whilst buyers of a rent roll business will encounter similar issues to buying a real estate agency, there are some very specific issues that require particular attention to protect a buyer’s interest and their ability to maximise their returns after settlement.

In particular, the three critical issues that need to be examined: the multiplier, the retention and the restraint of trade.

The Multiplier 

The market value of a rent roll in Australia is usually derived by applying a multiplier to the net property management commission. This is usually the most important issue for a buyer and it will be at the forefront of their mind. There are plenty of factors that need to be considered in determining the Multiplier.

• Ratio – a ratio of one property to one owner is considered to be excellent and most buyers will consider this ratio as extremely important.
• Term – what is the management term of every property? Generally, a property that has been managed for more than five years is a “blue chip” management.
• Location – properties located within 5kms of the office are ideal; those located outside are more costly (time and money) to manage.
• Averages – properties that achieve rents way above or below the average for the area usually have higher levels of vacancy, arrears, repairs and maintenance. High levels of vacancy and arrears are typical of low quality rent rolls.
• House v. Units – some managers consider units more profitable than houses, given that repairs and maintenance are comparably lower as the body corporate manages all external issues involving a unit.
• Condition – obviously the condition of the properties will impact upon the time spent in dealing with repairs and maintenance.
• Payment – the method by which tenants pay rent and statements are sent to owners is important (e.g. the monthly tenant direct-debit-rent bank transfer to owner considered most valuable); other less effective systems have a negative effect on the multiplier.
• Authority – agency agreements that provide limited or no authority to the agent result in time consuming and costly communication with owners on trivial matters.
• Relationships – are there any unusual connections between the seller and the landlords? Such relationships could impact on the loss of managements.

Aside from the factors that determine the multiplier, the buyer will need to properly consider the retention issue, which if not satisfactorily addressed, could undermine the value of the rent-roll business. ... Read more at: http://www.business2sell.com.au/blogs/2013/11/buying-a-rent-roll-business--the-3-critical-t.php

Author Bio:

This article is written by a lawyer "Joe Kafrouni" for Business2sell.com.au

Due Diligence When Buying a Business - The Best Investment

Some aspects of a business are more valuable than others. There are some aspects that you simply can’t live without. For example, whilst an owner of a café can easily replace a coffee machine if it fails, it may not be as easy to replace the taste of their particular coffee blend, which their particular clients are fond of, if they have a fall out with their supplier. Similarly, to replace the barista whom the customers share a quick laugh with every morning when they grab their daily dose might also be problematic. As a result, buyers need to ensure that the key aspects of the business are sound when they are buying a business. They need to make sure they are getting value for money.

To do this, buyers need to undertake a thorough “due diligence” of key aspects of the business. Due diligence simply means an investigation. A bit of CSI; but for the business scene. The business sale contract will be made “subject to due diligence” for a specific period of time to allow the buyer to make their investigations and to pull out or re-negotiate if things are not what they expected. As it is impossible to check every singe aspect of the business, it is important to check the key ones. Here is a list of some of the key aspects of a business to consider:

1. Intellectual Property (IP): a business’s IP can be one of its most valuable assets. For this reason, a buyer must ensure that the IP is properly identified, that the seller is in fact the legal owner and that it can be transferred to the buyer without any hassles.
2. Employees: sometimes, a business’s success may rest in the hands of some key workers of the business. If so, this is risky and buyers must take steps to ensure those workers are staying or at the very least, their knowledge is adequately passed on to the buyer.
3. Premises/Lease: when the success of a business is reliant on its location, the lease becomes particularly important. The buyer needs to ensure that the business can be lawfully run from the premises and that the lease allows the buyer to do what it needs to from the premises for a satisfactory period.
4. Licenses and Permits: businesses in some industries require specific licenses and permits to operate. Otherwise, they can’t operate legally. A buyer needs to check this out for themselves. When there is a requirement, the buyer needs to establish whether the seller has all the licenses and permits required to run the businesses, whether they are transferable or whether the buyer can successfully apply for such licenses.
5. Customers: if the revenue of the business is generated from some key customers, the agreements with those customers should be looked at carefully. A buyer must understand on what terms they are providing goods or services and determine how easy it is for the customer to end the relationship and therefore the revenue.
6. Suppliers: similarly, if the business is reliant on some key suppliers in order to do business, the arrangements with those suppliers are important.

At the end of the day, the buyer has to be comfortable that they are getting value for money. If they find that things are not as they expected, they will usually have the option of terminating the contract under the due diligence provision in their contract... Continue reading at: http://www.business2sell.com.au/blogs/2013/11/due-diligence-when-buying-a-business--the-bes.php

Author:

This article is written by a lawyer "Joe Kafrouni" for Business2sell.com.au

BUYING A MANUFACTURING BUSINESS? 4 KEY POINTS TO CONSIDER

There are many factors to consider when purchasing a manufacturing business in order to protect the continuity of the business following settlement. Here we cover some of the important issues (amongst others) that a buyer should discuss with their business lawyer before signing a contract.

Local & State Government Approvals

It is important to ascertain what licenses and approvals are required from the local government in order to conduct the business from its premises. A buyer will also need to ascertain whether the business currently has these licenses and approvals, whether they are transferable and whether the buyer will be able to continue to meet any conditions contained in the licenses and approvals.

Manufacturing businesses are generally required to meet many legal obligations under state and local laws in relation to fire safety, workplace health and safety, and environmental laws such as noise reduction and trade wastes. Many manufacturing business will require multiple licenses and certificates from their local government prior to being able to operate the business. It is therefore imperative that the contract is made conditional upon the approval or transfer of all necessary licenses by way of a carefully worded special conditions being inserted into the contract.

Lease, Plant & Equipment

If the premises are leased, whether there is to be an assignment of an existing lease or the negotiation of a new lease, it is important to ensure that the premises are fit for the purpose of the business, particularly in regard to structure and floor load bearings. Also, due to many manufacturing businesses having large fixed plant and equipment, attention should be paid to the length of the lease and whether any options for renewal are satisfactory.

It is also vital to ascertain the working order, age and repair requirements of all plant and equipment. If the machinery itself is imported, are there locally trained technicians that can repair the machinery and are spare parts available locally? Are all warranties for the machinery capable of being transferred?

As the premises, plant and equipment are vital to the business, it is imperative that a special condition is inserted in the contract to ensure that the buyer has the time to have the machinery and premises inspected by qualified professionals. Without such a special condition the contract will not be subject to the buyer being satisfied that the premises is fit for the intended purpose; and that all the plant and equipment is in good working order, is suitable for the intended purpose and that any warranties can be transferred to the buyer. Also, a special condition should be inserted to ensure that the contract is subject to the buyer’s satisfaction with the proposed lease. Read more at: http://www.business2sell.com.au/blogs/2013/11/buying-a-manufacturing-business-4-key-points-.php 

Author:
This article is written by a lawyer "Joe Kafrouni" for Business2sell

Examples of Confidentiality Agreements for Selling Businesses and Franchises

A Confidentiality Agreement is a basic contract between the owner of the business and a prospective buyer. This contract states that the prospective buyer will not disclose any information which has been given or talked about in meetings in relation to the business which they are looking at buying and they will keep everything confidential about this business and the operations, staffing, financials, etc…

In a number of cases the Confidentiality Agreement also states that the prospective owner will not start up a business which is similar to the one which they are looking at in competition to the owner of the business.

This document is important because it contains the full details of the prospective buyer to all of you to research and make sure that they aren’t your competitor and it also works to stop the prospective owner from telling others about the sale of the business. This includes telling current staff members about the sale of the business which can cause a mass exodus. Because confidential information is given to the prospective buyer during the sales process, information like the operation of the business, clients, competition, marketing and sales methods may be discussed during the sale of the business and this information may be used to start up a competing business or may be passed on to one of your competitors which could be disastrous for the business.

An example of the basic text used in a Confidentiality Agreement is shown below, but for downloadable PDF versions of Confidentiality Agreements please see the links below:

Basic Confidentiality Agreement
http://www.business2sell.com.au/docs/confidentiality-agreement-basic.pdf

Full Confidentiality Agreement
http://www.business2sell.com.au/docs/confidentiality-agreement-full.pdf

Confidentiality Agreement

I/We, being the people named in the Schedule set out below, acknowledge that we are prospective Buyers of the business as described below.

1) The business profile and material and all things connected and relating to this material are confidential and the intended purchaser(s) agree(s) not to disclose them to any other person except his/her legal, accounting, financial advisers and bankers being then only on the basis that they have to provide us with their agreement prior to receipt of the material to keep this information confidential unless prior written consent is first hand obtained from [Business Name] to disclose of this material to that party........... Continue reading at Business2sell.

Business2Sell : Convenience store + Residence Business for Sale

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 - Hastings

- Takings $9000 p/w

- No Opposition

- Next door to childcare and local primary school

- 25 On site car parks

- Excellent 3 bed 2 bath residence.

- Potential for further improvement and growth through take away/coffee set up

- No experience neccessary full training will be provided prior to settlement

- Easy to run and will suit a husband and wife team.

- Long term lease

- A must see business, at this price it won't be available for long.

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With a name that has 26 years of experience in servicing the paint and panel industry, this is a family business that is well known to the Brisbane trade for quality service and repairs.

Well positioned in the centre of the busy Strathpine business district for over 10 years, this workshop -- a recommended dealership(s) repairer -- has successfully serviced key north side dealership accounts in both paint, panel and warranty work.