Within the last 6 months there have been a number of changes to laws that are relevant to small businesses. Whether you’re an owner looking to sell or a prospective buyer, it’s important to understand how these changes can affect you. As the new year has rolled in, most business owners will be in the early stages of carrying out their strategic plans with hopes of a successful start to the new decade. As an owner, it’s natural to keep an eye out for anything that may get in the way of achieving your goals. Ever changing laws and regulations can often catch business owners off guard and halt long term plans and ambitions. Within the last 6 months there have been a number of changes to laws that are relevant to small businesses. Whether you’re an owner looking to sell or a prospective buyer, it’s important to understand how these changes can affect you. Below is a summary of some of the legal and regulatory changes to be aware of. Updates to Employee Awards The most significant area of change arrives in the impending alterations to employee awards. The Fairwork Commission, as a result of a review, has decided that it will alter the provisions of 22 employee awards from March 1. The changes are primarily focused on the annualised salaries component of each award. Under the existing legislation of the Fair Work Act, businesses are required to pay full time employees an amount that reflects what they would receive under their award, inclusive of overtime and extra allowances. However, the grey area has always centred around the recording of hours worked. Given that it is rare for full time salaried employees to note their hours and days worked, it is difficult to determine entitlements owed. With high profile corporations being exposed and scrutinised for long hours and potential wage theft, the government has responded with strict requirements. As the awards involved range from hospitality to finance and manufacturing, it is likely that you will be affected as a small business owner. • Recording and Tracking Hours The key takeaway from the changes to annualised salary provisions, is that you now must track and record the hours of salaried full-time employees. This means you will have to implement a system for the employees to submit all the hours they’ve worked and their breaks. Where an employee records hours outside of the limits under the awards, it is best to pay them for this at the relevant overtime or penalty rate. • Notice of Annual Salary and Ordinary Hours In addition to recording and tracking hours worked, employers must now provide written notice outlining an employee’s annual salary and the maximum hours they can work outside the 38-hour week. As an employer, you will be obliged to ensure that employees are paid at least the minimum wage for any hours worked after the 38-hour threshold. Employee Superannuation Changes As part of the changes to annualised salary provisions, there has been an effect on superannuation regulations. As of January 1, this year, salary sacrifices cannot be included as part of an employer’s mandatory superannuation contribution. Employers are now required to pay the 9.5% superannuation contribution on an employee’s gross pay including any salary sacrifice that has occurred. As an employer, you should also be aware of the Superannuation Guarantee Amnesty bill which has just passed through parliament. This will essentially provide employers with a 6-month window of opportunity to correct any non-compliance with regards to superannuation payments. If an employer chooses not to act and is exposed after the amnesty period, significant penalties will apply. Unfair Dismissal Threshold Although this change did occur halfway through 2019, it is extremely relevant given the substantial reform to employment legislation that is currently occurring. The high-income threshold that excludes an individual from claims unfair dismissal was increased to $148,700 per year. Provided the other necessary provisions are satisfied, an employee under this threshold can apply for unfair dismissal after termination. This is likely to influence an increase in applications and is something you should keep in mind when terminating someone’s employment. Conclusion As stories of wage theft and mass underpayment continue to appear, it is clear that a crackdown has begun in 2020. With significant changes to employment awards and legislation, the Fair Work Commission has taken a stance to ensure the correct payment of employees. Significant penalties will be imposed for those who breach these new amendments. As a result, there is substantial risk for small business owners across the country, with non-compliance now a fatal move. Given that these updates can be complex and difficult to keep up with, the advice of an employment lawyer may be of use. For more information, contact Christopher Tsiknas at Lawpath [email protected]://www.lawpath.com.au
Unlike Real Estate agents, who need to understand the readily available comparative house and sales data, professional Business Brokers should be able to source comparative business and sales data which is not readily available to most business professionals. Is now your ideal time to buy or sell a business or franchise? If so, you will need a qualified team of industry professionals working with you and in your best interest to ensure you achieve the best possible sale or purchase outcome. One of the most integral members of the team of business professionals assisting you with the purchase or sale of a business or franchise is a Business Broker. There is an old saying \"a good lawyer knows the law, but a great lawyer knows the Judge\". Well, it can also be said that the difference between a good Business Broker and a great Business Broker is measured by the level of gratitude expressed by both the buyer and the seller at the conclusion of a successful business sale. What does a Business Broker actually do? Business Brokers help people buy and sell businesses, similar in the way Real Estate agents help people to buy and sell properties. Professional, qualified and experienced Business Brokers have specialised skills, training and knowledge required to professionally service clients looking to buy or sell a business, taking into account the unique circumstances of each business, buyer and seller. Unlike Real Estate agents, who need to understand the readily available comparative house and sales data, professional Business Brokers should be able to source comparative business and sales data which is not readily available to most business professionals. Business Brokers also need to understand complex and detailed business valuation methodologies as well as numerous other factors which impact a business’s value. These factors can include, but not limited to: • Understanding a business’s financials, P&L’s, balance sheets, etc • HR matters • The value of supplier and customers contracts and relationships • Intellectual property • The value of a lease • The value of an online or partially online business versus a similar business with a physical location • The implications or impacts of a strong reliance on an owner; • A business being included/involved in a ‘roll-up’ or, that might be associated with an emerging or eclining industry. Professional and experienced Business Brokers should possess an incredible amount of knowledge and a clear understanding of the business, the client, the buyer, the landlord, the market, the region the business is located, the industry, how to best negotiate with the buyer and seller, the accountants (on both sides of the transaction], external advisors, valuers and the solicitors (on both sides). They also need to be able to understand the value of a business, which valuation methodology is most appropriate for that business (ie; ROI, Capitalisation rates, DCF, Future maintainable earnings etc) and which profit figure is appropriate in each case (EBIT, EBITDA, PEBIT, PEBITDA, SDE, ROT, etc) as this will change from business to business and is industry dependent. Additionally, a professional Business Broker must be aware of changes which impact a business’s value over time and have the skills to manage the confidential marketing of a business without disclosing the location and name of the business. They should also employ a rigorous confidentiality process which safeguards confidential and commercially sensitive business or franchise information. If you are considering buying or selling a business or franchise, or you’re a franchise system looking for professional representation, it is recommended that buyers, sellers and franchisors work with experienced, professional and licenced Business Brokers and Business Brokerages who are members of the Australian Institute of Business Brokers (AIBB) or accredited through the AIBB. AIBB members are accredited and comply with the institute's code of ethics. For information about the AIBB, or to find an AIBB member or an Accredited Brokerage near you, call 1300 79 66 67, email [email protected] or visit http://www.aibb.org.au or to contact Ian Jones mobile 0402 111 500, phone 1300 BROKER (1300 276 537).
With the Coronavirus officially gaining pandemic status, many businesses are forced to close their doors. If you’re not there yet, it is a great idea to create a COVID 19 response plan to keep your business productive should you have to shut down for a period of time. Is your team prepared to work from home? They may say they have a home computer, but can it perform as well as the device at the office, or are you creating false expectations for clients around deadlines? You can only manage expectations if you have the assurance that your employees are equipped to deliver results from their homes. Alongside this, is your organisation’s personal data safe? Here are tips from Fiona Kresby from Go-VA, an offshore outsourcing expert. She shares some of the top tips from the industry to enable small business to keep operations going. Here is Fiona's comprehensive COVID 19 response plan for businesses; Step 1: Have a trial run Have your team utilise their home setup on a chosen day to have a test run. This will give you insight into the potential pitfalls you might face when you have to resort to this plan. Preparation is key! The trial run will reveal how capable your employees’ devices are at home, how stable the internet connection is (especially in homes with families where children might also access the internet line], and how capable your teams are of working quietly and undistracted. Step 2: Make use of free software Compare the specs and evaluate the capabilities of your employees’ home devices in comparison with the devices used at work by using a free diagnostic tool. Try the handy dothis.to software - it will give you a complete insight into the capabilities of both devices, giving you a realistic idea of which tasks can and which tasks can not be completed at home. Equipped with this insight, you can plan ahead which will reduce the stress and the pressure later on. Step 3: Understand the true risks around data security (and take precautions) Data security goes beyond spyware and firewalls. The truth is that while you may trust your employee, you don’t know what kind of environment they’re working from. You can’t control what kind of people might peer over their shoulder or access their device while they’re using the bathroom. The integrity of your privacy is completely out of your control. Use software like timedoctor to monitor the progress and privacy of your work. It comes with a camera, it can track screenshots, and it tracks time spent on a task for productivity analysis. Use zoom.us as an alternative to Skype when you need to host meetings. Shut down might be out of your hands, but keeping your business up and running is possible. Equipping your employees to work remotely, however, requires preparation. If you are not able to prepare adequately, offshore outsourcing can keep your operations running even if your doors are “officially” closed.
Here today. Gone tomorrow. Such is the life of many brands in the fast paced digital world we now live in. The challenge for any brand, is how a brand can can effectively express it's own essence, it's true 'WHY\" and cut through all the social 'noise' in a way that’s more easily digested by those who will buy from you. As world famous Tennis star Andre Agassi said “Image is EVERYTHING”, and it’s especially true when it comes to creating a logo, the corner stone of any brand. A logo, by definition is a visual representation of your brand and is far more effective than a written explanation of your products or services. As a branding expert I’ve established 1000's of brands in my career and I’ve learnt a few things about how to create an iconic brand that will give your brand longevity and help your business stand out . Here are 9 ways you should consider when designing your brand. 1. Avoid a visual look too similar to another brandOnce a brand has become established it starts to become recognised by the general public. If you choose (or copy) a logo design that’s too similar to another brand, your market presence may be forgotten or overlooked - as your logo is mistaken for someone else’s and, worse still, they win the business! 2. Fonts matter, choose wiselyA font is just as important as the design of a logo. The font should incorporate the same feel as the business AND it should be appropriate and legible. Whether it's modern, edgy, timeless, or a sophisticated italic, it must match the overall appearance and personality of the brand or company it represents. 3. Cliché trends are fleetingDots, swooshes, straight lines, 3D shapes; these clichés have been so overused in a logo design that they are instantly disregarded. Don’t try to ‘spruce up’ a logo with these ineffective additions either, as it will only cheapen your brand. 4. Don’t rely on colourHaving a logo that doesn’t reproduce in black and white is a hugely common problem – even the Commonwealth Bank’s logo*, when not in colour, transpires to a black square! So make sure you check that your logos important features work well in colour and black and white. 5. Remember who you're targetingYour brand must appeal to your target audience if you ever want them to buy from you. So your logo is used as a visual tool to aesthetically draw the attention of your target audience and communicate your brand’s message. Unless your Mum or the kid studying design next door is your target market, don’t rely too heavily on their opinion. 6. Design for tomorrow, not todayBe cautious of creating a brand that look out of date or follows a trend that’s happening right now. A great brand grows with the business and can withstand time as long as the business does. Don’t choose a logo that is representative of a certain decade, era or trend, or you’ll risk making your products and services seem outdated, along with your logo. 7. Vanilla creates more blandSimplicity is important, but too much is boring and sterile. A “vanilla” brand isn’t memorable and adds to the noise out there. It won’t speak or form an emotion connection to your target audience. Your logo must incorporate just the right amount of personality, to avoid being boring or overlooked. 8. Simplicity is bestToo many styles, elements or ideas joined in the one brand could lead to a misinterpretation of your business, or attract the wrong kind of consumer. A brand is designed for quick recognition and brand loyalty – too much going on will defeat this. 9. Pay attention to spaceA busy brand with everything in it doesn’t appeal to customers. It creates a poor looking brand and becomes difficult to decipher, especially when letters are included. The visual logo must be clear and crisp to resonate with your target audience at first glance. Stick with an odd number of graphic elements, one, three or five elements work well. And, always remember the purpose of the 'why' of your brand. This single element alone will often set the tone for creating a brand that will be impactful and succinct, and can be used to represent your business for many years to come. For More Information: Stella [email protected] 109 102www.brandforbrands.com/stella-gianotto *Image Source: Adobe Stock (editorial use], References: Andre Agassi Quote http://www.tennis.com/pro-game/2015/08/image-everything-andre-agassis-infamous-ad/55425 Commonwealth Bank Logo reference: https://www.quora.com/What-does-the-Commonwealth-Bank-logo-represent
Building a business can be a tough gig, but working for your business owning boss when they’re at their wits end is no walk in the park either. The pressures facing entrepreneurs are widely known but sitting behind the owner’s stress, exhaustion and burnout are the staff doing their best to hold it together. Yes, the average entrepreneur spends nearly 70% of their time running a management hamster wheel. Yes, it’s a time consuming race that has a quarter of them working over 50 hours per week. But if the business owner is stretched too thin, chances are their staff are coming to the end of themselves too. Staff miss out on training It’s exhausting for business owners to chase their staff around to fix their mistakes. It’s frustrating for them to watch their team wasting precious time because they can’t find what they need. And it can be infuriating to realise that no matter how many times you show them, they still don’t know what to do. Even though research shows employees want to be trained, business owners in survival mode typically abandon the training and development their staff need to create business stability. Employees want to work more effectively, develop new skills, and advance their own careers. If they don’t get it, research shows 40% will leave the company altogether. If you employ millennials, 87% say they will jump ship if staying with you means missing out on professional development and career growth. Proactive business leaders make staff training a priority. They see the learning opportunity in every mistake and they champion the development of their staff as the best way to grow the business. Staff can feel unappreciated When you have been tied night and day to the work of growing your business it can be difficult to pop your head up out of the trenches to check in with your team. 30% of business owners report struggling with depression, and 50% of those deteriorate through to full burnout. Reaching out to care for your team is undeniably difficult when you can barely string five minutes together to care for yourself. It is easy to take your staff for granted, but when employees don’t feel valued or rewarded by their employer, they are likely to leave. 79% of employees who quit cite lack of appreciation as their reason for leaving, but with proper rewards and acknowledgement 90% of employees report feeling like their work really makes a difference. Strategic business owners invest just a few moments each day into acknowledging their staff and the contributions they make towards lasting business expansion. Staff will cost too much While your staff have the potential to be your greatest business asset, employees who miss out on the training and TLC they need can become a costly expense in any business. For every thousand employees, ineffective training costs businesses $13.5 million each year in poor customer care, reduced performance, and wasted resources. If a disgruntled employee leaves, replacing them will have the business owner spending half of their annual salary to find and train their replacement. The problem is that many business owners see training as a short term expense rather than an investment in the long game. Companies that invest in employee training have 24% higher profit margins than those that don’t, and they enjoy 218% higher income per employee than companies without formalised training. Business owners burning the candle at both ends in pursuit of growth will do well to remember that being the champion of their staff will accelerate the achievement of their aims. To develop a proactive leadership plan for your business, go to http://www.operationverve.com
Working on your business, not in your business, is the prevailing wisdom among businesses at the moment but growthcoaches.co founder Justin Theng said that it’s beneficial for entrepreneurs to learn to become better marketers. Speaking at a recent marketing training event, Justin Theng — a former advertising executive who now owns and operates marketing coaching business GrowthCoaches.co — said that many business owners have had at least one bad experience with a marketing agency or a marketing person they’ve hired. He subsequently told this publication that the reason is because instead of owning the marketing conversation the same way that they typically own the sales conversation, business owners abdicate instead of delegate. “For the last 15 years I’ve worked businesses ranging from large household brand names to small businesses and startups. What I’ve found is that the businesses that go onto see the most success are the ones where the owner has applied themselves to being the architect of their own marketing plans, with some guidance,” he said, “We have a diverse range of clients, from the top end who book in workshops over a number of days, and those who just want a quick online course with less than $500 to spend.” What is the most common mistake business owners make with their marketing? When it comes to their marketing, many business owners like to take a set-and-forget type approach. They’ll engage an expert to do the marketing, and hope that they’ll just get on with it, while the business sits tight and waits for the sales to come in. “When marketers don’t have regular connection with the visionary in the organisation, the chief ideas person, then the marketing can devolve into guesswork,” he said. “What’s worse, is the business owner is left thinking that they are not getting what they wanted, and the marketers wonder if their efforts are valued. That perceived indifference on both sides causes more lost ROI than anything else. How can business owners improve their mindset towards marketing? According to Mr Theng, entrepreneurs make the best marketers, because from the beginning they have lived and breathed the message to market. “Imagine one day the business owner is on a stage speaking to other entrepreneurs and inspiring them with the journey they've been on to get to where they are. In that context the brand and the entrepreneur are one in the same. They are the story of the business, and in a sense you can’t really delegate that,” he said. “Sure, they may not be able to use any marketing technology or use the tools, or even be the best with all the latest tactics and strategies, but that's not marketing. That's just execution. Real marketing is about moving people and motivating people to engage with the business and transact. That's it. That is what good sales is, and that is what good marketing is.” What to remember when planning your marketing Realise how involved you would be in your marketing if the whole world were watching. How close would you be to your marketing? You probably wouldn't set-and-forget.” Don't wait until you're on a stage to be an influencer and a brand ambassador. “Be an influencer now. You're already an influencer with your customers. When your customers or clients want the best of the best, who do they ask to speak to? You. So don't just be that in a small community of people who are already transacting. Be the best influencer you can beyond that. Whether that be on social media or in writing articles or blog posts or establishing partnerships or speaking engagements.\" Be an internal influencer. “Influence your team. Be the most customer-centric, marketing-thinking person in your business, and inspire, lead and coach your team. Be the one in your business to know the plan, like an architect turning up at a construction site. The architect is the one that designed the building. He knows what's going on. He doesn't know how to mix the concrete, necessarily. He's not there to tell the foreman how to be a foreman. But he is the guy that's carrying the vision in his head, and he knows not just what the building will look like, but what people will feel when they're in the building. What the space is supposed to feel like. What the emotions are that comes with it.\" For More Information Justin Theng [email protected] http://growthcoaches.co
Before I take on a client I stop and look at everything about that industry that could gripe, frustrate or irritate a potential customer. I ask people what irritates them. I try to internalize the same problems so I can experience the customer’s frustration when I create my client’s marketing. I write down on paper precisely what aggravating problems I want my client to promise to correct - all the problems someone could have who seeks out my client’s product or service. I then examine companies in my client’s field who are doing things right by addressing one or more of the problems on my list. I look at a lot of different industries looking for the undisputable winners’ in each field. Why? Because many success-building techniques that work for one firm in one industry are adaptable to others. In fact, most are useful. I've prepared a suggested worksheet you can modify or add to. Carry it with you all day. Keep it in the car when you're driving and listening to the radio. Keep it handy at home or in the office. Every time you see or hear something that irritates you, assume that it irritates the heck out of most everybody else and jot it down. To remedy this problem or its equivalent in your industry can lift your business head and shoulders above your competitors. When you see a business that truly stands out, ask yourself – What distinguishes that firm’s performance from its competitors? Once you find an answer, record it, and then employ that same technique in your business. Here is my suggested worksheet: Things I can't stand in other businesses. What would I do if I were in that business to overcome that problem? How I can adapt the positive side of that negative observation over to my business? Things firms do that impress me. How I can adapt that technique into my business’s marketing operation? Terrible ads I've seen. How could they be improved? What salesman/woman has impressed me? - How and why? How can I adapt that positive impression to my marketing? What turnoffs have I been subjected to by salespeople? How could that negative be converted to positive? How could I adapt that positive? Prepare worksheets for radio, T.V., newspapers, the Internet and direct mail and then force yourself to review it regularly. Frequently and systematically review this data, to identify marketing elements that can be incorporated into your business operation. Take the necessary actions to test the effectiveness of these elements in enhancing your marketing programs. While doing all this, remember your Unique Selling Proposition (U.S.P.) the reason or reasons why customers should chose to do business with you over your competition? If asked to recite in a tight, concise, compelling 60 words or less, the Unique Selling Proposition their firm offers that goes above and beyond all their competitors, most business owners would go blank. If you can't immediately, clearly articulate one or many unique sales appeals, how do you expect your customers to perceive it? Indirectly this article is really about how to improve, expand or create a compelling U.S.P. to make your firm invincible. It really works. Try the techniques. Integrate them into every fabric of marketing and observe the impact. It truly will amaze you. Bob LyonThe Better Business Report0438 830 937
Humanity and our environment are going through historically important changes, which we need to navigate more carefully. Technology can leave you vulnerable, but it is not the only challenge we face in business today. I grew up prior to computers and the internet, we had no mobile phones. What we had, was a much simpler version of now. It offered us certain benefits – TRUE, quality leisure time was one of those. We never had to check emails or text messages; things just had to wait for us to get back to work. Today, our leisure time is not comparable to pre internet and mobile phones. Your brain does not get the same opportunity to go into rest mode. Gadgets constantly require our input and attention. Technology has spread itself across our existence like a huge fishing net – and it can be highly irritating. Fake news, cyber crime, hacking, clickbots etc, are all new challenges that business until recent years had never heard about. These new area problems can ruin businesses that have become a target. Anti Virus software will not be a match to the latest hacking tools. There is a need for diversification in the offering of small business, to align with the changes to our lifestyle over the last 10 years. Pioneers and Innovators are needed in small business today, not just in the corporate sector. We have an increasingly unwell society and an increasingly unwell planet. Todays’ children do not get the physical exercise we once did. Yet, physical exercise is mandatory for a healthy brain development. The brain develops with exercise, as exercise stimulates the cerebellum in the brain. A business focusing on the shortcomings we experience today, would make an ideal ethical choice. How will it perform financially? Always run a feasibility study when you put your finances at stake. The quality of our supermarket food products has deteriorated. Preservatives and traces of many poisonous chemicals are found in the majority of what we put into our mouth each and every day. What has all that got to do with your urge to buy a business? Everything! You have to adapt to current needs and market factors. What was an appropriate indicator for a good business 5 years ago, may no longer be of any relevance today. I always remind people of the Kodak collapse. One of the worlds best known brands until the mid to late 1980’s. Yet, new technology wiped it out almost overnight. Looking for a business opportunity, evaluate the lifestyle impact of your decision. Will you have weekends to yourself, or does the business require a weekend roster? How do you feel about the product or service you will be dealing in? Does it meet your ethical standard? What is the industry growth forecast? Can I add services or products to the business to suit my location? Does my purchase contract prevent me from certain add on idea’s? Is the lease secure and fair value? What about the financial investment that you are about to commit? Have you allowed for all costs, including some initial operating cashflow to cover the first six months? Worked out all wages, taxes, utilities and other trade associated costs? The business that you are most likely to succeed in, is the business that you actually have a passion for. It may not be the style of the business, but the opportunity to grow a small business into a bigger business with a new idea. Most business buyers assume they can do things better than the current owners. This often rings true, as the current owners may just have had enough and have shown little love for the business of late. Just don’t jump in blind, the current owners may know something that may impact the business in future. Do your due diligence prior to the purchase and make it all inclusive. Leave no stone unturned. Finding a flaw with a business is not a bad thing. It may be the best buying opportunity. As long as you are confident that you can work around the existing flaw, you may pick up a bargain. In many fields, workplace security has dramatically declined and wage growth has been non existent since 2009. Being successfully self-employed can offer you, more job satisfaction, more job security and leaves you less vulnerable to loss of income. Many small businesses fail in their first year. Should that worry you? NO! This fact simply should alert you to the potential pitfalls and help you avoid mistakes made by some of the failed businesses. Owning a business can bring a certain feeling of freedom with it. It is your chance to find your calling and grow to financial success. It can also be the mistake that took away the family home. Don’t over commit yourself. Don’t be afraid of the new skills you may need to learn, just make sure they are skills that you are not afraid to learn. Create a business buying strategy, similar to planning your life. Don’t treat your business purchase as a separate entity, see if it can enrich your dreams and compliment your life goals. Use the internet to research your potential business purchase. Search the actual business and see if there are “independent” news articles or reviews, these may provide a clearer picture than the one you may be presented with by the seller. Once you found the right business, having done your research, just try and run it the best way anyone could run such a business. Put your shine on it, its not just an income producing vehicle – the business now is simply relying on you. Enjoy the ride and live your dream. Run it like an athlete, always aiming to improve performance. As an Insolvency advisor and business owner, I have seen more cases of business going bad than most people. Good operators and good businesses are not spared from unfortunate circumstances. We can’t fool proof everything, but we certainly can take many measures to reduce risk. The vast majority of insolvency cases are not made up of good operators, but often those who have over committed and perhaps those who have a lack of understanding of what it takes to run and grow a business. If you need help to purchase or sell a business, feel free to contact me initially via email, outlining your situation. Troy Eichelberger Email [email protected] or visit http://a1debtassistance.com.au
Starting a business can be a daunting proposition, with the aspiring business owner facing a myriad of tasks, decisions and challenges. Many business functions suddenly become the responsibility of the owner, whether they are skilled in them or not. That’s not to forget the financial risks, which can be life changing in either direction – boom or bust Starting a business can be a daunting proposition, with the aspiring business owner facing a myriad of tasks, decisions and challenges. Many business functions suddenly become the responsibility of the owner, whether they are skilled in them or not. That’s not to forget the financial risks, which can be life changing in either direction – boom or bust. The more risk averse entrepreneurs may see franchises as a great option, with some safety in a known brand, training, systems and processes, infrastructure and support; the best of both worlds (in theory). But, with the horror stories of franchising splashed across the media, it’s natural to question the promise against the reality. Is it better to just start a business on your own, save the extra fees and invest that into your own business? There is no simple answer, as every situation is as different as every new business owner. Let’s look at the pros and cons of each. Buying a franchise There are lots of franchises out there, varying in size from just a few, to national icons with thousands of franchisees. Even though the sector is highly regulated, the way that each business is run varies a lot. In franchises, the franchisee mostly follows the business formula of the company, doing things the standard way that fit in with the company brand. That can be as varied as making muffins, mowing lawns or running fitness classes. The upside of being part of the franchise is that you get to benefit from the brand identity, the business that comes with that, marketing systems and support. The idea of immediate cash flow is tantalising for a new business and can be quite appealing. The reality of how much support you get, how good the brand is and how much business you actually get varies a lot from franchise to franchise - sometimes good, sometimes not. One crucial factor for being in a franchise is that you can have less control over many aspects of the business. Ideally you should believe in the product and the company, which can be a challenge for some headstrong entrepreneurs. If you like doing things your own way, you may feel constrained by being in a franchise. Another factor is the location and how many other franchisees there are (and will be). Franchisors that want to grow sometimes do so at the expense of the franchisees. In my own experiences, I bought into a network being told there would be 18 in the state, which changed to 30 within 6 months. Some previous franchise clients of ours had their business cannibalised by a neighbouring franchise. Of course you pay the support, brand, marketing and systems, which means fees and charges up front and ongoing. Starting your own business Starting a business on your own is a lot less restricted than a franchise, so everything you will need to do yourself. There’s no built in support, processes and policies to follow, no brand, not traffic already looking for you. Because of that, you have an opportunity to do things completely your own way, to build completely your own empire, your own brand. With less restriction, you can control the set up costs more, but it will be up to you to build up the business. But that has its own risks. As with franchises, there are stories of success and failure. Without doubt, you will totally believe in the company since it’s yours. How to decide For any potential investment, especially a business, due diligence is crucial. Build your team of experts and consider all of the opinions in your decision making. In the most successful franchises that I have worked with, the franchisor has the best interest of the franchisees at heart, and doesn’t kill the relationship through punishing conditions or profit-at-all-costs attitude; they are there to support when times are harder. Know the conditions of your agreement inside out and get great legal advice. As there are so many franchises out there, do your homework and talk to some existing franchisees. Really ask yourself if you want to do that activity in the company way, every day? For the start-ups, take the time to build a solid business plan with external expertise to know what you are getting into. The ultimate decision rests a lot on the right opportunity but also on who you are as a person. Even though both are forms of business ownership, the experiences can be quite different. Knowing what is important to you as a business owner will act as a framework to make your decision. Take your time and look at lots of options; for the right choice, an exciting and rewarding experience lies ahead. For more information contact Dr. Warren Harmer Chief Business Planner Email [email protected] or visit http://businessplancompany.com.au
The end of the financial year brings with it the thrills of counting the beans of your business wins, or the condolences of tallying up losses. It is a perfect time to take stock of your current position and how you got here. Revise the goals you have set in your business for improved performance and better results. Ultimately, your goals will be successful only when their achievement grows your business and establishes freedom. Often measurements are set around lag goals which is not always helpful. Lag goals are usually results oriented, meaning their achievement comes directly from your organisation’s activity. Lag goals are easy to measure but not as easy to improve or influence. These goals target outcomes such as the number of sales made or the amount of revenue produced. While tracking them has value, they’re not always the most productive areas to set KPIs around, because they are by definition the type of goals that lag behind the activity being done. They can only be attained as a result of your routine business activity. Lag goals are important to measure because results are important to achieve. But if you want to control the activity leading these results you need to set KPIs around lead goals. Lead goals measure what is actually being done in the here and now. They are easier to influence or improve because they deal with immediate progress and show the likelihood that you will reach your aims. Lead goals track activities such as the amount of sales calls being made to result in the sales. They count the amount of customer interactions that you’re having which will result in revenue. They tally how many ads being presented on a daily, weekly or monthly basis to achieve the social media reach that you might be looking for. To put it simply, the difference between lead goals and lag goals is the difference between counting the amount of workouts you do and counting the amount of kilos you lose. The workouts are directly within your control, while the weight loss is something you cross your fingers for in hope. When you’re setting your business goals this financial year, be clear on the difference between lead goals (which are your daily and weekly routine activities) and lag goals (the results or the output of that activity). For more information about setting productive goals in your business, contact Kerry Anne Nelson at Operation Verve http://www.operationverve.com/
Introduction In the sale or purchase of a business, a very important consideration is whether the buyer should purchase the: shares of the company comprising the business; or assets of the business directly from the company itself. This article is focused on the sale and purchase of a business which is operated by a company. For other business structures such as a sole trader or partnership, the buyer is usually only able to purchase the assets of that business. The difference between an asset sale and a share sale An asset sale involves the purchase of some or all of the assets owned by a company. Examples of common assets which are sold include; plant and equipment, land, buildings, machinery, stock, goodwill, contracts, records and intellectual property (including domain names and trademarks). The transaction is between the company and the buyer of the business assets. The seller retains ownership of the company structure. In a share sale, the buyer purchases shares in the company, rather than just the assets. The buyer purchases the company – a separate legal entity. Typically, the company continues to retain its assets and liabilities. The transaction is between the company’s shareholders and the buyer of the shares. All business assets remain with the company. It is the composition of the ownership of the company that changes. Advantages and disadvantages of an asset sale Seller Advantages Typically, a seller provides fewer warranties and indemnities in an asset sale. The seller can exclude any assets that are not intended to be transferred. Seller Disadvantages Transferring individual contracts and assets from the seller to the buyer may require the consent of third parties and/or additional registration which can be a time consuming and onerous process. For example, suppliers of the business may have to consent to the buyer taking over supply agreements and the landlord under a lease would have to consent to the lease being assigned to the buyer. The seller must procure releases of any security interests affecting the assets of the business from their financiers prior to the completion date. The liabilities of the business generally remain with the seller. Buyer Advantages Usually, the liabilities remain with the seller company and do not transfer to the buyer. The buyer can ‘cherry pick’ certain assets and leave any unwanted assets with the seller. The buyer may agree to take on certain liabilities of the business. For example, if employees are transferred across from the seller company to the buyer’s business as part of the transaction, then a buyer may agree to take on the accrued employee entitlements subject to a reduction in the purchase price for the assets. Subject to certain criteria, the sale may be classified as the sale of a ‘going concern’ which may result in no GST being payable on the transaction. Buyer Disadvantages Stamp duty may be payable on the transfer of land and other real property. Third parties may refuse to consent to assign or novate contracts which the buyer considers to be vital to their decision to purchase the business. The seller will often require the buyer to offer employment contracts to all current employees which are substantially similar to their current terms. Some assets, such as government licences and permits, may not be assignable. Advantages and disadvantages of a share sale Seller Advantages There may be a better overall return for the shareholder in a share sale transaction which includes access to tax concessions. Client, supplier and employment contracts remain within the company. There is less effort and risk associated with ensuring clients, suppliers and employees will stay with the company than in an asset sale. Seller Disadvantages Because the company retains all historical, actual and contingent liabilities of the business, to protect against these liabilities, the seller may be required to provide extensive warranties and indemnities. These warranties (unless limited) could be required for a significant period of time. The directors of the selling company may be required to provide personal guarantees which may expose them to unlimited personal liability. Part of the purchase price may need to be held on trust or the seller may need to provide a bank guarantee as security if there is a breach of a warranty. The seller may need to comply with any restrictions on share transfers to third parties, such as pre-emptive rights provisions in the company’s constitution or the Shareholders Agreement. Buyer Advantages Where the company has recognised brand, goodwill and reputation, it may be preferable to buy the business by way of a share sale in order to capitalise on the company’s brand, goodwill and reputation. As contracts, business names, leases and intellectual property are already in the name of the company, there is no need to formally assign contracts and other property and therefore third party consents are not required. Stamp duty is not payable in a share sale (unless the selling company is ‘land rich’). Buyer Disadvantages The buyer becomes the sole shareholder in the company. The company retains all past, current, future and contingent liabilities of the business on completion (including any tax liabilities of the company). Even if the seller provides an indemnity for the liabilities incurred by the company up until the date of completion, unless an amount representing the value of the indemnities/ warranties is held on trust as security or a bank guarantee is procured, there is the risk that the seller may not have the funds to indemnify the buyer when called upon to do so. To mitigate the additional risks associated with a share purchase the buyer usually must engage in extensive and detailed due diligence to detect liabilities and risks associated with the selling company. Some agreements require third party consent where there is a ‘change in control’ of the company. Deciding how to sell your business Although there are advantages and disadvantages for buyers and sellers associated with a share sale and asset sale transaction, there are ways to mitigate risks that are associated with each type of transaction. It’s important to understand the commercial, taxation and legal risks associated with both types of transactions to select the most suitable type of transaction for the particular sale. If you would like further information please contact Justin Hill on 0418 578 701 or email [email protected]