Australia is a land of opportunities, and it's no surprise that many businesses want to do business here. But Australia is also a land of challenges for small business owners unfamiliar with our unique culture. The good news is that you don't have to be a local to run a successful business in Australia—but you will need to understand the local market if you want your venture to succeed. \"I recognise that business owners don't always know the best strategy to market their company. Furthermore, determining if a particular technique is a smart investment might be difficult. Making a decent marketing plan is a fantastic place to start, but putting those plans into action may necessitate business marketing loans,\" says Olivia Jones—business marketing and loan expert at Askfunding.com.au. Read on to discover why so many businesses are turning their eyes toward this sunny state! 1. Booming Australian Market, The Australian Government, has been working hard to encourage growth in key industries such as mining and tourism by investing in infrastructure projects such as roads, bridges and tunnels that will improve access for businesses and tourists across the country. The government has also worked closely with local councils to develop policies that promote investment in new development projects, creating jobs for Australians from every walk of life. 2. Rising Spending Power Australian consumers spend more on new technology, travel and entertainment. They also spend more on food and beverage, clothing and footwear, and health and beauty products. 3. Highly Motivated Businesses To Invest In Their Success In Australia, business owners are highly motivated to invest in their success. They enjoy long-lasting customer loyalty and have a reputation for being innovative. Australian businesses gain benefits from this mindset: Younger entrepreneurs are more likely to incorporate technology into their business models to stay competitive. This can lead to faster development cycles and quicker releases of new products or services. Australian entrepreneurs tend to be more comfortable with taking risks than other countries' entrepreneurs by nature of their culture; they're less worried about losing money on investment because it's easier for them (and others) to make up lost ground financially by applying for a loan if necessary. 4. Australia Has A Vast Market If you want to expand your business or start a new one from scratch, Australia is the perfect place. The country has a large market with lots of potentials that you can tap into. Marketing your products or services to Australians is easy because they are generally open-minded and willing to try new things. There are also ways to buy a business without using your money or borrowing money from a typical lender. Market Your Business With Australian Business For Sale Australia is a great place to do business, and there are lots of opportunities for entrepreneurs and companies alike, and the market is chock-full of potential customers who want quality products and services at reasonable prices. Before marketing your business, it is essential to seek out expert advice. If you decide to utilise an agent or broker, Australian Business For Sale can assist you in locating a suitable business broker anywhere in Australia. They can also advise you on how much money you should use for marketing your business and what types of loans would work best for your situation. Give it your best shot if you have an idea for a product or service that could sell well here. You won't regret it!
The assets of a business are a valuable component of the purchase price. However, the acquisition could be even more costly if you buy assets that are encumbered, or not owned by the seller, or not in working order. Due diligence enables you to understand and eliminate the risks in buying the assets. It helps you to identify the assets that form the purchase price; allows you to determine what the seller has said about the assets and their ownership is correct and helps verify the quality of the assets. Assets There are different categories of assets, including tangible; non-tangible; operating and non-operating assets. For the purposes of the sale agreement, some of these assets might be regarded as excluded assets and excluded from the sale. 1. Tangible assets – Plant and Equipment: Tangible assets are physical assets that can be identified and valued. They include operating and non-operating assets. These assets may change over time in value and quantity. An example of a tangible asset is plant and equipment, which includes photocopiers, printers, forklifts, company vehicles, machinery and furniture, for example. When undertaking the due diligence process, ensure that you undertake the following: Identify: Obtain a list of the plant and equipment and verify the location of each asset. Check the model numbers and descriptions. The final list, once confirmed and agreed, will be attached to the sale agreement. Owner: Check who owns the plant and equipment. The business might not necessarily own, but rather, might have leased or obtained finance for the assets. Agreements: For rented or financed plant and equipment, verify that there is nothing under the respective agreement that would prevent the agreement from being assigned or novated and that there are no onerous terms. Ensure that the seller is up to date with payments and hasn’t breached any obligation under the agreement. Note whether any money remains outstanding on the plant and equipment and determine whether you will take over the repayments or the plant and equipment will be paid by the seller before the sale completes. Test: Test the plant and equipment to make sure it’s in proper working order. If any equipment isn’t working, request that the seller repairs it before the sale completes, or exclude the plant and equipment from the sale. Maintained: Check that the plant and equipment has been adequately maintained. Review when and how often it has been serviced and that the servicing was undertaken in accordance with the applicable maintenance agreement and by a qualified person. If there are any maintenance contracts, these should be reviewed. For any equipment that hasn’t been maintained, consider having the seller service it before the sale completes. 2. Intangible assets – Good will and Intellectual Property Assets that are intangible, might not be physical assets. An example of assets that are intangible are goodwill and intellectual property. (a) Goodwill: Good will is an amount that the buyer is willing to pay to recognise the reputation of the business. To determine whether a business has good will, check to see whether they have strong branding; a customer list with repeat and loyal customers and something that can differentiate the business from similar businesses, such as proprietary technology or software. (b) Intellectual Property: Intellectual property is a valuable asset of the business although it might be difficult to value. When undertaking due diligence on the intellectual property, ensure that you: Identify: Identify all of the company’s intellectual property, whether registered or unregistered. Intellectual property includes, but isn’t limited to, the business name; the business contacts; client lists; the social media accounts; confidential information; know-how; formulas; works; trademarks; service marks; designs; patents; copyrights and policies and procedures. Ownership: Understand who owns the assets. The intellectual property of the business may not be owned by the company selling the assets, but by a separate entity either to protect the intellectual property or because it was acquired by a shareholder, say, before the business was operational. Copyright: Examine who owns the copyright in the materials, such as the policies and procedures or articles, that you’re acquiring. The owner of the copyright is the author of a piece of material. If the author is an employee of the business who has completed the work during the course of their employment, then the employer will own the copyright in the works. However, if a consultant completed the work, they will hold the copyright unless it has been assigned to the seller. Agreements: Obtain all of the back up agreements relating to the intellectual property, so you can be sure who owns it and whether the intellectual property is licenced, or has been assigned effectively through a deed of assignment. Assignment / Transfer: In regard to the assets that you have agreed to acquire, it is not enough to provide for the assignment or transfer in the sale agreement. Ensure as part of your due diligence that you check the requirements on how to assign or transfer each type of intellectual property to ensure that you get the benefit of the asset following completion. 3. Operating and Non-Operating assets: As you are reviewing the assets, you might come across references to operating and non operating assets. These assets are merely components of tangible or non-tangible assets but reference to operating or non-operating assets is dependent on whether or not these assets are used in the business. Operating assets are used in the business regularly to produce goods or services and may be tangible assets, such as cash, stock and plant and equipment or intangible assets, such as good will and intellectual property. Non-operating assets are assets that have been acquired, but might not be used daily in the business. They might be obtained for investment or contingency reasons. Shares acquired by the company or equipment that isn’t being used are examples of non-operating assets. 4. Excluded assets: Excluded assets, are usually assets that are excluded from the sale, either because the buyer does not want to acquire the asset; the asset is not owned by the seller so the seller does not have authority to sell it; or the seller owns the asset, but has excluded the asset from the sale. These assets should be listed and attached to the sale agreement as excluded assets and the value of them should not be included in the purchase price. Key takeaways: Due Diligence on the Assets Due diligence on the assets owned by the Company or the Business is an essential component of buying a business. Due diligence on the assets enables you to:o Identify the assets.o Investigate who owns the assets.o Determine the value of the assets.o Identify any risks relating to the assets; ando Qualify the processes that need to be fulfilled to fully acquire and receive the benefit of the asset. About the Author: The following extract has been taken, in part, from the book, ‘Entrepreneur Know How – Mindset and Winning Steps for Buying a Business,’ written by Sharon Robson (Available through Amazon and select bookshops – see: https://entknowhow.com/the-bookstoreSharon is the principal lawyer and founder of Antler Legal – a corporate commercial legal practice in Sydney, Australia. Sharon RobsonAntler Legalwww.antlerlegal.com.au
Validating the purchase price The purchase price of a business is often calculated on the value of the revenue or earnings generated by the business less the expenses accumulated to generate those sales. The value might also be determined by comparing similar businesses, or if there is no revenue, the price might be determined by the value of the assets of the business. Due diligence on the business’s financial reports, source records and data and depending upon the valuation method, the results of similar businesses, helps validate the value of the business. However, there might be some of the following circumstances which mitigate the perceived value and potentially allow an adjustment to the purchase price. 1. Financial reports If the value is equated on the revenue and expenses, request the financial reports and source documents including the profit and loss report for the current and previous two or three years. Review the financial reports carefully, including the sales, income and expenses and the value of the company’s assets, liabilities, creditors, and debtors. The information on the report should be compared to actual receipts and invoices to ensure that the figures are correct. The financial figures can support the valuation and determine how well the business is proceeding over time and whether it’s been impacted by market conditions or other factors. If you notice for example that there has been a decline in profitability, this might alert you to potential business issues, including with management; the product or service; or market events. Any potential issues have the capacity to reduce the perceived value of the business. 2. Expenses Expenses can be divided into regular, discretionary and capital expenses. Discretionary expenses are one-off expenses which might be incurred by the business. These expenses are not required regularly and may change according to the activities of the business. Examples of discretionary expenses include advertising or training. Capital expenses are more expensive and incorporate items that add value to the business. They might consist of costs for photocopy machines or computers. Depending upon how you plan to operate the business after completion, some of the expenses could be reduced or increased. Expenses are usually, but may not always be, listed in the financial reports. A business might enter into a contra deal, which involves the exchange of skills for goods or services but may not record the arrangement in the accounts. A coffee shop might provide free meals to a graphic artist in exchange for signage for example. However, if this arrangement is not continuing after the business is sold, but the business still requires signage, then the cost of that signage should be factored into the cost of the business. You should also review staffing arrangements. If the existing owner has operated the business without a salary, you will either have to replace that worker personally, or employ someone to do the work, which would reduce the business’s perceived value. If the perceived value is reduced, then the price might be able to be renegotiated. 3. Creditors and Debtors The business might owe money to others (creditors) or be owed money for goods or services it has provided (debtors). Determine whether this money is for once-off services or payable on a regular basis. Creditors and debtors will have a different impact depending upon whether you are buying the business or the shares in the company that owns the business. If you are buying the business, typically you take the benefit of the business from the date following completion and any money owing by or due to the business at completion is for the seller. However, if the payments relate to assets that are required to operate the business, then it will depend if the business will continue to receive the benefit of that asset following completion. Suppose money is owed to a coffee manufacturer. If the seller paid for the coffee, but the coffee will not be received until after completion, then the purchase price should be adjusted to allow for this purchase or the new owner might reimburse the seller as an adjustment to the purchase price on completion of the sale. If you’re buying the shares in the company, given the company does not change after completion, any payments and debt will continue to remain with the company after settlement. For debtors, find out how long have these payments been outstanding and the likelihood of receiving payment. If these are aged debtors and unlikely to be recovered, ensure their value is not included as revenue. 4. Work in progress ‘Work in progress’ refers to partly performed jobs that are yet to be completed although they might already be paid for by the customer, such as when a customer pays for a gift certificate but has not received all of the services. If these jobs are not identified during the due diligence process, it might result in the business having to perform the work after buying the business but not being compensated for it. The due diligence should involve understanding the status of the work, including where each job up to; the extent that the work has been paid for by the customer and the cost of delivering the work. Also determine who will settle the work after completion and whether that party has been paid for it. If the work is to be completed by the buyer, but if the customer has already paid the seller for the work, then there should be an adjustment to the purchase price on settlement. 5. Assets The due diligence on the assets should commence with determining why the business does not have revenue it can base the valuation of the business upon. Is it as a result of poor management, issues with the product or service or issues in the market for example. Due diligence should include reviewing the assets, and ensuring that they are in good working order, and the value is only attributed to assets that the business owns. If the assets are under finance, determine how much debt is owing on them and whether the finance will be paid out before completion. Unless you want the benefit of the asset that is subject to the liability, you might agree on adjusting the purchase price to allow for the debt, otherwise, the liability and the encumbered asset might stay with the seller. 6. Market Often the purchase price is calculated by reference to similar businesses in the industry. In this case, the due diligence should not only involve reviewing the business, but the market and competitors to determine whether the business has the capacity to perform on par or better than the market, and whether there are any contingencies that would vary that market value. If the business is operating under current benchmarks or if it must spend additional money to compete, then the perceived market value of the business will be reduced. Key takeaways: Value and the Purchase Price The seller usually establishes the sale price of the business on a particular valuation, which might be based upon revenue and expenses; market; or on the assets. Undertaking due diligence can identify features in the business which will reduce the perceived value of the business, which might allow for the renegotiation or adjustment of the purchase price. About the Author: The following extract has been taken, in part, from the book, ‘Entrepreneur Know How – Mindset and Winning Steps for Buying a Business,’ written by Sharon Robson (Available through Amazon and select bookshops – see: https://entknowhow.com/the-bookstoreSharon is the principal lawyer and founder of Antler Legal – a corporate commercial legal practice in Sydney, Australia. Sharon RobsonAntler Legalwww.antlerlegal.com.au
According to the Reserve Bank of Australia, the business loan margin is 2.4% as of July 2021, 4.3% for small businesses, 2.70% for medium businesses and 2.0% for large companies. \"Business loan is a financial instrument given by banks and other financial institutions to business owners to finance their businesses. A bank may offer a business loan to a company if they believe it has a good chance of repaying the loan,\"says small business loan provider Shane Perry of Max Funding. If you have been looking for a way to finance your business, you should consider applying for a business loan. Check out these six simple steps. Step 1: Determine Your Needs The first step to getting any loan is determining what you need. You should know precisely how much money you need and what you plan to use it for. If you don't have a clear idea of what you want to do with the money, then you won't be able to get a good loan. Step 2: Find Out How Much Money You Can Afford To Borrow Once you've determined what you need, you'll need to find out how much money you can afford to borrow. There's no point in borrowing more than you can afford. Step 3: Get Pre-Approved If you apply for a business loan, you'll need pre-approved. Getting pre-approved means telling the lender how much money you can borrow, and they give you a number based on that information. Step 4: Apply Online Now that you're approved, you'll need to fill out an application online. Don't worry about making mistakes; the lender will review your application before giving you approval. Step 5: Get Funding Approval After you submit your application, the lender will check to ensure everything is okay. Once they approve your funding, you'll receive your funds via direct deposit. Step 6: Make Payments On Time Make sure you pay back your loan on time. Lenders may charge late fees if you miss payments. Advantages Of Getting A Business Loan There are many advantages to getting a business loan. Here are some of them. 1. Easy Access To Funds Getting a business loan is not difficult at all. You do not need collateral to get a business loan. Banks and other financial institutions make money by charging interest rates. Therefore, they are willing to lend money to people who are likely to repay the loans. 2. Flexibility A business loan gives you the flexibility to make changes to your business plan. If you keep making payments on time, you can change your mind and decide to return to school or take a break from running your business. You can easily borrow additional funds if you plan to expand your business. 3. No Hassle When you apply for a business line of credit, you only need to provide information about your business. Your lender will review your application and approve or deny it within 24 hours. 4. Tax Benefits If you are self-employed, you can deduct certain expenses related to starting a business. These deductions include advertising costs, rent, supplies, and legal fees. 5. Better Credit Score Your credit score affects your ability to obtain loans. If you have bad credit, you will find it hard to get a personal loan. However, you will have no problem obtaining a business loan if you have a good credit score. Disadvantages Of Getting A Business Loan in Australia Aside from the advantages, there are also some disadvantages of business loans. Check it out below. 1. Higher Interest Rate Lenders charge higher interest rates compared to personal loans. 2. High Cost Repayment of the loan requires high monthly instalments. 3. Limited Options Only certain types of businesses qualify for business loans. 4. Long-term commitment You cannot withdraw your funds at any point in time. Grow And Expand With Australian Business For Sale Before applying for any type of business loan, it is essential to seek out expert advice. A financial advisor can help determine whether a business loan is right for you. If you decide to utilise an agent or broker, Australian Business For Sale's connections can assist you in locating a suitable business broker anywhere in Australia. They can also advise you on how much money you should borrow and what types of loans would work best for your situation.
Undertaking due diligence on the business is one of the most critical processes needed to eliminate risk when buying a business. Undertaking due diligence means thoroughly investigating what the seller has said about the business. It involves identifying the assets that are being sold and verifying that the seller owns, and is able to sell them. The broad steps to undertaking due diligence are: Step 1 - Information request Request from the other party all of the information that you’d like to review. This information should include all material information regarding the company or the business that is being acquired. Some of the information that should be gathered includes: Corporate information: If you’re buying the shares in the company, you will need to obtain the corporate material relating to the company. This includes the history of the company, the constitutional documents and the company registers. Material agreements: You need to obtain all of the material agreements to review so you can determine whether there are any on going obligations following completion and whether there are any agreements which might impede the sale of the company or the business. Goods and services: Obtain the details of any material agreements relating to the goods and services so you can understand the obligations and whether there is any limitation to the ongoing manufacture, supply, storage and distribution of any goods or services after the sale completes. Lease: Obtain a copy of the lease for the premises, and any other licence or lease agreements relating to the assets. Check to determine whether you need to obtain the other party’s consent to assign the leases and licenses or whether you need to enter into new agreements. Financials: The financial information, including details of liability, loans, financial reports and statements help to establish the purchase price. Request for review the financials for the previous two or three years plus a list of debtors and creditors and forecasted budgets. Assets: In order to understand what the business owns, obtain a copy of the fixed asset register and all material agreements relating to the assets, and details of whether any of assets are secured in return for finance. If there are assets that are secured the security should be released before completion. Intellectual property: Intellectual property is usually a valuable asset of the business. Obtain the details of the intellectual property, including any trademarks, domain names, copyrights, business names and agreements relating to intellectual property. Litigation: Determine whether the business is subject to any litigation, whether current or contingent. Litigation is costly and might have an impact on the reputation of the business. Employees and contractors: Obtain the details and records of the employees and contractors and determine who will continue following completion of the transaction and whether new contracts need to be entered into. Customers and marketing: Obtain the details of customers and sales and cross check this information against the financials. Understand how potential customers are marketed to, including whether there is a marketing plan. Policies: To gain a better understanding of how the business is operated, review the policies and procedures of the business. The above is some of the main items of information that you should obtain, however depending upon the business, other information will likely be required. The information will be facilitated manually or via a due diligence room, which is a portal where documents may be requested, uploaded and reviewed. Step 2 - Review The next step is to review all of the information received from the seller, or sourced via searches and market and industry reviews. There are four areas of review, including: Legal due diligence: The legal due diligence includes: Identifying all material information and documents concerning the business to determine the risks and whether any matter needs to be addressed prior, during or following the sale. Checking the contracts and the lease arrangements for their terms, identifying any onerous obligations, and ensuring that following the sale, you can obtain the benefit of them. Examining the business to identify any requirements that would prevent the transfer and change of ownership of the business. Identifying and verifying the ownership of the assets and determining the steps required to sell, assign or transfer the assets. Determining whether there are any associated risks with the assets, including any potential debt owing, breaches, litigation or failure to renew terms of any material agreements which might be essential for the business to continue operations. Financial due diligence: The financial due diligence includes: Double-checking the basis for the calculations in the financial statements which equate to the deemed value of the business. Verifying whether the sale price accurately reflects the value of the business. Determining the status of the assets and liabilities, creditors and debtors. Assisting with structuring the purchase price and the value attributed to the assets. Commercial due diligence: The commercial due diligence includes: Ascertaining whether the business has the documentation in place to reflect the commercial dealings. Whether there are sufficient assets to operate the business. Whether there are adequate supply arrangements in place. Industry and market due diligence: The industry and market due diligence includes: Checking the industry and understanding the risks in the business or industry that the business operates within. Undertaking market research. This process will provide you with a greater understanding of the target market, industry standards, the strengths and weaknesses of the business and whether there are any threats and opportunities. Step 3 - Clarify After reviewing the information that has been received, obtain clarification on any information that has been omitted or which is unclear. Sometimes the other party might provide further details readily upon request. Other times, the information might not be entirely clear, and extra insights about the business must be elicited. Due diligence will form the basis of any further negotiation, the drafting of the sale agreement, and the inclusion of any warranties or indemnities. Due diligence must be completed before a binding contract is signed. If the sale contract is signed before the due diligence is complete, the binding agreement should be conditional upon the due diligence being completed to the buyer’s satisfaction. If you’re not happy with the results of the due diligence, even after asking for clarification from the seller, then if the agreement provided a condition that the results of the due diligence must be satisfactory to you, the transaction can terminate, or different terms may be arranged between the parties. How much due diligence should I do? Some people may consider that the business they’re buying is not worth much, so why bother spending the money on due diligence. If you take that approach, you might not be clear on the business that is being acquired, and many things can go wrong. You could rush into the transaction and underestimate the time required to transfer the assets, and not receive the title of all the assets. You may end up owing money under a contract because you didn’t review it. In practice, how much due diligence you should do and the cost you’ll spend on the process will depend upon what’s practical and commercial. It’ll include taking into account the cost of the business and any perceived risks. Key takeaways: Due Diligence Due diligence is an essential component of buying a business and includes legal, finance and market due diligence. It includes requesting the information that you need to review, reviewing the information and clarifying any information that has been omitted or needs further explanation. Due diligence enables you to investigate the business and the ownership of the assets, to determine risk and to qualify the processes that need to be fulfilled to fully acquire and receive the benefit of the business. About the Author: This extract has been taken from the book, ‘Entrepreneur Know How – Mindset and Winning Steps for Buying a Business,’ written by Sharon Robson (Available through Amazon). Sharon is also the principal lawyer, director and founder of the boutique law firm, Antler Legal – a corporate commercial legal practice in Sydney, Australia. She has played a key role in facilitating, advising and negotiating many business transactions on behalf of her clients. Sharon is also a speaker, marketer and business owner. She is passionate about mindset and empowering people through education. Sharon RobsonAntler Legalwww.antlerlegal.com.au
The next step after signing the confidentiality agreement is to obtain some information about the business, so you can decide if you would like to negotiate a sale price and the terms of the transaction. The information provided at this stage would not be everything about the business but may be enough to consider whether you would like to proceed to the next stage. If, after receiving some information about the business, you’ve negotiated and agreed to proceed, the next step is to enter into a memorandum of understanding (MOU], which is also known as a ‘Heads of Agreement’, ‘Letter of Intent’ or a ‘Term Sheet’. What is the purpose of the MOU? The purpose of the MOU is to record what has been agreed and assists in furthering the transaction. It’s a way that the parties show that they are committed to continuing the negotiations, before undertaking due diligence and prior to entering into a binding agreement. From a physiological perspective, once the parties spend money on the transaction (such as legal fees to draft the MOU], they might consider that the deal is partly completed and be more committed to seeing the transaction through to the end. Main terms The MOU sets out a summary of the main terms that the parties have agreed to, along with the indicative timetable. The items that would usually be included in a MOU are: Parties: The parties to the agreement. Background: A brief background to the transaction. Purchase price: The proposed purchase price and the way the business is valued. The amount should be able to be changed if there are circumstances that would mitigate the price after undertaking due diligence. If this is stated upfront, the seller might not be surprised if there is further negotiation of the purchase price at the end of the due diligence period. Deposit: The details of the deposit, including whether it will be refunded if the transaction does not proceed. Conditions: If any items need resolving before the transaction completes (such as the release of encumbrances over the business) or matters that should be in place to proceed (like finance or approval by the landlord to enter into the lease). These items should be included as conditions. Assets: The treatment of any assets that will be acquired. Exclusivity periods: An exclusivity clause prevents the seller from negotiating with any other party in respect of the business for an agreed term which might be while the buyer is completing the due diligence. This will prevent any third parties being brought into the transaction to compete with the buyer, which would otherwise put pressure on the buyer during the negotiations. Confidentiality provisions: A clause indicating that the MOU and all information disclosed under it, is confidential will assist in keeping the disclosed information confidential. Governing law: The jurisdiction where the contract has been made or which governs the interpretation of the MOU, and where the court will be located should a dispute arise. Expiry date: The MOU should include a proposed expiry date or details of any triggers which will result in the termination of the MOU. The indicative timetable: An indicative timetable should provide for when the parties intend to enter into more formal agreements and complete the transaction. The timeline will help inform and prompt the parties to take action. It should include all the elements of the transaction along with the applicable indicative deadline for when the activity should be completed. While timescales will vary, a sale and purchase of a business can take anywhere from one week to one year. If a party has never purchased or sold a business before, the timeline might be underestimated and could impact upon completion. If the business is in distress or if either party has a reason to complete quickly (such as going on vacation or if it’s nearing the end of the financial year) there may be pressure to enter into and complete the transaction urgently. In this case, one party might be more willing to provide concessions to the purchase price or the terms. You will need to balance these concessions with how much time you’ll have to complete the transaction and if you are the buyer, whether this will impact on the due diligence. Key items for the transaction documents: The MOU is only an outline of what the parties have agreed. Any key items for the transaction documents should also be included in the MOU. Costs: There usually is a clause which provides which party will be obligated to pay the fee of drafting and settling the MOU. Generally, each party will pay their own costs, but sometimes, during negotiations, one party may indicate that they will pay the price of putting together the MOU. Terms: Any other terms between the parties that are particular to the transaction should be included. Is the MOU binding? Other than the provisions relating to the deposit, exclusivity, confidentiality, governing law, the expiry date and costs, the terms are not set out in detail and may be subject to agreement and change as a result of what is discovered during due diligence investigations. As there isn’t enough certainty in the MOU the main terms are not binding. This means, although you might enter into a MOU, there is no obligation under the MOU to complete the transaction. The terms of a MOU are only a summary of the agreement. The terms will be expanded into much more detail once the business has been investigated further and the draft of the sale agreement commences. Key takeaways: MOU The purpose of the MOU is to record what has been agreed and assists in furthering the transaction. It shows commitment on both parties to proceed and helps provide the basis for the draft of formal documentation. The MOU should include the main terms of what has been agreed, but except for a few provisions, the MOU is not binding. About the Author: This extract has been taken from the book, ‘Entrepreneur Know How – Mindset and Winning Steps for Buying a Business,’ written by Sharon Robson (Available through Amazon). Sharon is also the principal lawyer, director and founder of the boutique law firm, Antler Legal – a corporate commercial legal practice in Sydney, Australia. She has played a key role in facilitating, advising and negotiating many business transactions on behalf of her clients. Sharon is also a speaker, marketer and business owner. She is passionate about mindset and empowering people through education. Sharon RobsonAntler Legalwww.antlerlegal.com.au
At the early stages of buying or selling a business, there are certain documents that are required even before you sign a sale agreement. One such document is a confidentiality agreement (which is often referred to as a non-disclosure agreement). Why is a confidentiality agreement important? After years of building a business, often an amass of information, including trade secrets, know-how, contracts, marketing and finance information and intellectual property would be created. This information has intrinsic value, is important to the seller and would form part of the sale of the business. The buyer might also have valuable information such as financial information, sales data or personal details which they need to disclose during the transaction, to obtain consent from the landlord to the lease or by a franchisor, if buying a franchised business. If someone used this information, by providing it to a competitor or using inside know how to compete, it could result in significant harm, loss of revenue and positioning to the business. To show that someone breached the obligation of confidentiality you need to prove that the information is confidential and if used incorrectly would cause loss or damage. A confidentiality agreement can be used to protect the information that is being disclosed during a transaction by identifying what information is confidential and providing obligations around how to use that information. The confidentiality agreement should be a mutual written agreement with both parties agreeing not to disclose any information that the other party has provided to them. What is confidential information? Confidential information is anything that possess the quality of confidence. Given each business might have a different concept regarding what they consider to be confidential information, the confidentiality agreement should identify what information is regarded as confidential. This information would typically include financial figures; marketing information; trade secrets; intellectual property details; details of the assets; clients; supply and employee lists; pricing and costing information and any other information that is specific to the business and regarded as confidential. Measures to control that information. To protect confidential information, you need to have control over it. The agreement should include measures aiming to control that information, by indicating that the information can only be used for a particular purpose; by particular people and used in a particular way. Purpose: The agreement should provide the purpose for providing the information to limit the scope of situations where that information can be used. If the information is disclosed for the sale transaction, and the transaction does not proceed, each party would be prevented from using the confidential information that was provided to them for any other purpose, unless additional approval from the person that disclosed that information was first obtained. If the information was used without approval, they would be in breach of the confidentiality agreement. Disclosure to whom: The agreement can also restrict disclosure of the information to people that need to know the information, so that only those who are assisting with the transaction, including the accountant, lawyer, financial advisor, bank and staff would have access to the information. If this detail is not provided in the agreement and the information was disclosed to other people, there would be a breach of the agreement.Specifying who should access the information protects both parties. If disclosure was made for example, to employees of the business it might prompt staff to resign should they be uncomfortable working with new owners. It also stops the transaction being disclosed to other people who might have an interest in the business or activities of the buyer or the seller. Controlling the information after it has been given: It is also good practice to require each party to have systems for the protection of confidential information. For instance, you might want to require that once the information has been received, it should be stored securely, be password-protected, and not handled in public places. Exclusions to the obligation of confidentiality Not all confidential information can be protected. If any information is already public domain and can be found through public searches, the information has already lost its confidential nature. This means you will not be restricted from disclosing information about the other party or their business if you have found that information in newspaper articles, or public searches or where anyone else could have found that information. Information cannot be regarded as confidential, if you are already aware of that information before entering into the agreement. Information also cannot be regarded as confidential if you are required by law to disclose it. What happens at the end of the agreement You’ll need to consider how long the agreement should be in place for. Sometimes the agreement will end once it is replaced by a sale agreement or the agreement might end on a particular date or by a trigger, such as once the parties agree in writing not to proceed with the transaction. Despite the agreement ending, the obligation to keep the other party’s information confidential might endure for a period of one or two years after the agreement has ended. The agreement should also include provisions indicating what will happen to the information that the other party has been provided, once the agreement ends. Typically, the information is either returned to the party that owns it or is destroyed. Key takeaways: It‘s essential to enter into a confidentiality agreement to protect both parties before any information is disclosed. The agreement should be mutual and in writing. The agreement would typically include: o What is regarded by the parties to be confidential information.o For what purpose has the information been disclosed.o How information relating to the business, and the transaction, should be used.o Who has access to the information.o How should the information be kept and stored.o What happens to the obligation of confidence after the agreement ends – will it continue for a certain period.o What happens to the information after the agreement ends – will the information be returned to the owner of that information or be destroyed. About the Author: This extract has been taken from the book, ‘Entrepreneur Know How – Mindset and Winning Steps for Buying a Business,’ written by Sharon Robson (Available through Amazon). Sharon is also the principal lawyer, director and founder of the boutique law firm, Antler Legal – a corporate commercial legal practice in Sydney, Australia. She has played a key role in facilitating, advising and negotiating many business transactions on behalf of her clients. Sharon is also a speaker, marketer and business owner. She is passionate about mindset and empowering people through education. Sharon RobsonAntler Legalwww.antlerlegal.com.au
Don't take your return customers for granted. Read our tips for keeping customers happy and coming back. While most businesses have a focus on attracting new customers, it's just as important to keep your current customers coming back. Here are our tips for encouraging repeat customers. 1. Employ the right people Unpleasant experiences with employees are one of the main reasons for customers leaving a business and not returning. Good employees are the key to developing a good reputation for your business. Your employees are the face of your business and the main point of contact for customers. Having friendly, efficient and happy employees with good customer service skills will give your customers a positive experience and ensure they more likely to return. 2. Stay in touch Staying in touch with your customers through emails and reminders can help you stay on their radar. Email newsletters are a simple way of giving regular updates, like details on special offers or promotions that can remind and encourage them to visit your business. Some email tools can let you organise customers by groups to provide more personalised offers or information. For example, if you know their date of birth, you could send a birthday greeting with a special offer. There is a fine line between keeping in touch and sending spam. Make sure your communication is meaningful and serves a purpose. The information should be interesting and relevant to your customers. 3. Show your appreciation Customers who feel valued are more likely to feel loyal to your business, come back again and recommend it to others. There are many ways you can show your gratitude, from a personal phone call to a written thank you note or a special reward, such as extra product or a discount. Creating customer loyalty programs to reward frequent customers can encourage them to continue coming back in order to receive their reward. For example, every tenth coffee a customer buys is free. 4. Make it easy for customers to contact you Making your communication channels clear and easy to use is vital for establishing new customers and keeping existing customers coming back. Your communication methods should be clearly displayed on your businesses Google listing and if you have one, your website. Customers should also be able to reach you through your social media channels, through comments or direct messages. To keep customers happy, make a point of responding to social media comments, emails and voicemail messages quickly. 5. Take responsibility Your brand reputation is essential for encouraging customers to return. To keep up a good reputation, it's important to admit when you make a mistake and apologise if necessary. It’s important to respond to customer reviews or complaints quickly, so that you have the best chance at winning them back. By admitting your mistakes and attempting to fix them, customers can see that you’re willing to correct faulty processes and prevent future mistakes. It can also increase your business authenticity, which is a selling point for customers. For more information visit www.business.gov.au
Business is looking up in 2022 according to many of the more than 1000 individual businesses representing 83 franchise systems in the first national survey of Australian franchisees. The Australian Franchisee Survey conducted by FRANdata for the Franchise Council of Australia confirms that a growing number of franchised businesses saw an income turnaround in the closing months of 2021 and further improvement is expected over the next six months. Almost half (49%) of respondents expected better trading performance in 2022. The most optimistic industries included convenience stores, retail food outlets, retail stores, pet services and home services. Thirty six percent (36%) anticipated conditions to remain “about the same”. The “Risk of Further Government Lockdowns” was identified as the greatest challenge for the next twelve months at 57%. This was closely followed by “Finding Staff” (56%) and “The Financial Performance of my Business” (53%). More than 70% of respondents indicated they hoped to increase employment numbers over the coming twelve months. Thirty percent of these businesses hoped to employ an additional 2-4 people, 21% an additional 5- 25 people and 3% more than 25 people. Eighty (80%) per cent of respondents found their franchisors supportive over the past twelve months. “The fact that a majority of survey respondents indicated they felt being part of a franchise system provided an advantage over operating an independent business shows that the franchising model provides a strong framework for small businesses,” said FCA CEO Mary Aldred. “Since 2018, the FCA has worked consistently with all stakeholders, including franchisors and government, to improve support for franchisees, including small business advisory and education services and tighter regulatory compliance across systems.” The fact that being part of a franchise network has helped many small businesses make it through the pandemic impacts and restrictions is a strong indicator that franchising is achieving success in Australia,” said Mary Aldred. 80 per cent of survey respondents indicated they were receiving high levels of marketing support from their franchisor and 67% said they were receiving high levels of technology and systems support. Between 30-40% of the sample indicated they were receiving high levels of franchisor assistance in the areas of dealing with landlords, vendor relationships, payroll and HR issues and accessing government support programs. Snapshot of Australian Franchisee Survey participating businesses Responses from 1,007 franchisees representing 83 Australian franchise systems. The survey sample indicated that 69% of Australian franchised businesses were operated by men and 29% by women. Whilst the majority of respondents (57%) were born in Australia, more than 40% were born overseas with India the second most common place of birth at 15%, followed by China 7% and the UK at 3%. A high level of education across franchise owners was evident with 18% holding a tertiary degree and a further 27% holding a Post Graduate Qualification. 52% of respondents indicated High School (22%) or Diploma/Certificate (30%) as their highest level of education. The vast majority (73%) of franchise units were owned by single operators. A further 20% of respondents indicated the operation of 2-3 units and 7% indicated the operation of 4 or more units for their franchise system. The survey reflected that 33% of respondents had commenced their business in the last five years (2017-2021). A further 30% commenced their business between 2012 and 2016 and 37% had now been operating their business for more than ten years. Responses indicate that franchises are typically operated by mature age owners with 76% of respondents aged 40 years or older. Franchised businesses are a significant employer in the Australian economy. The employment of more than 2 people was indicated by 81% of respondents. Single operators accounted for 19% of respondents. Almost half of all respondents (48%) indicated their business employed 2-10 people with a further 34% reporting their franchised businesses employed more than 10 people. The majority of franchised businesses (76%) were based in capital cities. Franchised businesses also have a significant regional footprint with 24% of respondents indicating their businesses were based outside of state and territory capitals. There is a significant variance in average weekly sales across franchise units, attributable to the type of industry, business structure and the scale of the individual business. Higher turnover levels were evidenced from respondents working in food-based businesses which accounted for 80% of the businesses reporting turnover of more than $10,000 per week. For franchises with sales of less than $10,000 per week, 91% were involved in non-food businesses which in many cases were operated by mobile businesses without rental and wages overheads. For more information visit Franchise Council of Australia website www.franchise.org.au
HOW TO NEGOTIATE WITH CONFIDENCE PART 3: Welcome to the final part of the 3-part series on how to negotiate with confidence. In the first article we explored how being prepared before you negotiate, can increase your confidence. In part 2, we looked at how you can confidently negotiate if you understand the other party, including their communication, personality and negotiating style. In this part 3, we look at how you can communicate with confidence by using not only verbal but non-verbal communication to express your objectives and build rapport with the other party. Tip 1: Gain Confidence with your Presence Communication consists mainly of non-verbal cues. Professor Albert Mehrabian of the University of California in Los Angeles, found that words only take up 7% of our communication, tone takes up 38%, and physiology or non-verbal communication takes up 55%. Even when you’re not talking, your physical presence silently communicates and creates a perception. What you think is being suggested by your actions and body language. If you’re nervous, annoyed or even relaxed, this will be reflected in your body language. But during a negotiation, you can use verbal and non-verbal cues to your advantage: Personal power: You can create and emanate personal power and a sense that you are meant to be there by enhancing your posture; standing tall and erect; looking direct and talking slower and lower while deepening your voice. Interest: You can show you’re interested in someone by leaning forward as they speak, or positioning your body so that everything is pointed towards them. Let’s be friends: Friends usually stand next to one another. At a meeting, stand next to the person. This suggests collaboration rather than confrontation. Smile: Smiling makes you appear more attractive, and makes you feel fabulous. It will also signal to the other person that you are friendly and willing to collaborate. Changing pace: You can change your presence and the tone of the meeting by moving, or deepening your voice. You can lighten the mood by saying a joke or by becoming animated. Change of mind: You can also change someone’s presence, body language and thoughts by interacting with them. If they have their arms crossed and look defensive, hand them something like a piece of paper, a business card or a drink. They will need to release their arms to receive the item, which forces them to move their body positioning and may alter their defensive state and thought patterns. Tip 2: Create confidence through Rapport People usually like to deal with people they like and who are similar to them. There is a natural tendency to like similar people, as you feel more relaxed and at ease, as there is something unconsciously familiar about them. Being similar is being in rapport. Rapport can be created by: modelling or copying the other person’s body language and communication style; mirroring by reflecting back their posture and body language as if the person is looking into a mirror. replicating what people are saying including the words, the tone and inflections in sentences (such as an upward or downward inflection at the end of a sentence) and the speed of speech and breathing rhythm. If rapport has been achieved, you will feel a level of comfort with the other person and the negotiation is likely to be easier. Tip 3: Create confidence through Language Watch your own and the other person’s language styles closely. Language and the way people structure words speaks volumes about how someone is feeling. Language can reveal assumptions, beliefs, how people think and act, and can be used as an emotional tool during negotiations: Generalization: People sometimes make generalizations of the information that they receive either by making incorrect assumptions or statements based upon particular beliefs. An example of a generalization is ‘everyone loves to negotiate’ or ‘it’s impossible to get staff to do things’. Although the statement might be true in some cases, it will not be accurate in all situations. If you notice this occurring during your negotiations, request further clarification of what is being said so that you can understand the basis for the generalization. Blame: A person may, when they’re speaking, blame, or try to assert guilt or a sense of obligation by using words ‘should’ or ‘must’. It is a technique which reflects that the person blaming is not comfortable and is trying to control the situation; criticise the other person or get the other person off guard . Cause and effect: If a person uses words such as ‘if’,‘then’ or ‘makes’ they might be speaking in cause and effect and trading off one element of the transaction for another or trying to offer a compromise. Distortions: A person might distort the information that is being presented to reflect a particular argument. They might summarize the information and repeat the words that have been presented, but slightly change the meaning.For example, if the other party states that ‘you must take over all of the supply agreements in the business’, your response might be, ‘we’ll take over all of the supply agreements in the business that suit us’. It sounds similar. There is some agreement. You will take over all of the supply agreements, but only those at your election. Deletions: Information might also be deleted so that the information reflects a particular argument. The facts about a specific situation relating to the business might be known, but omitted for example. If this occurs, re-clarify facts and statements if necessary. Control by presupposition: A person might also attempt to control the conversation by presupposing the situation as being true, even though the information which presupposes a particular scenario might not have previously been disclosed. For example, asking, “Have you stopped buying from that person?” presumes that the other party has previously bought from that person. Control by assumption: Alternatively, a person might jump to conclusions and make assumptions and infer a particular situation, although there might not be any information to suggest that outcome, but the assumptions will generally highlight a bias or belief. ‘I bet you…’ is an example of an assumption. Deductive reasoning: Have you ever been led into an argument and been left wondering how you agreed to something? You might have been subject to deductive reasoning. Deductive reasoning is a process where you take a number of true statements to form a conclusion. The information might be chunked up to a high level of abstraction and be so general that you agree to the initial statements. Then the statement is applied to another piece of information. Given that the former information is correct, the conclusion is naturally correct – or is it? An example of deductive reasoning is:‘All businesses are risky’.‘Emma and Abi have a flower shop’.‘A flower shop is a business’.‘Therefore, Emma and Abi’s flower shop is a risk’.While deductive reasoning might have you agreeing to conclusions, be aware that deductive reasoning can be incorrect. In the above example, just because businesses are risky, it doesn’t necessarily mean that Emma and Abi’s flower shop is risky. Presuppositions: A person might assume without any evidence the position of the other person. For instance, you can position the status of the negotiations, by saying something like, ‘we agree that there is nothing else to be discussed’. It may be used to control the situation, but not adequately reflect the actual status. Tip 4: Moving the transaction forward by Agreement The negotiation process proceeds through various stages of agreement and disagreement. Generally, when people agree, the negotiation will progress forward. But sometimes when you are at an impasse, you might need to agree to some element to move the deal forward: Be in agreement: Find elements of the conversation that you agree with and confirm what has been said by using positive words and statements, such as, ‘Yes I agree’, ‘understand’, ‘appreciate’ or ‘respect’. Eliminate walls, build bridges: Eliminate words that build walls, such as ‘but’ or ‘however’ as they negate what you’ve previously said. Instead, use connecting words that build bridges, such as the word ‘and’. No butting: When words such as ‘but’ and ‘however’ are used by the other party, note what is said following that word, as that phrase will disclose what they are really meaning. Minimize defences: Eliminate any words which suggest negotiation, as that might put the other party in a defensive position. Chunk up or down: To gain agreement, the information should be ‘chunked up’ or summarized or abstracted. Information that is more general in nature is likely to be agreed with. A person will more readily agree with a generic statement like, “I think this boardroom will be large enough for us, don’t you?” (when there are only the two of you in the room negotiating) rather than, “I like the panelling on the walls, don’t you?” The latter statement is more specific and based upon personal taste. The higher the information is ‘chunked up’, the more general it will be, and the greater the probability that agreement will be achieved. Re-articulation: After a lot of information has been provided, chunking up and summarizing it will help clarify the main points and deal with overwhelm. Sidestepping: There may be challenges to your position. Your position will be strengthened if you can rely on an example where the outcome reflects what you are trying to achieve. You might refer to a similar business which sold for a different price for example. Or you could challenge the other party by providing an industry standard, or strengthen your stance by relying on a principle that you or your team always rely upon (like ‘we always do it that way’). Improvise: If the discussion becomes tense, never be afraid to request a break in the proceedings or if appropriate, lighten the negotiations with a joke or anything that can bring the relationship closer. Always be open to improvisation and provide an alternate proposal or be ready to walk away from the present negotiations. Concessions: Concessions are trade-offs, which can be used as a means of exchange, which one party gives to the other to achieve an outcome. Concessions should only be given grudgingly, with conditions attached in order to achieve something in return. For example, you may grudgingly agree to pay an additional $10,000 for the business, but only if the seller allows you to deal exclusively with the transaction during the due diligence process or provides an extended settlement period. This strategy appeals to the other party’s sense of fairness and if done correctly, usually closes down an aspect of the negotiation. Impasses and delays: Determine whether there are any timelines that the other party must meet. If the other party is pressured by time they might be amenable to concessions to the purchase price or terms of the sale so that the transaction is completed within their timeline. However, never agree to settle early if the Seller has not given you time for your due diligence, as the pressure to act, might be an excuse to hide certain elements of the business. Lowest points and limits to negotiating: Be mindful that there are limits to the negotiation and ensure you act in alignment with your original objectives or make concessions only after considering them. If you are too agreeable to the other party’s demands, they might continue to push. Remind the other party of the concessions you’ve already provided to them, and the limits of the negotiation. This will help the other party see that you are willing to make some sacrifices but will also set limits. Understand when the negotiation is not progressing; and when you need more time to consider the proposal; and when to walk away. Key takeaways: Knowing how to communicate using verbal and non-verbal cues enables you to create an impression; develop rapport and a connection with the other party. Communication has the ability to manage your state and shape the negotiations. Use communication to confidently direct the negotiation to where you would like it to go. Mastering communication will enable you to negotiate with confidence. About the Author: This extract has been taken from the book, ‘Entrepreneur Know How – Mindset and Winning Steps for Buying a Business,’ written by Sharon Robson (Available through Amazon). Sharon is also the principal lawyer, director and founder of the boutique law firm, Antler Legal – a corporate commercial legal practice in Sydney, Australia. She has played a key role in facilitating, advising and negotiating many business transactions on behalf of her clients. Sharon is also a speaker, marketer and business owner. She is passionate about mindset and empowering people through education. Sharon Robson Antler Legal www.antlerlegal.com.au
HOW TO NEGOTIATE WITH CONFIDENCE PART 2: Welcome to part 2 of the 3-part series on how to negotiate with confidence. In the last article we explored how being prepared before you negotiate, can increase your confidence. Preparation enables you to understand the business and the environment it exists within, so you can make informed decisions to match your intended outcome. Preparation gives insight to the tactics that could occur during the meeting, and by preparing your mindset, it will help you manage your nerves, so you can function more effectively. In part 2, we look at how you can negotiate with confidence by understanding the other party. Tip 1: Understand someone else’s objectives The aim of negotiating is to etch out a pathway to an agreement. While it’s ideal that the final agreement is a win-win for both parties, it won’t always be the case. People often fail to reach an agreement, because they do not understand what the other person’s objectives are, or they are unwilling to compromise on their own objectives. Understanding the other party’s objectives will highlight what is important to them, and which aspects they can’t do without. Although each party’s objectives might be different, you might be able to structure the transaction to suit both parties. To understand the other party’s objectives, you will need to slow down the process; listen and understand what is being said, gain rapport and be open to consider alternatives. Tip 2: Understand the other person’s representational systems Have you ever wondered why you don’t understand someone? It could be because they are communicating with a different representational system or learning style than your own. In the 1920’s Walter Burke Barbe explained that people learn by using their senses, with one of the senses usually being dominant over the others. The theory classified the learning styles as visual (learning through sight], auditory (learning through hearing) or kinaesthetic (learning through feeling). Neil D Fleming later added auditory digital (which is learning through reading and writing). People usually relate more effectively if the information they receive is presented in their preferred style. Visual: A person who is primarily visual, relates to visual cues. They’re interested in how things look, including appearances and learn by seeing the material. When negotiating with someone who has a visual representational system, use visual words, associated with sight such as see, look, reveal, clear, view, show, crystal clear and imagine. Use phrases, such as ‘can you see what I mean?’ and include in written material pictures, graphs and diagrams. Auditory: A person who is mainly auditory, relates to sound. They learn by listening and like to talk. They want to be told what to do and respond to hearing words such as listen, hear, silence, tune in or heard, or phrases such as ‘can you hear what I’m saying’. They will also respond to your tone of voice. So when negotiating, occasionally repeat what you have said, or have the other party repeat your words, and use tone for emphasis. Kinaesthetic: A person who is mainly kinaesthetic, relates to how they feel. You can connect with someone who is kinaesthetic by using words associated with feeling, such as touch, feel, understand, or grasp and use phrases associated with feeling, such as 'yes, I understand’.. When presenting material, include images which evoke emotions. A kinaesthetic person might also want to physically touch or be involved in the task. Auditory digital: A person who is predominantly auditory digital, appreciates steps and notes and is considered. They learn by listening, reading and taking notes, but might also display various other traits from the other representational systems. The words that they will respond to are, consider, motivate, process and know. When dealing with an Auditory Digital person, you might also need to summarise key pieces of information on charts or with dot points. If you understand how other person relates and negotiate in their style, it will enhance your communication, connection and confidence. Tip 3: Understand the other person’s personality type Negotiation might also be difficult if you don’t relate to the other person’s personality type. Personality is the combination of traits, including thoughts, behaviours, perceptions and emotions. Generally, there are four different personality types, although some people may reflect a combination of two or more of them. Direct: A direct personality type communicates in short, sharp sentences. They don’t like a lot of detail and prefer information to be presented succinctly. They might appear aloof and will usually get to the point quickly. They will appear bored, impatient and frustrated with small talk and long drawn-out negotiations and conversations. An example of a person with a direct personality is Donald Trump.Direct personalities usually use direct assertive communication. When they negotiate, because of their assertive communication, they might appear powerful and controlled. If this person lacks charm, it might be difficult for them to create rapport, especially with other personality types. When dealing with this personality, don’t worry about making small talk - Keep to the point and be direct. Sanguine: A sanguine personality type communicates light-heartedly. They may appear outgoing, bubbly, gregarious, easy-going, friendly and are relationship orientated. They might appear to be disorganized and are often late. An example of a person with a sanguine personality is Richard Branson. When engaging with this personality, you will achieve a better connection, if you first work on building a relationship with them, before proceeding directly into the negotiation. Phlegmatic: A person with a phlegmatic personality appears relaxed, calm and quiet. In discussions, they might not become involved initially or make any comments. Don’t take this as them being uninterested, they are merely considering the information that has been presented before providing their ideas. The phlegmatic’s lack of response might make you feel nervous and might cause you to talk and provide additional information to fill in any silent gaps. This isn’t necessary and might end up with you providing too much information. Lady Diana had a phlegmatic personality. Conscientious: A conscientious personality type (also described as melancholy) likes detail and facts, and prefers planned rather than spontaneous behaviour. They may be organized, efficient and considered, and communicate by asking lots of questions. When speaking, they might find it hard to be direct and instead will provide you with a lot of detail. When dealing with this personality, provide them with a lot of information and allow them to ask questions. But, to avoid getting lost in the detail, chunk up the information, summarize the facts and lead them back to the point of what is being discussed in order to move the discussion forward. Accountants, or people who appreciate detail, may have conscientious personality types. Summary of Personality Types Tip 4: Understand the other person’s negotiation style People do not only have different personalities or communication or learning styles, but they might have different negotiation styles. Some people might try to accommodate your objectives or appear agreeable because they want to avoid conflict. Others might compete and be aggressive. Others might be indirect and avoid conflict. By recognising how someone negotiates you can respond accordingly. If you usually avoid conflict and have to deal with someone who is aggressive, for example, then perhaps you should take someone else to the meeting to assist with the negotiation. Tip 5: Understand the other party’s beliefs and values People also behave in accordance with their beliefs and values. Beliefs: Beliefs are what someone holds as being true. If someone believes that they always win, they will negotiate differently from someone who thinks they never win. If they believe they will win, their attitude, which is reflected in their beliefs, might be arrogant. The person with the belief that they will not be successful might justify that belief and discount their loss, with thoughts such as, ‘they didn’t proceed as the transaction as it was high risk’ or ‘I didn’t want it anyway’. Values: Generally, people will act in accordance with their hierarchy of values or what they deem as being most important them. Understanding someone’s values is vital in understanding their motives and objectives, and enables you to build rapport by reflecting those values.Someone that has a high value for business might spend more time on their business than with family. Perhaps their value is self-actualization and personal growth, which is more important to them than emotional security. You can increase your connection with that person by acknowledging their achievements however, if you referred to their family it might not have the same emotional trigger for them. Key takeaways: An aim of negotiation is to settle differences and find an agreement that is suitable for both parties. However, quite often the parties might not reach an agreement and misunderstanding occurs because of the different personalities, communication and negotiation styles. A person’s objectives, values and the way they relate through their style of learning, communication and negotiation will provide key information which will help you understand their behaviour and how to relate and negotiate with them, with confidence. About the Author: This extract has been taken from the book, ‘Entrepreneur Know How – Mindset and Winning Steps for Buying a Business,’ written by Sharon Robson (Available through Amazon). Sharon is also the principal lawyer, director and founder of the boutique law firm, Antler Legal – a corporate commercial legal practice in Sydney, Australia. She has played a key role in facilitating, advising and negotiating many business transactions on behalf of her clients. Sharon is also a speaker, marketer and business owner. She is passionate about mindset and empowering people through education. Sharon RobsonAntler Legalwww.antlerlegal.com.au
HOW TO NEGOTIATE WITH CONFIDENCE PART 1: Being in business provides many opportunities to negotiate. The aim of negotiation is to settle differences and achieve some sort of compromise or agreement. The process occurs through a combination of influential and persuasive techniques, communication and strategy. Sometimes, the only way to get what you want is to negotiate - but negotiation can be stressful. In this 3-part series, we explore how to negotiate with confidence. One way to ensure that you can confidently negotiate, is to prepare for the negotiation process. The more prepared you are, the more confidently you will be able to align the outcome of the negotiation to your objectives. So, if you are buying a business, what should you consider when preparing to negotiate? Tip 1: Understand the business You need to understand what you are dealing with, the potential of the business and the environment the business operates within, which can be achieved by undertaking market research and gathering information about the business. Market research enables you to identify trends and identify similar businesses so you can determine the perceived value of the business. A SWOT analysis will help identify the strengths and weaknesses of the business and determine whether there are any market opportunities, competitors and any potential threats that will impact on the viability of the business including whether there is a continuing demand for the product or service that is being supplied by the business. Knowledge of the market and the business will increase your bargaining position and enable you to construct an offer and determine whether any further information is needed before an offer can be made. Tip 2: Prepare your argument and ideal outcome Being prepared means understanding your position and what you would like to achieve: Consider your argument or presentation, including the questions that need to be answered; whether there is any other information that you need or changes that you would like to propose to the transaction. Your comparisons of similar businesses can be used to strengthen your argument. Also, consider whether there are any mitigating circumstances in the environment the business operates within, or in the business itself, which will likely impact on the transaction and the value of the business. Tip 3: Know what you would like your ideal outcome or objectives to be: Consider your objectives and your ideal outcome. Ensure you have an alternative position or some compromises that can be offered if the ideal outcome is not accepted. Also consider if your objectives are not met, at what point you would walk away from the transaction. Tip 4: Understand the framework It is helpful to have an idea of the scope and framework of the negotiation before the meeting. Suggesting and preparing an agenda will enable you to explore what will be discussed. It will enable you to verify facts and the other party’s position. Once you are in the meeting, the agenda will be useful to keep the meeting on track. Tip 5: Understand the location Believe it or not, where the meeting is held, has the ability to provide a competitive advantage. It might be preferable to meet at your own premises, as this will allow you to control the meeting and access any backup paperwork that might be required. If you concede to the other party’s demands by having the very first meeting at their premises, then you have lost the first negotiation, and it might put the other party into a stronger position by making them feel empowered and, on the day, more comfortable. Alternatively, you could meet at a neutral location, which will enable both parties to focus on the negotiation, rather than using the space to strengthen a particular party’s position. Tip 6: Understand who will be at the meeting Consider who will be present at the meeting. Calling the other party in advance of the meeting and asking who will be present at the meeting for the purposes of the agenda will provide you with advanced knowledge of the number and quality of the attendees; their personality; motivations and style of communication and negotiation. This will help you prepare how you communicate and respond to them and enable you to match those people with people who are of the same calibre and who have a similar level of experience. Tip 7: Understand what might happen at the meeting Seating: Also be aware that the seating arrangements and the choice of table being used at the meeting might impact on the negotiation: Someone might sit at the head of the table, as a way to jostle for power and control of the meeting. If the table is square or oblong and you sit opposite the other party, you might be perceived as being equal, but on the other hand, it might set the parties into opposing positions, ready for battle. A round table softens the negotiation and allows, as a starting point, for equal representation. Speaking for agreement: Aim to get some sort of agreement early in the negotiation. You can have the other party agree to a general comment, or something that is common knowledge. By obtaining an initial agreement, the negotiation will start in a positive manner, with each party subconsciously feeling that their needs might be met. Tip 8: Prepare your mindset You can prepare for negotiation by ensuring, despite what is happening around you, you have the right mindset. Your mindset will be the strength or an impediment to the transaction. A positive mindset will help you appear and feel confident, relaxed and in control of the situation. You can prepare your mindset in advance by doing the following: Understand that the process of negotiation and asking for what you want is often unpredictable. The process might take longer than anticipated, and not everything will be smooth - there will likely be obstacles and surprises along the way, such as the tactics used by the other side which might take you off guard. If you are stepping into an unfamiliar situation, you might feel nervous or fearful – but these feelings are normal and knowing this, will help you manage the process emotionally. Assume from the beginning that you don’t know everything and there will be matters that need to be resolved. Adopt an inquiring mind. Instead of accepting the information that you receive at face value, investigate that material. Act consistently and direct your mind and the discussion to the outcome of what you would like to achieve. Remain open but in alignment with your objectives. This will help direct your focus to achieving your objectives rather than reacting out of nerves. Think that you want to solve any disparity between the parties. A solution-based mindset will provide the opportunity to think clearly and laterally. It will allow you to be flexible and come up with alternative proposals that might help traverse through any blocks. Key takeaways: In summary, you will be more confident when you prepare for the negotiation, if you: Understand the business you are buying by completing research and comparing the business to existing businesses. Examine whether you have everything about the business on which to make an informed offer or whether you need other information. Know your intended outcome and any compromises that you are willing to provide before you attend the meeting. This will ensure that you do not make rash emotional decisions and can confidently align to your objectives. Consider where you would like to meet the other party. The location of the meeting might provide an immediate strategic advantage, particularly if the location makes you feel comfortable or empowers you. Understand who will be at the meeting, and ensure you have similar calibre of people attending the meeting on your behalf and have framed your argument to match the styles of the participants. Have knowledge of what might happen at the meeting, including the framework of what will be discussed, where to sit and what you can first say to obtain an agreement given these factors will likely have a bearing on the discussion and influence the power between the parties. Use your mindset to shape the outcome and help manage your nerves, so you can function more effectively. The more prepared you are, the more confident you will be, and the more likely you will be able to influence the outcome as you will know what questions to ask, the information to source and refer to, what you want and how to respond to any offer. About the Author: This extract has been taken from the book, ‘Entrepreneur Know How – Mindset and Winning Steps for Buying a Business,’ written by Sharon Robson (Available through Amazon). Sharon is also the principal lawyer, director and founder of the boutique law firm, Antler Legal – a corporate commercial legal practice in Sydney, Australia. She has played a key role in facilitating, advising and negotiating many business transactions on behalf of her clients. Sharon is also a speaker, marketer and business owner. She is passionate about mindset and empowering people through education. Sharon Robson Antler Legal www.antlerlegal.com.au