Back to articles page

Make The Dream Come True
by Evan Kambourakis, Dip.A, B. com, ASA - #62

Many people dream of stating or owning their own successful business in Australia. This dream may start with a simple idea for a family legacy. An opportunity may also arise for you to purchase an existing business at the right price. The world’s richest entrepreneurs in the field of technology, computing, consumables and the Web, brand names of the like of Hewlett-Packard, Apple Computers, Nads, Nudies, Facebook, You Tube, and Google are all success business stories with started in the humble home garage and were driven by people with a
real passion for their work.

However, not all new businesses become success stories as many businesses fail within the first year of operation. Major reasons cited for business failure are lack of planning, lack of capital and economic conditions. It is important at the initial phases of starting up or purchasing a business that you do your homework and plan. Develop a business plan which is workable, flexible and realistic. Business managers commonly underestimate costs, fail to price their product or service correctly and over estimate projected income.

Lack of capital funding and business cash flow shortage may also strain business success. Businesses fail to factor economic conditions or are unable to make changes in the time to stay afloat. Ensure that you have sufficient working capital which will allow the business to continue its operation for a considerable amount of time
in the event that there is a slow down in revenue. You must take into consideration all expenses that are incurred in the business including rent, wages, taxation and legal fees. Seek financial advice form us on how much you can borrow, obtain the best interest rates and always negotiate. Ask lots of questions and expect thorough answers. A good banker should be prepared to give you advice on all your banking requirements.

You will need to grasp an understanding of what you expect to get from your business. How many hours are you willing to work daily? What experience can you bring to the business? Is your product or service better or cheaper? How will you market your business and products? Review the market place and surrounding competition. Will location and presentation affect your turnover? Can you improve existing operations and how? Review your product costing and mark- ups. Will you require full time or part tie staff? Employ the right staff for the particular role. What award and work conditions will these employees come under?

In the initial planning phase, you will also need to decide on a business structure that is right for you. You may decide to set up as a sole trader, Partnership, Company or as a Family Trust. You must also consider Tax File Number (TFN), Australian Business Number (ABN) and Goods and Service Tax (GST) registrations. Speaks to us about the advantages and disadvantages of each structure and the necessary registrations we can undertake for you.

Any legal issues such as lease agreements and contracts should be reviewed by a solicitor. You should also contact your local council and find out your zoning requirements and any zoning restrictions relating to your proposed business premises.

We emphasise the importance of seeking our professional advice prior to making any offer to a vendor to purchase an existing business. Negotiation of price for the business, rent and lease term should always be undertaken by a third party. We offer our experienced services in this respect.

Certain checks should be carried out to evaluate and advise you of any potential risks, and ensure that the vendors selling price and business representations are realistic and fair. Business brokers usually work on a commission basis and are remunerated on sale. It is very important to seek as many details form the vendor and request at least three years of financial accounts, tax return lodged with the Australian Taxation Office. Historical financial performances in conjunction with benchmarking data are the key information which will assist in the valuation process. Cash flow projections may also assist in the analysis phase.

Understand the market place and the type of customers you would like to attract into your business. Spend considerable time researching your competitors, their products and pricing. Analyse your products with customer feedback ratings. Be critical on how you may improve your product line, customer service the environment at point of sale: for instance; a coffee shop with a great colour scheme, pleasant environment with music playing in the background, quick service, selling quality coffee and cakes at the right price. You should always aim at keeping your customers happy. With the help of technology and computers you may also wish to sell products online or have a may also wish to sell products online or have separate delivery section within your business.

Establish a credit policy with clients which is legally binding. Have a follow up system in place to remind clients when they have exceeded these terms. You may wish to offer discounts when payments are made promptly. This will assist with increasing your cash flow. With your suppliers, be a good payer and always stay on good terms. Ask for a discount on bulk buy items.

The day to day bookkeeping is extremely important in keeping is extremely important in keeping your business on track. Keeping accurate records of receipts, debts outstanding and reconcile your records to bank statements. You should use us wisely to help you with your bookkeeping, tax and accounting needs.

Whether you are buying an existing business, or you are starting up your own business, it is important that you factor in the abovementioned aspects. It is also critical that you seek professional advice from us and your lawyers are ware of economic, legal and financial environments affecting business. St. Clair partners have been advising people for over 35 years with respect to buying and selling businesses. If you are interested in receiving sound advice, kindly contact us.

St. Clair partners
Phone (02) 9221 4088

Back to articles page