Businessbroker The Authority on buying and selling businesses volume 1 no.1 Aus $5.95 nZ $6.95 inc GsT Introducing how do you vAlue A linK business? buyinG A business And AusTrAliAn GrowinG iT privATe And what to consider compAnies before buying a show business? resilience ThrouGh The sTorm TM Your One-Stop Finance Shop Commercial Loans Business Loans Residential Loans Personal Loans Leasing and Equipment Finance SCR Finance specialises in developing creative finance solutions for businesses and home owners that are tailored to meet each client’s specific requirements. They actively source the best deal available and submit an attractive financial package for approval. Managing director, Tony Taylor, has more than twenty one years banking experience and over six years managing his own finance broker business on the Gold Coast. With a passion for creating winning financial strategies, Tony should be at the top of your list when you need finance. No challenge is too great! Call Tony now for a competitive, no obligation quotation. P. 1300 665 074 F. 07 5575 9514 E. firstname.lastname@example.org W. www.scrfinance.com.au ediToriAl The TeAm editor/designer: Liann Rasera/ Shannon Fleming Thank God Your writers: David Fitzgerald, Aaron Toresen, Tim Craft, Peter Rowe, Guy Cooper, Catherine O’Keeffe, Barry Morwood, Peter Jackson, Shannon Here! Fleming, Rebecca Brookes, David van Herwaarde, Liann Rasera, Michael Webb, William Shillingford, Tony Taylor, Andre Vosloo, Mark Mansour Like the hit television show of the same name these were the exact words used by a renowned business mentor Peter Rowe when I told him of our plans to take business cover: www.skyepics.com.au 1300 737 767 broking to a whole new level never experienced before by buyers and sellers of businesses in Australia. Business Broker magazine is published by Business Sales Corporation Pty Ltd Welcome to the first edition of “Business Broker”. Our magazine is designed to be trading as linK informative, interesting and educational with up-to-date articles on issues of interest to AdverTisinG business owners, people looking to own a business and the professionals that service if you wish to advertise in and advise people in business. The articles we publish are not written by journalists as our magazine please call: we source information from leading professionals and successful business people that Liann Rasera (07) 5572 2122 or we believe will benefit our readers. email: email@example.com We at Link are business brokers with more than 50 years combined experience in conTAcT deTAils advising and selling businesses. As the magazine grows we expect to be showcasing business sAles corporATion pTy more quality businesses for sale while providing real life information and education for lTd t/as linK people in business especially if they are looking to buy or sell a business. Too often I see The Atrium, people that have owned and managed good businesses for more than 20 years yet when Level 2, 15 Lake Street Varsity Lakes, Qld 4227 the time comes to retire or sell their business they have no idea what to do, leaving it Australia to the last minute with little time to prepare their business for sale. They all say “If only I knew….” P O Box 5141 In our first issue we have some very informative articles that cover a range of topics GCMC Bundall including how to buy a business, preparing a business for sale, getting finance to buy a Queensland 9726 Australia business, changes in franchising as well as the accounting and legal issues that need to be addressed when buying or selling a business. We have some great interviews with Ph: +61 (07) 5572 2122 successful business people along with real life stories from business mentors and an Fax: +61 (07) 5572 2322 article on corporate office design today. firstname.lastname@example.org www.linkbusiness.com.au As the seasons and economic climates change so will we at Link. We have sold over a thousand businesses and work with Accountants, Solicitors, Finance Brokers and email@example.com business professionals on a daily basis. This exposure to an enormous variety of www.linkbusiness.co.nz businesses and professionals in South East Queensland allows us to experience exactly disclAimer what is happening in the market place. While never undermining client confidentiality The contents of Business Broker we are more than willing to share our knowledge and experience with people either in are copyright of Business Sales person or through this magazine “Business Broker”. Corporation Pty Ltd t/as LINK. Any reproduction without prior permission Over time I am sure that all people looking to buy or sell businesses will benefit from this is strictly prohibited. Although publication and our knowledge and experience as it is our goal to lead the industry in information in Business Broker has been derived from sources believed to education, information, quality service and results. I welcome your feedback and please be reliable and accurate, no liability by all means let me know firstname.lastname@example.org if there are any topics that you is accepted for any opinions expressed would like us to cover in future issues. or for any error or omissions. This includes material which may Sincerely, be inserted into the publication. dAvid FiTZGerAld TM MANAGING DIRECTOR www.linkbusiness.com.au business broker 03 10 Tips For Selling Your Business By Peter Jackson, a highly successful Business Broker with over 15 years experience 1. Ensure all of your financials are up-to-date. Usual 6. Prepare a list of everything that you would have to requirement is the last 3 years Profit & Loss and show or teach a new owner. Balance Sheet as prepared by your Accountants for taxation purposes. 7. Contact an experienced Business Broker to get advice on what you should do and could do to 2. Tidy up like you are about to move house. Get rid maximise the price that you get for your business. of any old stock, paperwork, bad debts and bad 8. See your Accountant and get their advice on payers, problem customers, unproductive staff and taxation and capital gains issues so that you do not unutilized assets. have to pay more than you need to. 3. Put measures in place so that your business does not 9. Plan what you are going to do once you sell your rely solely on you to run the day-to-day operations. business as this will affect timing, Accountants Delegate and train others to do as much as possible. advice and future requirements. 4. Check leases, contracts and any agreements that 10. Don’t get bogged down selling it, leave that up you have in place. Ensure that they are up-to-date to a Business Broker. It is most important that you and can be assigned to a new owner. concentrate on ensuring the business performs to 5. Get your accounts up-to-date both debtors and its best ability prior to and during the sale process. creditors. A Perfect Venue For Your Next BIG DEAL.. Our Corporate VIP package includes but is not limited to: - Exclusive use for your guests only in the Executive VIP Lounge, caters for up to 350 Guests - A professional photographer to take photos of your guests and party with images supplied to you following the event - Decorations - Savings on beverages - Food Platters - Promotional artwork to advertise your event to colleagues via email or web LOUNGE BAR & NIGHTCLUB - Transport to/from Shooters Lounge Bar & Nightclub www.linkbusiness.com.au business broker 23 For bookings & enquiries contact Shooters Lounge Bar & Nightclub 5592 1144 or email@example.com volume 1 no.1 13 22 08 16 Contents 06 Acquiring or Disposing of an Existing 19 Due Diligence Business The essential part of any deal AVA Solicitors, Andre Vosloo discusses practical tips to ensure your business venture is a flawless transition. 20 Juggling Family Life & A Career We ask mother of two, Nicole Nguyen how she manages family 08 Varsity Lakes is Fast Becoming the Most and a career in business broking. Dynamic Business Precinct See who has just joined this smart business community. 21 Getting Ready To Sell Your Business Advice To Sellers 10 When Times Are Good Peter Rowe of Profitune Business Systems explains that 22 Australian Private Companies Show Resilience businesses should now be capturing the bigger slice of the pie. Through The Storm A brief outline of KPMG’s Private Companies Survey 2009 11 Business Broker A rewarding profession. 23 How To Buy A Business Business Broker, Guy Cooper talks about how fun, exciting, 12 The Secret To Success challenging & rewarding it can be to buy a business as long as it’s We asked one of the most successful Business Brokers how he done properly. became so successful. 24 Franchising & Where Are We Now? 13 Why Use a Finance Broker Michael Webb looks at the importance of the Franchising Code. SCR Finance, Tony Taylor explains some of the advantages of using a finance broker. 25 Franchising Is Not For Everyone The benefits of a Franchise. 14 Corporate Office Design Evolves and Changes With Time 26 How Do You Value A Business? The latest trends in office design. What everyone wants to know. 16 So What Is Different About LINK? Major change in the industry is on the horizon. 18 Buying A Business and Growing It Xplode Accounting, Catherine O’Keeffe gives her advice on business opportunities things to consider before buying a business. 28 South East Queensland www.linkbusiness.com.au business broker 05 leGAl Acquiring or Disposing of An Existing Business Andre Vosloo discusses practical tips to ensure a flawless transition The purchase of an existing business usually involves of profit, sharing of losses and exit strategies. the investment of a significant sum of money, or the AVA Solicitors are a realisation of an investment, which in both cases can business Asset purchase vs. share boutique law firm and be a complex exercise. Whilst there are specific issues purchase provide specialist legal to consider in each business transaction, there are advice in business sales general legal and practical issues common to most When buying a business, you can either buy the and acquisitions and business transactions in which this guide aims to business assets from the vendor or, if a company asset protection. Our highlight. owns the business, you can buy the shares in the objective is to achieve a company and thereby acquire the business with commercial, rather than As the purchaser, know what you the company. If you decide to acquire the shares, it purely legal, resolution to can spend is imperative to conduct a thorough due diligence our clients’ problems. We and obtain extensive warranties, guarantees and make sure that when you The starting point for any potential purchaser is to indemnities from the vendor and the vendor’s related purchase your business, determine a comfortable purchase price. Speaking to entities as you will also acquire the liabilities of the your investment will be an industry finance professional like a finance broker, company. protected. specialist accountant or banker can assist you in determining a realistic price point. commercial Terms of the contract ASSET PROTECTION In addition to the purchase price of the business, you When initially negotiating the deal with the vendor, should add an allowance for fees and expenses of the greater the number of specific commercial points COMMERCIAL LAW roughly 5% of the purchase price. This will normally and issues that can be discussed and agreed up cover stamp duty and accountant’s, bank’s and front, the easier it will be to close the deal. Often, ESTATE PLANNING solicitor’s fees. These costs are significant and should important issues which are not considered at the be considered as part of the overall investment beginning later emerge as “deal breakers” after (particularly since they will be included in the cost you have invested substantial time and money in base for Capital Gains Tax (“CGT”) purposes). progressing the deal. business structures The following issues should be discussed: If you have any queries please contact: When entering into a new business venture it is 1. conditions precedent outline the conditions Andre Vosloo important to choose an appropriate entity and struc- which need to be fulfilled prior to the agree- or ture to ensure tax minimisation and asset protection. ment becoming unconditional, those condi- Tegan Hocken of our tions and the time when they are to occur office on (07) 5630 6562. The purchasing entity should be determined and should be agreed upon. Typical conditions established before a contract is entered into. If the precedent include due diligence investiga- purchasing entity is changed after the contract has tions and finance approval. This article is a guide only been entered into, there is the possibility of having and is not legal advice. We to pay double stamp duty. Choosing the correct 2. due diligence should be conducted prior to strongly recommend that purchasing entity will require input from your the Contract becoming unconditional. It is you consult your accoun- accountant and solicitor and for that reason it is imperative to conduct legal and financial due tant and solicitor to take advisable to involve your professional advisors early diligence processes to independently ascer- independent accounting in the process. tain and verify the legal and financial posi- and legal advice regard- tion of the business. The cost of having your ing the issues addressed in If you intend to have business partners it is essential accountant and solicitor inspect the business this article. to agree the type of commercial arrangement you will is not wasted if they discover issues that are enter into (e.g. a joint venture or a partnership) and to serious enough to cause you not to proceed document that arrangement including distributions with the deal. 06 business broker www.linkbusiness.com.au linK 3. The deposit amount, when it will be paid and to whom it will 8. stock included in the purchase price should be reflected in the be paid should all be determined prior to entering into the Contract. If the purchase price does not include the stock then Contract. you should agree a maximum value that the purchaser must pay for stock at settlement. A stocktake should be conducted on the 4. The business name and intellectual property is an evening prior to or the morning of settlement. If the value of increasingly important asset for any business. When purchasing the stock is greater than this limit then you should be entitled to a business it is necessary to take into consideration any patents, reject items of the stock to reduce the value to the agreed stock designs, trade names, trade marks or logos registered by the limit. business, as well as any web domain name, e-mail address or registered business name. 9. employee entitlements need to be considered from a legal and practical perspective. The Contract will generally require the 5. licenses, permits, certificate and consents may be required vendor to terminate the employment of all staff from the date for some businesses. It is necessary to ensure that you are of settlement. All accrued entitlements should be paid to the eligible to hold those consents. You may need to attend a employees by the vendor prior to settlement. Any long service registered course or hold some specific qualification to be able leave entitlement should also be considered when negotiating to conduct the business. the contract and consideration given to whether long service leave should be adjusted at settlement. 6. The business premises lease must be transferred to the purchaser if the vendor is not selling the freehold title to the 10. Training must be agreed upon at the time of negotiating the business premises with the business. The purchaser must Contract. The Purchaser may require the vendor to provide the consider the remaining period of the lease term, renewal purchaser with training prior to or after settlement. options and rental escalations, all of which could have an impact on the future profitability of the business. 11. vendor’s restraint prohibits the vendor from competing with the business being purchased. If you have agreed that PHOTO shuTTersTocK imAGes 7. existing contracts may be required to conduct the business the vendor will not compete with the business then you must and you should ensure that these agreements are transferable. specify the period of time and area within which the vendor It may be necessary to obtain some form of consent to transfer (you may specify individuals if appropriate) will not be allowed the contracts or enter into new contracts. These contracts may to compete with the business. include service agreements, rental agreements, hire purchase agreements and license agreements. www.linkbusiness.com.au business broker 07 linK LINK’S Gold Coast office joins V arsity Lakes is considered the geographic heart of the Gold Coast. It is fast becoming the region’s most dynamic business community and the Coast’s largest office precinct. The area of Varsity Lakes is known as Varsity Central Business Precinct and is home to a number of communication and information technology firms and has a growing base of law, finance, accounting, education, professional services, general business services, retail and entertainment. The area has already attracted such companies as Minter Ellison Lawyers, Delfin, McDonald Balanda & Associates, IBM, AAPT, Bank of Queensland, Gold Coast City Council as well as Bond University. And now LINK is enjoying this most desirable address. W ho is LINK? LINK is the authority on buying and selling businesses. TM 08 business broker www.linkbusiness.com.au linK the Varsity Lakes Community W here can you find LINK? The Atrium • • It is centrally located with easy access to all major arterial routes; Strong population growth with over Level 2, 15 Lake Street 7,000 people living in Varsity and over Varsity Lakes 4,500 business owners working daily in the area; The Atrium Building was developed by the most • Transportation with Bus lines, ample prolific developer - Solmac Developments. With parking, and the Varsity Lakes Railway their enviable reputation for producing properties Station due for completion in 2010; of value, high quality and superior design. • Vibrant restaurant and retail precinct that makes it a great place to do LINK engaged 5 Star Developments to design the business over lunch or coffee. LINK office. The end result is stunning and all due to the creative vision and design of its architect, William Shillingford. Ideally, Varsity is developing into a very smart community and offers a unique lifestyle location W with multiple benefits for us and our clients. hy have we moved to Varsity? If you are considering selling your business then call Well there are many reasons why Varsity one of our professional and experienced brokers Central works for us.... on (07) 5572 2122 for a free appraisal and advice on how to assist you in exiting your business. PHOTOS solmAc & lendleAse • First and foremost Varsity/Robina is rapidly becoming the central business district for the Gold Coast; • The area has a strong communication and information technology sector; www.linkbusiness.com.au business broker 09 business speciAlisT When Times are Good The Farmer Who Liked A Good Drought peter rowe managing director, profitune business W www.profitune.com hen the season is good everything grows - including Smart operators anticipate cycles. That doesn’t stop them making the weeds. They shoot out shallow roots to suck up hay while the sun shines, but it does stop them blowing the lot, and it the surface moisture and nutrient and so stunt the does cause them to lay in stores for the Winter. deeper rooted cash crops. Weeds are opportunists. They flourish in good times, but when times turn tough, they don’t have Jim Collins, business researcher of renown in his latest book How the the deep roots or the solid heartwood to survive. They die and become Mighty Fall, says, “Our research shows that if you’ve been practicing fertiliser for the hardier plants. the principles of (business) greatness all the way along, you should get down on your knees and pray for extreme (market) turbulence, for that’s “I like a good drought. It tends to get rid of the deadwood”, my when you can pull even further ahead of those who lack your relentless farmer mate Curly used to say - and he wasn’t talking about trees! intensity.” No, he was talking about his less resourceful neighbours; tax-break here endeth the lesson farmers who jumped into a rising market, bought new gear, ran a crop in with little fertiliser, no weed control, paid at the top of the market for the best breeding stock, and let their dams silt and their feral pests run You’ll have to ask me another time what The Principles are, because wild (into Curly’s immaculately-groomed property!). They used their right now the point I wish to make is this: If your market is shrinking primary producer tax breaks to compensate for their inefficiencies and you need to be grabbing a bigger slice of it – at someone else’s expense. turn a quick buck. You had best be improving your business right now because other operators less resourceful than you are struggling and will fail, and their “Smart operators anticipate cycles” market share will be up for grabs now, or shortly. Curly, meanwhile, cleaned his dams, nurtured his pastures, controlled Now is the right time to capture the his weeds, selectively bred his stock and controlled pests. Because demand that others are too weak or he was continually investing, his input costs were higher than his confused to be servicing, and you had neighbours but his yields were higher too. In good seasons, he socked better put some planning into how you his profits away for hard times and continued to invest in his assets. will handle the surge when the market once more breathes in and your bigger When the market turned, the get-rich-quick operators promptly slice of the pie expands and your failed, and their neglected lands, silted dams, shiny new equipment and business comes out of this current exquisitely-bred stock were snapped up at the next clearing sale by - downturn like a champagne cork you guessed it - Curly! out of the bottle! Right now, this same cycle is playing out in the broader business market. The new-comer opportunistic operators who jumped into rising markets for a quick buck (and the incumbent average operators who, despite their inefficiencies couldn’t help but thrive in a rising market with its fat margins) are failing. The business weeds are withering! And the Curly’s of the business world? Well, they are making brace a killing! yourself! when The Going Gets Tough . . . PHOTO IsTocKphoTos imAGes We humans are funny creatures for we choose to ignore Nature’s lessons and expect our markets (which, incidentally, rely on Nature) to expand, and expand. Economies never grow straight-line, but always cycle. Ours breathes in and breathes out; expands then contracts. Without any change in the fundamentals why would we not expect, after a long period of inhalation, there would not be an exhalation – and possibly a forcible one? 10 business broker www.linkbusiness.com.au linK Business Broking how hard can it be? Managing Director of LINK, David Fitzgerald explains what attributes make a good business broker T his is a question that I am often This is also why people don’t succeed as clients. People with good businesses that asked especially as many people they can work extremely hard and put in many work smart and provide a quality product or think that selling a business is easy. hours only to receive nothing for their time service usually always make a lot of money. Unfortunately the attrition rate in and effort as they did not produce results. Business broking is like any other business in our industry is over 80% which makes it one People soon get sick of working for nothing that if you look after your customers they will of the hardest professions to succeed in. With however I believe that this can be avoided if always come back. over 4 out of 5 people in the industry failing the main 4 reasons mentioned are addressed this is not a record to be proud of which makes prior to a new broker starting. We have just moved into a new state- me ask, why? of-the-art office in Varsity Lakes and have First of all a business broker must a limited number of business broking In the many years that I have been a understand what it is like to be in business positions available. If you believe you have business broker I have seen many gung ho for themselves. They also must know how got what it takes to succeed in business starters that never complete their first year. to read financials especially a Profit and Loss sales then we have the rest including the While there are many reasons as to why people Statement and a Balance Sheet. They must most comprehensive training package in the don’t make it, it invariably comes down to one also be self motivated with a strong desire industry. and or all of these: to succeed and be able to listen and focus. Honesty and integrity are other key attributes We provide an excellent working 1. Poor choice by the employers in not they require, as without these you will soon environment with highly skilled support picking the person with the necessary get found out and be doomed to failure. staff, one-on-one training with some of attributes and skill base in the first the most knowledgeable and successful place; To be successful a business broker must business brokers in Australia and a detailed 2. New candidates not prepared to listen, learn and gain a thorough understanding step-by-step training manual. We also have learn, focus and put in the hard yards; of how and why many various businesses a dedicated trainer and broker development 3. Employers not being able to offer the work. What makes them profitable, how they manager in Tim Craft, who is also a Director right training program; make the money, what their purpose is and of Link, very successful with over 15 years 4. Broking firms having inadequate what they are truly worth amongst a host experience and actively selling businesses. systems and support staff. of other things like understanding leases, risk assessment and contract negotiation? If this is something you feel you can do, For the top 20% that succeed they enjoy a Never have I mentioned the word “sell” as the then call our office on (07) 5572 2122 for more PHOTO shuTTersTocK imAGes great and rewarding lifestyle. When you sell selling of a business is all in the preparation, information or send an email to: businesses, for the most part, you get to meet presentation and communication which if firstname.lastname@example.org to make an and deal with a lot of nice, happy, interesting done correctly will sell the business for you. appointment. and successful people. However these same people want results and business brokers Financially business broking can be very only get paid when they successfully sell the rewarding as being a business broker means business and complete the deal. being in business for yourself just like your www.linkbusiness.com.au business broker 11 business broKer Q & A The Secret To Success We ask, Tim Craft, why he is such a successful business broker Q: how long have you been selling planet, the banking system has become more Q: how difficult is the sale process? businesses? laborious and difficult especially when trying A: It is not difficult it is just involved and must A: About 15 Years now. to obtain finance. be managed properly. There are Solicitors, Accountants, Landlords and Banks as well as Q: can you remember your first sale? Q: do you have a system or magic formula the Buyers and Sellers. The broker needs to A: My first sale was Midas at Nerang. that works? keep everyone informed so that there are no A: I never assume that people understand, I surprises. Q: what was your most memorable sale? make sure that they receive comprehensive A: A large Manufacturing Plant in Brisbane information to make an informed decision. I Q: how important is advertising & prepar- where I matched an English Accountant and a communicate clearly and am always honest ing a business for sale? Dutch Production Engineer who both wanted and truthful. A: Very important, when someone has to come to Australia and both had half of the decided to sell they are in most cases wanting money needed to buy the business. This was Q: is it difficult to negotiate the sale? to get on with it. Advertising can include all done via the internet and became a perfect A: Sometimes if things are not clear, newspapers, mail drops, websites, word-of- match. information provided is incorrect or parties to mouth, buyers’ lists, etc. Without advertising the contract are not working toward the same it can take a very long time and once the Q: what has been your most difficult sale? goal. This is the business brokers’ job to keep momentum starts to wane the enthusiasm A: A very large multimillion dollar things simple, remain focused and remember drops. You can’t sell a secret however manufacturing business based in Brisbane. It that it is a business transaction, nothing confidentiality is imperative. Producing a was an extremely specialised production with personal. Again if you are honest and truthful detailed profile incorporating all or most of the many long term contracts and agreements and are trusted by both parties then invariably information on the business serves as a strong in place. Not only did I have to find the right you will complete the deal. reminder and sales tool for all potential buyers. buyer but I also had to ensure all relevant agreements were assigned to the new owner. Q: once both parties have signed the con- Q: you are already a great success, so why The paperwork was enormous however tract is your job done? join link? everyone had a happy ending. A: Absolutely not! This is the most important A: The industry is changing and we have time. You must constantly make sure both always wanted to be at the forefront. We Q: what knowledge and skills do you need parties are kept fully informed and keep the could have spent considerable amount of to have to sell businesses? process moving forward. Contracts have many money over a number of years developing A: You have to have a thorough conditions that must be met by both the buyer systems and new technology ourselves or we understanding of how each business works, and the seller within a strict time frame and could join a progressive international group what makes it profitable and its unique points this needs to be managed as it often involves like LINK and leap ahead. The LINK system of difference. Then you must be able to convey many parties not obligated to the contract. and advanced technology will raise the bar in this information correctly and accurately to our industry for quality service and customer potential buyers. You must be able to read Q: have you had any businesses that you match up and communication far beyond and understand profit and loss statements could not sell? if so why? anything available in Australia at present. By and balance sheets. Also it is very important A: Not many but in the odd case where we taking over LINK we have probably saved 5 to uphold the highest integrity, honesty and cannot sell a business then there is usually years and I am looking forward to becoming confidentiality. something wrong like location, industry, staff, even more successful and having even more presentation, lease or price. There can be satisfied buyers and sellers. Q: what has changed in business broking many reasons most of which can be solved if over the years? everyone communicates. ______________________ A: We now have computers, the internet and Tim Craft is a Director with Link and is highly the ability to communicate information all Q: what does a seller of a business need to respected by his peers and all of the profes- over the planet instantly. This is of great ben- do in order to help you with the sale? sionals that provide service to the Business efit to selling businesses as it gives us access A: Provide everything that fully informs the Sales Industry. His commitment to customer to more buyers and allows them to fast track incoming purchaser. Don’t keep anything in service, attention to detail and success rate is the receipt of cumbersome documents. On the dark – communicate and put yourself in well known by hundreds of satisfied buyers the other side with all of the improvements the buyers position. and sellers of businesses. and fast tracking of documents all over the 12 business broker www.linkbusiness.com.au FinAnce Why Use a Finance Broker Managing Director, Tony Taylor specialises in developing creative finance solutions for businesses. After 21 years working for a major bank and 6 years as a finance broker 3. banks are not fair... specialising in obtaining finance for businesses I feel well qualified in A very experienced business person once told me that Banks are advising those looking to buy a business to see a Finance Broker. I have happy to give you an umbrella when the sun is shining and take used some real life examples to demonstrate these advantages. it away when it is raining. If your Bank suddenly decides it does not want your business anymore you need someone on your 1. A broker will know which bank to apply to for your side to help. Your Broker will be able to help find alternatives. finance requirements... While the number of finance alternatives has dwindled due EXAMPLE: Last year one major Bank decided that it would to the Global Financial Crisis (GFC ), there are still significant review its client portfolio and exit those that in their opinion did differences in Bank policies. If you are looking to buy a business not meet minimal lending standards. Most lending Contracts a Broker will be familiar with the Bank’s policies. you will sign enable the Bank to demand full repayment of the loans at any time. (It is important to seek legal advice when EXAMPLE: Client applied for a loan to purchase a signing loan Contracts). Clients received a letter from the Bank Manufacturing Business with a significant amount of Plant advising them that they wanted full repayment of all loans and Equipment. We needed funding against this equipment within 30 days, if not they would proceed with legal action to to make the deal work. One of the big four Banks would only sell the security. This was despite the client being up-to-date on lend Auction Value, the other will lend Fair Market Value. The all loans and never missing a payment. We wrote to the Bank difference between these two values in this case was over $700k. and provided Cash Flow projects and reasons for poor profit The deal was done. The client purchased the business. performance over the past 12 months and what was being done to rectify. This bought us some time to enable full refinance at 2. saving you money... better rates and lower repayments. Clients have since met the We all know that a Broker should source the best possible projections & trading well, and paying much lower interest rates. interest rates and fees, however this is only part of their role. A Broker’s relationship with a client should not end when the 4. A broker needs your business to stay in business... Business has been purchased, they should be a critical part of While having a good Bank Manager is important, they are still your Business helping to Manage your ongoing relationship paid a salary and for the most part they do not rely on getting with your Bank and finances. The Bank Manager works for you the loan before they get paid. Sure they are paid bonuses the Bank and they have profit targets to meet so they must on lending growth amongst other targets. A Broker on the other maximise their return to the Bank from each client. Your Broker hand has to get you the loan and have it draw down before they is there for you. get paid. What this means is they are going to work harder to get you your loan to help you achieve your goals. The reverse of EXAMPLE: I was given documents by the Bank for the client to this is that the Broker does not believe that your application has sign for increase lending to build a factory. The interest rate was much chance of success they will be honest and not waste your 9.8%. Upon questioning the Bank and requesting a different time on a loan with minimal chance of success. product (i.e. Commercial Bills) we saved the client over 3% on a $7m loan. Do the Math! EXAMPLE: Over the last six years I have had numerous occurrences where clients have come to me saying they spent six weeks waiting for a decision from their Bank and finally they were declined. This normally turns out one of two ways. Firstly, we can’t understand why it was declined and apply with another Bank and get loan approved. Alternately, there was no chance of success in the first place and the clients should have been told PHOTO shuTTersTocK imAGes this from the outset. We could go on, however why go to a Bank when you can go to a Broker who can access almost all Banks? ________________________ For more information contact : Tony Taylor, Director, SCR Finance on 0402 809 660 www.linkbusiness.com.au business broker 13 oFFice desiGn CORPORATE OFFICE DESIGN Corporate Office Design William Shillingford, MSIDA.JP Director Corporate Office Design Evolves & Changes t: 0414 886 122 email@example.com With Time • • Interior Design Home Décor • Furnishings A s an architect, one of the most exciting things about corporate office • New Home Design & design is its ever-changing and evolving nature. More than ever, trends are Construction changing rapidly as a reflection of tremendous advances in technology, the • Corporate Office Design environmental movement and the strength or weakness of the employment market. Today, there are several significant design trends that are having a profound impact on The Design Firm has office interior our industry, including the “green phenomenon,” demand for high-tech office space and designers who are highly skilled in the return to more private offices and away from the ubiquitous “office landscape” plan. office interior decorating. We will help you stand above your direct competi- Green buildings, or sustainable facilities are rapidly gaining momentum. New develop- tors by starting afresh, or updating your ment, tenant improvements and building renovations are all subject to green initiatives existing spaces for a new “cutting edge” as more companies look to incorporate these elements into their spaces. As architects, professionalism. this is welcome news because we no longer have to convince clients that we can design green while still being conscious of clients’ bottom-line needs. Business and office interior decorating is quite different from residential. Your There are numerous ways to incorporate green Demand for Design Project will be custom-designed into buildings other than solar panels or Energy Star high-tech office by a team of professionals. features. Light bulbs with dimmer switches; recycled space design is materials in furniture, floors and wall coverings, even another trend that When designing and planning a com- composting and/or waterless toilet systems are just a is increasingly in mercial personality some types of ques- few. It is refreshing that both tenants and landlords are demand! tions to start with would be: becoming more aware of green building design. It allows • What is my target market? us to explore other creative design alternatives. • Is my office interior seen by my clients, and how often? The demand for high-tech office space design is another trend that is increasingly • Do I need a reception room? in demand among tenants who are either moving into new space or retrofitting their • Do my employees spend long existing space. hours here? • Are sales closed on site? With the tremendous technological advancements that have been occurring over the past several years, companies are requiring space that features Wi-Fi capabilities, larger All Corporate and Office Designs are floor plates and tremendous power and data centre functions. developed with Great Attention to Detail. Every corporation today is cognizant of having its space designed to accommodate technological infrastructure, not only people. This new Ultimately, Our Message to You Would Green awareness puts a premium on flexibility and reorganisational potential Be: buildings because of the rapid changes in tel-data and information retrieval systems. are Business design planning rapidly Another trend in corporate office design is the return to private offices, is based on your “making the sale.” gaining which was a trend in the 80’s and 90’s, and the move away from the cur- momentum! rent trend of open spaces. The reason for the increasing popularity of more The Design Firm understands this busi- traditional offices is the fact that a great many corporations are maintaining ness climate and will start afresh or current staffing levels or even reducing head counts. update your existing spaces for that “cutting edge” professionalism that is With companies continuing to invest in technology, there is less of a demand for new so needed in today’s highly competitive employees and therefore a reduced need for square footage. Designing for a company marketplace. This will help you stand that is downsizing its office spaces requires organising space so that there are a smaller above your direct competitors and result number of cubicles and “carrels.” in increased sales for your company. 14 business broker www.linkbusiness.com.au oFFice desiGn This trend, called “hotelling” workstations, is common for companies that are more frequently employing individuals who spend most of their time on the road or mostly work from home, and only need part-time workstations in the actual office. The construction of more private office space is oftentimes a cost- effective business decision because the construction of this type of space is typically built into landlords’; work letters, whereas with open space planning, workstations are considered furniture, which is a cost that is normally the responsibility of the tenant. Because of these trends, as well as for economic purposes, companies will continue to demand increased productivity and therefore be less inclined to over-commit to space. The challenging and rewarding aspect of an architect’s job is to keep up with the evolving needs with each unique client. New products, materials and innovations are being introduced to the marketplace at an increasingly rapid rate. In order to be fully effective today in understanding and anticipating clients’ needs in a change-dominated business culture, architects and designers must become change agents themselves. Feeling the Financial Squeeze??? We can Help with OUR HOSTED DESKTOP SOLUTION and IP TELEPHONY SAVE on IT and Telecommunication costs! JCRIT can provide the right hosting solution to resolve your IT infrastructure challenges whilst simplifying your IT management. Support your company with virtual, dedicated, co-located or fully managed hosting services through our strategically located data centres. Keep your business connected around the clock with our industry leading hosting hardware and software technologies. IP Telephony The highly flexible IP environment is widely used as the primary method of connecting people and devices. IP Telephony leverages this technology to SAVE on telecommunication costs. Take advantage of this technology to boost your businesses revenue, increase productivity and enhance customer satisfaction by replacing traditional phone systems with IP phones. For more information on Hosting Service and IP Telephony Services with JCRIT, call 07 5572 3213 or email our professional consultants at firstname.lastname@example.org JCR Computer Company trading as JCR IT PTY LTD PO Box 422, Burleigh Heads, Qld 4220 Website: www.jcr.com.au ACN: 080 124 929 ABN: 81 080 124 929 linK SO WHAT IS DIFFERENT ABOUT LINK? Major change in the industry is on the horizon david Fitzgerald, managing director, linK This was the first question that we asked Aaron Toresen, sellers of businesses so that we were clearly better than anyone Managing Director of LINK Business Franchising Ltd, when he else in the industry. came to see us six months ago. His answer was direct, bold and spoken with sincere confidence “We sell businesses, achieve We had made a list of what was lacking in the industry and results and provide a customer service better than any other how we could achieve the required standard. High on our list business broking firm in the world”. Anyone bold enough to was a CRM (Customer Relationship Management) system which make a statement like that in a foreign office to 4 of the most had to be developed specific to our industry and cater for sellers experienced and successful business brokers in Australia had our and buyers of all businesses. We had looked at enough CRM’s to attention. realise that anything we purchased would need to be severely modified at a significant cost and take an enormous amount of Aaron went on tell us of his quest to travel the world, meet time to be developed to meet the high standards we required. with the best business broking firms, share information and find Just over three years ago LINK had come to the same conclusion out what LINK could do better. His conclusion was that while and proceeded to develop and build the BOSS (Business there were some very good, large and professional brokerages Operating System Software) system from scratch. The BOSS out there none of them had a strong working Franchise model system was developed by business brokers for business brokers that met all of his required high standards. He learnt a lot and specifically to simplify, facilitate and streamline the complicated was able to gain great ideas from many firms as some were and often time consuming process of selling businesses. excellent at customer service yet behind on streamlining information and others had first class systems that were broker When Aaron showed us the BOSS system and went through friendly and poor on customer service. He realised that to be the its enormous amount of features we were extremely impressed best he needed to build it himself. as it had more bells and whistles than we had imagined and exceeded the standards we believed needed to be met to be the Timing can be everything and at this point in time it was right best in the industry. Also you did not have to be a Rhode Scholar in Aaron’s favour. We had the Licence for NBS (National Business or an astronaut to drive the system, it is very broker friendly and Sales) on the Gold Coast and had been contemplating our future relatively simply to use as it prompts you for information and as we wanted to be able to improve our service to buyers and ensures all of the required data is entered into the system. 16 business broker www.linkbusiness.com.au linK BOSS has a highly sophisticated buyer and seller requirements identification and matching database management system that ensures the widest variety of businesses are marketed and immediately brought to the attention of qualified buyers looking to buy a business within those DUPLICATING SUCCESS parameters. It also allows the broker faster and greater access to more comprehensive data and detailed information on businesses for sale and The current economic climate is causing contraction buyer requirements which saves time and allows us to provide a quality in many industries, however LINK is bucking this service for all of our clients. trend and is continuing its growth phase as demand remains high for quality businesses. LINK is expanding LINK was more than the BOSS software program, it is a Franchise System throughout Australasia with 4 branches in New that has been operating, developing and growing for over 13 years with Zealand, and 2 in Australia and a further 3 under strong ethics, high standards, and innovative ideas and is at the forefront consideration. We are also currently in discussions of professionalism in the industry. They wanted us to join their Franchise even further afield with potential partners in South group as they had researched the market and believed that we not only met Africa and California. Worldwide the business their high standards but would add enormous value to their brand through broking industry remains largely fragmented and our combined experience and unprecedented success. We too saw the unsophisticated, whereas our highly developed benefits of joining an international business brokerage that was light years processes and quality control systems are world class in front of anyone in the industry as it would allow us the opportunity to and are attracting interest from operators looking to fast track our ultimate goal of providing a standard of service to sellers and take business broking into the 21st century. buyers of businesses better that anyone else in Australia. LINK has a powerful and fully integrated broker Meeting the LINK international standards also requires us to have the best office facilities and infrastructure in Queensland and arguably Australia. Our operating system (BOSS) which is the backbone of new office facility was designed by renowned architect William Shillingford operations and allows remote access, automated and situated in the Varsity Lakes CBD. We needed to develop a high-tech processes, reporting, marketing and process office design that could enable us to offer the best quality service that management among many other features. As no meets the demanding and challenging needs of sellers and buyers. This quality business broking software was available required us to have plenty of space for client service areas and state-of-the- internationally LINK developed the bespoke system art technology and office equipment as well as additional office space for from the ground up. more business brokers and specialist back-up staff all in a user and customer friendly environment. With a focus on results and only engaging the most professional, proven and capable business brokers Our customer service standards have improved dramatically with four in the country, LINK are a long awaited solution for new key executive positions required to meet the LINK Franchise System business owners and advisors who want professionals Standards: we have a new Operations Manager to oversee the smooth they can rely on. While most organisations will espouse integration of the BOSS system so that we can maximise the benefits for virtues of integrity and ethics, these statements are buyers and sellers; a new Office Manager to provide back up service and usually hollow and are often contradicted by their facilitate contract management for Business Brokers; a new Marketing actions. We strive to maintain the vision we built this Executive to manage the sophisticated database and information service business on; Facilitate the sale of businesses ethically, system; and a Franchise Manager to understand and work with the professionally, confidentially and with utter integrity. hundreds of Franchises operating in Australia so that we can provide potential buyers and sellers with up-to-date and accurate information on If you require business brokerage services either on the various franchises available. the sell side or buy side, please contact a LINK office and if we don’t yet have one near you, it won’t be far The LINK difference is outstanding and for anyone selling or buying a away! business you will find our service, information, knowledge, systems, facilities, technology and experience second to none as we have truly lifted the bar in our industry. Don’t take my word for it. Come and see for yourself as we are happy to meet any challenge and show you in person what you can expect. Aaron Toresen Managing Director LINK Business Franchising Ltd TM www.linkbusiness.com.au business broker 17 plAnninG Buying a Business & Growing It Catherine O’Keeffe of Xplode Accounting explains the structure and setup involved in buying a business catherine o’Keeffe principal, There is an enormous range of articles and advice available today Once you know your business, tell as Xplode Accounting aimed at your first foray into business. It can be very daunting knowing many people as possible! You often find where to start, and who to listen to. We talked to Catherine O’Keeffe, that support and referrals can come Principal of Xplode Accounting for advice on things to consider before from unsuspecting places. you enter the business gauntlet. Catherine was able to give us the following advice: 3. start as you intend to continue Whether buying or beginning a business, many budding 1. Know why you are going into business entrepreneurs will try to cut costs where possible. Often, the People go into business for a range of reasons. Some are trying temptation is to “start the business” and worry about structuring to build an empire, some are trying to build a job. Before you later. The problem with this approach is that changing structure start out, you need to understand what it is you are trying to can have significant Capital Gains Tax and Stamp Duty costs, and achieve. This simple idea will then help you identify the types trading in inappropriate structures may expose your assets to of income that you will receive (active/passive) and the types of undue risk. expenditure required (branding vs advertising). It will also help your advisors give you the best structural advice from the outset. Just like a building inspection before you buy a property, money spent on professional structural advice can save you money and 2. Know your own business heartache in future. Whether buying a business, or starting out from scratch, you need to understand your new business inside and out. 4. prepare for growth Traditionally this is done through a business plan. When purchasing a business, often clients aren’t prepared for In my experience, the best business plans answer the following the level of working capital required to run the business. When important questions: performing due diligence on a business, entrepreneurs should ask the question “ how much working capital do I need to run • who are we this business now, and how much if I grow 20%?” This way, the What products/services do we provide? Who are our com- first year after purchase is not stifled by your lack of funding. petitors? What differentiates us from the competition? • where are we going 5. Know what you don’t know What is our market – now and in 5 years? What is our staff In any business proposition, you should examine what skills level/turnover/customer base 5 years from now? and attributes you have to contribute to the business. For • how will we get there skills shortfalls, you may need training, or the assistance of a What is our marketing plan? How will we address the professional advisor. For example, if record keeping and details competition? How much funding is required for capital are not your strength, consider getting a bookkeeper from the investment and for working capital? Where will those outset. This can save costly accounting fees down the track, and funds come from? can also help give you some timely feedback on your business’ • how will we know when we are there performance in its initial stages. What are our KPI’s (Key Performance Indicators)? How often will we be measuring the KPI’s? It’s also important to find a business accountant that understands what you are trying to achieve, and can provide you with meaningful A business plan is not just for new businesses. In fact, a business advice. Ask other business owners who they would recommend, plan is just as important when you are buying a business. This and don’t be afraid to change accountants if you are unable to get is because it will help you identify how you can improve the the feedback your business needs. After all, for the time, passion and business you have just acquired. money that is invested in your business, you can’t afford not to receive great advice. A business plan should be a working document. We often find, particularly with new businesses that some of these aspects ______________________ will change particularly in the first 3 years as market conditions XPLODE Accounting is an exclusive accounting firm specialising in shape your business. growth-stage businesses. Based in Bundall, Xplode offers a range of one-on-one business advising, taxation and accounting services. 18 business broker www.linkbusiness.com.au due diliGence Due Diligence Barry Morwood of McDonald Balanda and Associates Lawyers discusses the essential part of the deal barry morwood, consultant solicitor, Unless they have some special sixth sense or intuition, time in the contract for the job to be done properly. mcdonald balanda & Associates lawyers most people buy a business based on the information Accountants will usually need to inspect extensive books www.mba-lawyers.com.au given to them or representations made about it before of the business including tax records for at least several they agree to buy. years to validate the seller’s information. The expression “due diligence” is just the commonly used name given to the process of appropriately checking “the best time for a full that information before completing the transaction. It’s a natural and essential part of any deal. due diligence is after From the buyer’s viewpoint, a contract with conditions the contract is signed” making it subject to appropriate due diligence enquiries is great: the seller is bound to the deal while the business The legal due diligence can embrace a wide variety of is checked out. If it doesn’t, the deal is cancelled, deposit checks. They will normally deal with the entitlement to refunded and no further liabilities exist. use the name of the business and its intellectual property rights, title to all business assets, validity and currency It’s also a fine selling tool. The seller has the comfort of any necessary government licences for particular of knowing there’s a committed serious buyer - and industries, compliance with government regulations such conditions allowing verification is a powerful persuader to as in the food or child care businesses, town planning buyer confidence. permits or consents needed for the business and obligations to employees. It follows that the best time for a full due diligence is after the contract is signed. Actually, in some cases it If the business operates from leased premises, the can’t happen until then. Often Lessors of the business terms of lease will be reviewed to ensure their continued premises, significant suppliers and franchisors will deal availability on acceptable terms. A general review can be only with buyers who have already signed a contract. crucial in checking options, rent reviews, repair obligations, Why? They don’t waste time dealing with tyre kickers - just landlord entitlements to relocate the business or terminate those clearly considering a future business relationship as the lease altogether, allowable uses under the lease, demonstrated by the purchase contract already in place. signage rights, the area leased or the obligations to carry out renovations during the term and the like. Franchise Business sale contracts routinely include conditions agreements, supplier or buyer agreements should be making the transaction subject to the purchasers being reviewed if they are fundamental to the business. satisfied with their enquiries about the business and its associated assets. Any aspect of the business important to Incidentally, it’s worth noting the broker’s role in any the continued operation of the business can be the subject business sale. Good business brokers know the kind of of a due diligence. Some due diligence clauses, including information prudent buyers need. They gather it from relating to financial and leasing aspects and asset title the seller and present it to the buyer. What they don’t do warranties, will be built into the standard contract - but - they can’t – is investigate, verify or warrant its accuracy. others may need to be negotiated into the contract, such That has never been their function. Buyers should check it as checking town planning approvals. themselves. So, due diligence is vital. The broker makes the deal Kinds of due diligence: The financial due diligence is happen with information given on behalf of the seller. The done by the buyers accountant. The standard Queensland seller knows it’s likely to be checked under due diligence contract, for example, gives the buyer a number of clauses. The buyer has confidence to sign up on a deal with business days to verify the financial information presented. those clauses, verify, then settle. No tears later. Of course, its important to promptly engage a suitably ________________________ experienced accountant for the job and allow enough Barry Morwood, MBA Lawyers (07) 5539 9688 www.linkbusiness.com.au business broker 19 inTerview Juggling Family Life and a Career In Business Broking Interview with LINK’s Business Broker - Nicole Nguyen how long have you been a business broker? Over 4 years my youngest is in bed. This is my time to surf the Internet and Skype has your career lived up to your expectations? Definitely and I am my family. honestly looking forward to the next 10 years! This career offers me what do you like most about being a business broker? Lifestyle and everything I could possibly want: financial freedom, lifestyle, exciting job satisfaction challenges and a high level of satisfaction. When a client can genuinely what do you like least? Paperwork – although, I put this on myself show appreciation for your work - it makes it all worthwhile. ‘cause I like things done right the first time. how many children do you have? Two. One aged 2 years 4 months why do you feel you are a successful business broker? I don’t like and the other 3 months. to waste time on things that won’t produce a result. Results make how does a woman like you juggle family life & career? It’s easy everyone happy. when you have the flexibility to work from home and work your own what is your goal? To semi-retire at 45 and still be business broking – hours. I can juggle appointments and phone calls during the day and LOL! catch up on paper work at night. what do you wish someone had told you about the industry? That describe your typical day? My typical day revolves around what’s women can make good business brokers! going to produce results. This way I’m more productive and can prioritise on what’s important. would you recommend business broking to other women? Definitely. This is probably one of few jobs where you can enjoy your when do you find the time to relax? Honestly? About 11pm when family and be successful. ARE YOU LOOKING FOR AN EXCITING REWARDING CAREER? LINK Business Broker Opportunities If you have business and/or mid-level management Email: email@example.com experience this may be the professional job for you. Ph: 07 5572 2122 to make an appointment (all enquiries will be held in strict confidence) We are “the authority on selling businesses” and we offer: • Gold Coast leading information systems • Ongoing support in a team environment • Stability • Comprehensive and ongoing training • Generous, rewarding commission structure www.linkbusiness.com.au 20 business broker www.linkbusiness.com.au plAnninG Getting Ready To Sell Your Business Advice to sellers S elling your Being organised is key, pre-empting what a domain name. If you as the seller are not the business is not buyer may want to see as part of its due dili- registrant steps should be taken to rectify this necessarily just gence will mean a request is not unexpected before a buyer is found. a matter of a signing and there will be no delays in providing the a contract. It involves information sought. Stock: Check your supply agreements. If you a consideration of all purchase stock on credit, it is likely that the aspects of your busi- In addition to the financial statements and supplier retains title to the stock until such ness and as a seller the books and records of your business, a buyer time as it has been paid for in full. The general best time to do this is will be entitled to see every document critical rule is that you cannot sell what you do not before you have found to the operation of your business including own. rebecca brookes, Associate, a buyer. premise leases, material contracts with suppli- Ffrench commercial ers and customers and plant and equipment can the assets be transferred? lawyers If you are unsure about hire purchase agreements and leases. what will be expected Is each of the contracts you have identified of you or don’t know Below are some tips for getting ready to sell: transferable to the buyer? Some contracts what to expect from the sale process, seek require the consent of a third party before advice from a professional who is experienced idenTiFy business AsseTs ThAT will a transfer can be effected. Most commonly in business sale transactions. Don’t be afraid Form pArT oF The sAle premises leases require the consent of the to ask your proposed advisor about their expe- landlord before an assignment can take place. rience, you want someone that specialises in Prepare a detailed list of your business assets, this type of transaction. including: If a statutory licence is required to operate your business, the licence may be personal to Presenting your business for sale profession- 1. Unencumbered Plant and Equipment you and not transferable, find this out early. ally and being able to supply information - items of plant, equipment, machinery, quickly will show potential buyers that you are furniture, fixtures and fittings that you conTrAcTs organised and will ultimately lead to a smooth own outright. These are also known as Prepare a copy of all of the contracts you have sale process. fixed assets which are used for carrying identified so that these are ready to be given on the business. to a buyer upon request. As a seller you need to be prepared to let 2. Stock – identify each item of stock by a buyer carry out a due diligence on your type. If there are contracts to be transferred to the business. Due diligence is the process where 3. Intellectual Property – registered and buyer your sale agreement will need to pro- the buyer undertakes a close examination of unregistered trade marks, copyright vide sufficient time to obtain the consent of all aspects of your business, not just financials materials, domains, business names, any third parties. but all things necessary to carry on your websites. business day to day. 4. Contracts – hire purchase agreements, Always bear in mind that it is in your best plant leases, premise lease, supply interest to clearly identify all of the contracts The easiest way to prepare yourself for this agreements, service agreements, host- required to carry on your business. Failing to process is to take a good look at your business ing agreements, customer agreements, do so could mean you are left with the burden from the buyer’s perspective. Prepare and third party rights to use intellectual of a contract which is of no use to you after implement a detailed plan of action to get property. settlement. your business ready for sale and due diligence: 5. Statutory Licences – many business • Identify business assets that will form require a statutory licence to operate, Addressing the above matters as soon as you part of the sale; for example if your business is a res- decide to sell will ensure that you are prepared • Identify all agreements that are taurant that serves alcohol the liquor for the process and being prepared usually required to carry on the business; licence will need to be transferred. results in a smooth handover at settlement. • Ensure that all legal documents relat- ing to the business are up to date; do you own each asset identified above? __________ • Make sure your financial records are Make sure that you own or have rights to This article was written by Rebecca Brookes, accurate and up to date; transfer the above assets. As an example: Associate & specialising in commercial law • Ascertain if your assets are transferable at Ffrench Commercial Lawyers. She can be and whether third party consents are Domain Names: A quick online search will contacted on (07) 5591 7555 or necessary. verify who the domain registrant is for your email: firstname.lastname@example.org www.linkbusiness.com.au business broker 21 FeATure Australian private companies show resilience through the storm KPMG Annual Private Companies Survey has shown that mid-sized Australian businesses are weathering the effects of the global financial crisis remarkably well but are battering down the hatches for the next year T he results indicate that despite to business. However private companies unnecessary expenditure and reduce staff suffering what is considered to seem to be prepared to act, with 90 percent costs, they remain remarkably positive. At be the biggest downturn since the of respondents claiming to be very well or the time this survey was undertaken, twenty- great depression, Australian private moderately well prepared to take advantage of six percent of businesses believed we have companies are not experiencing a credit led any opportunities during the downturn. already reached the bottom of the downturn recession. Instead they believe that consumer albeit with a tough twelve months ahead. sentiment is steering their fortunes in the Employment is often a lagging indicator Nearly half (46 percent) rated the medium term short term. Such findings certainly challenge of economic health and on this basis the prospects good or very good. A further forty- a common perception that the credit squeeze surveys’ findings are somewhat equivocal on three percent felt prospects in the next three is strangling Australian business. employment prospects. However issues of year period would be average, while eighty employment were high on the radar this year percent said the long term outlook (5 years Well over half (62 percent) of respondents have with questions on headcount introduced to and beyond) was good or very good. told us that the availability and cost of credit the survey for the first time. The majority of is having little or no impact on their activities. respondents (52 percent) reported a reduction Overall, Australian private companies have The drop in interest rates has provided only in employee headcount over the previous six maintained a tight ship in handling the minimal relief to private companies, with months as a direct result of the economic choppy waters of the past twelve months. rate cuts not being fully passed on to private climate. There will no doubt be market changes that company borrowers, although it was agreed result from the economic downturn – these that rate drops and the Government’s stimulus This years’ results confirm a trend in the are usually beneficial to the economy, though efforts had helped to maintain consumer importance that private companies place on can be challenging for those directly involved. demand. attracting suitably qualified employees. Private Yet Australian private companies are well companies are taking concerted action to equipped to come through the storm, and Many private company executives also avoid headcount reduction, using a range of take advantage of any opportunities that arise felt that if there was a credit crunch it was mechanisms to retain good staff. after the deluge. predominantly for the big end of town and that it was very much a sector related The survey showed common alternatives to problem, affecting property, construction and redundancies were requesting employees manufacturing hardest. take long service leave (27 percent) and annual leave (50 percent), along with reduced The results also suggest that many private working hours (20 percent). Nearly half of all companies entered the downturn with lower respondents (43 percent) had put a freeze on geared balance sheets compared to public salary increases. companies. One respondent claimed that banks were knocking on their door for the It is also interesting to note that despite the first time ever, though it seems that many downturn, a third of all respondents are still businesses are waiting to see how things play struggling to find appropriately skilled labour out before borrowing further. and many believe the skills shortage will return with a vengeance when the good times Forty-two percent of respondents had return. A skills shortage was reported across _______________________ PHOTO shuTTersTocK imAGes cancelled major projects or business expansion all industries but remained high in the mining, David van Herwaarde is a Partner with plans compared to fifteen percent in 2008, and manufacturing and utility sectors, showing KPMG’s Gold Coast practice. a further 57 percent deferred plans in the short that the traditional trade skills are still in short term. supply. This also shows that even in the worst For a copy of KPMG’s 2009 Private Companies of times, the need for skilled people remains. Survey, please visit www.kpmg.com Overall there appears to be a slowdown in While the results show private companies anything considered unnecessary or not core are taking appropriate measures to minimise 22 business broker www.linkbusiness.com.au linK How To Buy A Business Most people believe that buying a business is like Guy cooper, buying a house and while there are many similarities marketing director, linK the process is completely different. Buying a business is a major lifestyle change which can be fun, excit- sure that all of the information is correct and that this business ing, challenging and very rewarding providing you do it properly. is exactly what you want. You are only fully committed to the contract once all of the conditions of sale have been met. By The steps are simple and must be done in order: taking this step, you need to engage a Solicitor to advise you on the contract and complete the legal due diligence and your 1. see your finance broker or bank and find out how much money Accountant to complete financial due diligence. If you carry out you can borrow then add this to the cash you already have to due diligence before entering into a contract you may save on establish how much you can afford to invest in a business. While legal and accounting fees however, if someone else buys it in you may not want to spend all of this on a business you need to the meantime then you have effectively wasted your time. My know your maximum limit. advice, if you find something you believe is good and you like it 2. meet with your Accountant to tell them that you are looking to then buy it, as good businesses are always in demand and if you buy a business and ask them to review your structure (company, like it then you can be sure others do too. Also, to do a thorough partnership or trust & taxation set up). Advise them that when due diligence most sellers will only give out detailed financial you find the right business that they will be required for due information once they have entered in to a contract. diligence. 9. you have now entered in to a contract to purchase a business. 3. establish what sort of business that you would like to buy. How exciting! Make sure that you have a good solicitor that is What are your interests? What are you good at? What skills do experienced and understands business sale contracts as you need you have? Remember a business is a lifestyle change therefore your solicitor to guide you through the sale process and advise you must buy something that you are going to enjoy. you at each step, beginning with the contract to purchase. Your 4. Know your income requirements and financial needs. If you Accountant will ensure your structure is right and do a thorough need to earn $100,000 a year from a business to live comfortably financial due diligence. Your Solicitor will ensure that contract and meet your financial commitments then this forms part of deadlines are met for finance, due diligence and the receipt of your criteria. (Consult your Accountant or Finance Broker if you information as well as transfer of assets, intellectual property are unsure). and payment of encumbrances. When you buy a business legal 5. so you know how much you can afford, what would interest ownership is extremely important and requires the preparation you and your income requirements; now “start looking”. You and signing of a lot of necessary paperwork. need to learn what businesses that meet your criteria are worth. 9. The business stacks up, passes due diligence, meets your You need to speak to business brokers, get information on busi- criteria and you are moving on to settlement. Now you get nesses you see advertised and get to know what their real value very excited! You are one final step away from owning a business is. This will take time however, it is time well spent. and making a lifestyle change. For the most part your solicitor 6. be prepared as you may not get everything you want for the will prepare everything for settlement and instruct you on what price that you can afford. You may need to compromise which you need to do. You need to get your own house in order so that may mean prioritising your requirements or criteria. Like house you are prepared to commence running this business the day of hunting you never get exactly what you want however after you settlement. The seller usually stays on for 2 weeks tuition so there purchase and move in it becomes home. is no need to stress as you will be surprised how quick you learn 7. you have now looked at lots of businesses, spoke to many everything. business brokers and received advice from everyone includ- ing the cab driver and your daughters’ gym instructor. By There are no short cuts to buying the right business. Jumping any now if you are not totally confused or have given up you know of these steps will only cause you unnecessary stress, expense and exactly what you want, what it is worth and what is available. ultimately cost you more time. All through the buying process the 8. you find a business that you believe is right for you. Do you business broker is there to help you, chase up information and then at buy it right away or carry out due diligence before you buy? the contract stage manage the process so that everyone is happy and Neither answer is right or wrong. If you buy it first, that means a mutually beneficial outcome is achieved by all parties. You also have entering into a contract with the seller to purchase the business your Accountant and Solicitor to guide and advise you. and under the standard terms and conditions of sale of a business ____________________ you must have sufficient time to do due diligence. In doing so, Guy Cooper has been a successful Business Broker for over 15 years you have effectively taken the business off the market so that no and has helped 100’s of people buy businesses, improve their life- one else can buy it, while you complete your homework and be style and make money. www.linkbusiness.com.au business broker 23 leGAl perspecTive michael webb, partner, sp&G lawyers Franchising & Where Are We Now? Michael Webb looks at the importance of the Franchising Code T he Franchising Code of Conduct came into effect as a The Committee made eleven (11) recommendations which aim mandatory Code in July of 1998 pursuant to the Trade to raise the standard of conduct of franchising in Australia; these Practices Act, with its purpose to regulate the conduct of recommendations included the following: participants in franchising towards other participants. 1 that the Government investigate the benefits of developing The importance of the Franchising Code can be seen in a Court action a simple online registration system for Australian Franchisors commenced by a Franchisee in the case of Ketchell –v- Master Education requiring them on an annual basis to lodge a statement Services Pty Ltd. The issue in this case was whether or not a technical confirming the nature and extent of their franchising network breach of the Franchising Code rendered the Franchise Agreement and providing a guarantee that they are meeting their illegal and unenforceable. The particular requirement in the Code obligations under the Code and the Trade Practices Act; was that a Franchise Agreement could not be entered into until the Franchisee provided the Franchisor a written acknowledgement that 2 the inclusion of an obligation to act in good faith in relation to the Disclosure Document and the Code had been received, read and all aspects of the Franchise Agreement; had an opportunity to be understood. The Franchisor had failed to ensure the Franchisee had provided this document before entering the 3 that the Trade Practices Act be amended to include pecuniary Franchise Agreement. penalties for breaches of the Code. “ persons contemplating buying into a On the 21st of June 2009 the Minister for Innovation, Industry Science franchise can spend between 3 to 6 months and Research advised the next step in the consultative process is for investigating and undertaking research before any party wishing to provide comment on some or all of the issues obtaining business or legal advice ” raised by the Joint Committee they should to do so by the close of business 10 July 2009. Initially the New South Wales Court of Appeal held that a Court cannot enforce a Contract prohibited by Statute and concluded the relevant Whether any recommendations will be enacted in the Code when next breach rendered the whole Agreement illegal and void, thus making reviewed and amended is yet to be seen. the Agreement unenforceable. On appeal to the High Court, the decision of the Court of Appeal was reversed. The Court held it was Included within the submissions to the Committee, were issues not the intention of the Trade Practices Act to automatically make void relating to pre-contract enquiries. Through these submissions, it any Franchise Agreement where there had been a technical breach. appears that persons contemplating buying into a franchise can spend Although the Franchisor was successful in that case, Franchisors that do between three (3) to six (6) months investigating and undertaking not observe the strict provisions of the Code or do not retain evidence research before obtaining business or legal advice, and there was that they have done so, are in a potentially vulnerable position in the some discussion about whether courses should be conducted or made event of a dispute with a Franchisee. mandatory for Franchisees. Ultimately it was felt that the existing facilities through the Australian Competition Consumer Commission The Franchising Code of Conduct is constantly under review, the most PHOTO shuTTersTocK imAGes and its website for Franchisees to access and inform themselves recent amendment had affect from the 1st of March 2008, and within regarding the Franchising Code dispute resolution mechanisms and 3 months, on the 25th of June 2008 the Parliamentary Joint Committee compliance were adequate. on Corporations and Financial Services resolved to inquire into and report on the operation of the Franchising Code of Conduct, with it ________________________ tabling it’s report in December 2008. Article was written by Michael Webb, SP & G Lawyers , the Leaders in Property & Business Law (07) 5538 2277 24 business broker www.linkbusiness.com.au FrAnchisinG While Franchising is not for everyone, for many it has provided them with a lucrative income and quality lifestyle that is envied by a vast number of stand-alone businesses. Mark Mansour was a very successful The benefits are simple: and highly respected Franchisor of 1. A franchise is a system and usually a tested and tried 6. Banks seem to understand Franchises more than other UTK (Uncle Tony’s system that works. Franchise systems are documented businesses therefore making it easier to borrow funds Kebabs) up until and usually given to Franchisees in a simple easy to for the initial outlay. late 2007 when the understand format. 7. Most Franchisors have a strong and knowledgeable group was sold to Ali 2. Franchises usually take the risk out of opening your own support team to train, assist and troubleshoot for Babas’ Kebabs. Since business on your own which can often be very risky. Franchisees. this time he has 3. You know what you are getting into as the Franchisor 8. Franchisees share knowledge as you become part of a worked as a Business must provide you with disclosure documents and the family that supports one another. Analyst for NBS better ones are very transparent when granting you 9. A Franchise usually represents strong branding and has on the Gold Coast access to information and other Franchisees. established consumer confidence. preparing businesses 4. The Franchisor is there to support you and you have a 10. Most Franchisors are continually looking for better ways for sale, developing Franchise Agreement that binds them and you. to make their products and service their customers, exit strategies 5. The Franchise Council of Australia has also established of which Franchisees will ultimately benefit. Most and advising on a Code of Conduct which the better Franchises have will even do the testing at their expense so that the Franchise Systems. agreed to be bound to by way of membership. Franchisees only ever receive the benefits. Selling Your Business & Want a Higher Price? Done your numbers? Know what your business is worth? If you could prove it was worth more than your trading figures indicate, would a buyer pay more? Or decide more quickly? We can prove the real profit improvement potential of your business. After that, you may want to increase your price - or keep it yourself! To learn more about how we can help you put your business into the best possible condition to attract your top price, please go to: www.profitune.com/sellbiz Buying A Business & Want Higher Profits? Done your due diligence with LINK’s professionals? Found your dream business? Already have an idea of what it can do in your hands, based on its past numbers? Like to stack the odds of that success in your favour? We can accelerate you on your path, add certainty to the mix and ensure a greater margin of safety than if you were on your own. To learn more about how we help you achieve your business goals faster, safer and more certainly, please go to: www.profitune.com/newbiz linK How Do You Value A Business? By David Fitzgerald E veryone that owns a business or is I had listened to his point now it was my turn. broker that is actively and successfully selling looking to buy a business will need I asked my learned friend a simple question businesses in the market place. Also ensure to understand the answer to this “How much is a motor vehicle?” He thought that the business broker explains how they question. Eventually business owners about it for few seconds then asked “What sort arrived at that valuation and that you fully will need to sell their business and must be of motor vehicle?” I said a “Sedan that seats understand why your business is worth that satisfied that they received the price at which 5 people”. He preceded “What size engine?” amount. the business is worth. Buyers that invest in a I said “6 cylinders” he said “What make?” I business must be satisfied that the amount said “BMW”. He gave this some very serious In the United States they believe that valuing paid is fair market price and that they will be thought, for over a minute, and then decided a business and selling a business, for the able to get their investment back when they it was time for him to phone a friend. After purpose of putting it on the market for sale, sell and even make a profit. speaking to his car savvy friend he looked at are separate and specialist professions. You me and said “Did you know that there are over go to one firm for the valuation, then to the A very successful and clever Accountant friend 100 different prices for the vehicle that you business broker to get your business marketed of mine, whom is now retired, once said to me described if you take into account type, size, and sold. that there must be a simple formula for valuing model, interior and available extras”. I didn’t a business. He was adamant and insisted on know this, however I was not surprised. ULTIMATELY, the price of a business is arguing the point with me. I listened to him measured by return on investment and return intently as he put forward a strong argument Buying a business or buying a car there are on investment is measured by profit, risk, that businesses should be valued at increasing literally hundreds of variables that need to lifestyle and other variables. multiples the more profit they make. For be taken into account. My Accountant friend example if a business makes a net profit of conceded the argument and proceeded to In our next edition of Business Broker I will $100k pa then it should be valued at 1.5 times seek my opinion when valuing businesses explain the numerous variables that need net profit then if a business nets $200k pa it from that day forth. It still did not stop him to be taken into account when arriving at a should be valued at 2 times net profit. from grossly undervaluing a business when valuation of a business. I will also explain the ever he acted for the buyer or overvaluing a affect that these variables have on the value of Interesting concept and it would almost business if he worked for the seller. Needless a business. definitely simplify the whole valuation process. to say we had some great friendly arguments. In his Accountancy business he would value quite a few businesses each year however he I have told this story to help buyers and sellers would never be at the cold face selling them. understand that there is no magic formula I was valuing businesses, selling businesses or simple equation. Buyers need to spend ____________________ and working in an office with many successful time and educate themselves by speaking David Fitzgerald has valued and sold 100’s of Business Brokers that only valued and sold to business brokers, getting information on businesses and his advice is sought by many businesses. I knew all too well that there could businesses they see advertised and get to Accountants, Solicitors and successful business never be a simple formula due to the amount know what the real value of a business is. owners. of variables. Sellers need to get a valuation from a business 26 business broker www.linkbusiness.com.au linK Business opportunities Here is a selection of businesses LINK has for sale. For more business opportunities visit www.linkbusiness.com.au 28 South East Queensland PHOTO SUPPLIED & SHUTTERSTOCK IMAGES TM Phone (07) 5572 2122 www.linkbusiness.com.au 27 General Business TM Average Net Over 3 Years - $600,000 ld Established 22 years this exceptional 4 x 4 Accessories so Business is located on a main arterial road in Brisbane. Business is very active in the market and is run Under Thriving IT Business Management. Sales remain strong and growing. Good Net Profit $138,666pa lease available. • Very reputable IT Provider • Secure cash-flow Great opportunity for a new established over 20 years • Up-to-date new technology owner to build on a successful with strong systems in place solutions business model. • Experienced expert team of • Irreplaceable intellectual management and staff property, systems and • Enormous buying power infrastructure. • Specialised systems in place • Central booking system SET FOR MAJOR GROWTH! • Services a large number of Asking $1.8 Million + sav Blue Chip client base Asking $295,000 ref 10180 • Strong professional ref 10157 contact Tim Craft ecommerce site contact David Fitzgerald ph 0411 874 452 ph 0411 693 588 Cafe/Coffee Shop Furniture Repair & Manufacturer Recently refurbished coffee Husband/wife team can net 2008 - Net $79,417 The sale includes $50,000 shop located in a suburban $110K on current figures. Husband/wife team can net worth of Plant & Equipment. centre. Plenty of parking, over $100k Would suit a handyman! has ex coffee rights in centre. EASY TO OPERATE! Largest manufacturer & So call now Turnover growing rapidly. repairer of its type on the Gold to make it your business!!! Coast. They supply and repair Owner works 6 days a week - Asking $150,000 all forms and styles of PVC Asking $99,000 + sav no nights. Option to open on ref 10142 (poly) furniture. Factory has ref 10178 contact Peter Jackson contact Guy Cooper Sunday’s. ph 0418 986 991 low rent and can be relocated! ph 0431 227 644 Some images shown are for illustration purposes only and are not necessarily examples of the business’ products or services 28 www.linkbusiness.com.au Phone (07) 5572 2122 TM General Business Digital Printing & Design Manufacturer & Installation If you are into technology you • Wide range of clients - Expected Net 2008 - $200k plus will love this business! small to government entities This business was established peoples homes. coupled with a broad range in 1992 and is located at the • State-of-the-art of services Northern end of the Gold Major player in their segment digital printing business Excellent future Coast. of the market incorporating all aspects of growth potential There are two businesses, one Inspection is a Must! printing & file handling manufacturing canvas & vinyl • In-house production plus Asking $295,000 ref 10182 products in a well-equipped Asking $359,000 ref 10156 outsourcing factory and the other involves contact Peter Jackson contact Guy Cooper • Weekdays only 8:30am-5pm ph 0418 986 991 installing the product into ph 0431 227 644 IGA SUPERMARKET Net Profit $271,835pa Established 16 years by present supermarket is the anchor Copy Shop owners in busy Suburban tenant in this centre. GREAT Potential Centre. Supermarkets seldom come • stablished over 17 years - E • ood long lease and very G Turnover is strong and growing on the market - Owner selling 4 1/2 by current owner stable customer base every year. Solid Business due to other commitments. • Located in Burleigh on the • Owner wants to retire that can easily be run under Gold Coast management. • Producing $165K Net with Asking $435,000 + sav Asking $1,300,000 P & E valued at $250k ref 10150 Additional years on lease ref 10188 contact Tim Craft contact Peter Jackson • Owner works 5 days ph 0411 874 452 can be re-negotiated as this ph 0418 986 991 Some images shown are for illustration purposes only and are not necessarily examples of the business’ products or services Phone (07) 5572 2122 www.linkbusiness.com.au 29 General Business TM Huge Profits, - Fun Product! rAer cT Net Profit $233,435pa nT d after Owner’s Wage co un • Considered the #1 Outlet • Long established brand trading history - 13 years by current owner! • Extremely profitable products that basically sells itself and only relies on word-of-mouth, reputation Food Distribution and strong traffic flow Trades 5 days with two This business will continue to • Systemised & documented exclusive areas owned and run grow and will eventually need procedures Easy .......Fun....... under one business. more vehicles to keep up with • No industry knowledge and Exciting Business!! demand. required - experienced, Currently netting $200k for Little under $3 Million Turnover professional staff in place What more could you want? owner and is growing rapidly. Motivated vendor • New favourable lease in anxious to retire!! place Established staff structure • Great return on investment Asking $400,000 wiwo that includes one full-time Asking $620,000 ref 10176 salesman and two cold trucks ref 10134 contact David Fitzgerald contact Tim Craft ph 0411 693 588 with drivers. ph 0411 874 452 Manufacturing Food Manufacturer Aluminium fabricating This business would suit a This business is located on the • his is an ideal add-on or T business producing specific boilermaker especially if you Gold Coast and exports most stand alone business products for the scaffolding are keen to own your own of its production to very stable • & E valued at $693k and is P industry. Strong regular business! customers in the East. all in excellent condition clientele base and stable staff. • Average Net over 3 years is Call now!!! $150k and growing fast Owner is willing to stay on to Asking $495,000 • Budgeted to Net $175k in Asking $450,000 train. ref 10171 2010 as half the orders are ref TC8118 contact Peter Jackson contact Tim Craft ph 0418 986 991 already on hand. ph 0411 874 452 Some images shown are for illustration purposes only and are not necessarily examples of the business’ products or services 30 www.linkbusiness.com.au Phone (07) 5572 2122 TM General Business Great Concept, Huge Profits! Net Profit $245,822pa • Established 5 years with an exclusive territory and located in a prominent position on Brisbane’s Southside • Very strong growth and sales Fully Managed Brumby’s Franchise • Endless list of customers from all parts of Australia • Net this year $123,936pa If you have good customer • Easy automated systems • Fully managed & service skills and drive then • Staff in place GROWTH POTENTIAL experienced staff in place you need to seriously consider • Successful trading history IS ENORMOUS! • Northern NSW, only one in this opportunity. that will only get better as township - Very Busy the concept expands and • Best position in CBD awareness grows • Sales up on last year Asking $375,000 + sav Asking $350,000 ref 10141 ref 10148 contact Guy Cooper contact David Fitzgerald ph 0431 227 644 ph 0411 693 588 Distribution & Wholesale Net Profit $207,943pa This home-based business was Included as part of the P&E is a Simple Supply Business established in 1996 and can be Big Mack Truck (Prime Mover) Solid Growth Opportunities located anywhere in South East & a 40 foot Refrigerated Trailer or South West Queensland. Van; Total P&E value $141,300 • et Profit $158,790 pa N • o bad debts N • ong trading history L • Predominately Cash Business They transport small goods, This business is a dominant • reat Lifestyle! G milk, bread, fruit & vegies and player in the region. • ream Trading Hours D more. • ery relaxed customers & V Asking $235,000 + sav($90k approx) ref 10168 Asking $495,000 ref 10155 work environment Owner’s work minimal hours. contact David Fitzgerald contact Guy Cooper • Strong Growth ph 0411 693 588 ph 0431 227 644 Some images shown are for illustration purposes only and are not necessarily examples of the business’ products or services Phone (07) 5572 2122 www.linkbusiness.com.au 31 How much time can you spare to organise the sale of your business? Many people will consult a professional doctor when they are sick, a licensed motor mechanic to fix their car; yet one of the biggest decisions that involves a sale of a business ........ many go it alone. Given the time and complexities involved, you have to wonder why? Well, look no further then the professionals at LINK. We can help you manage the sale of your For a confidential business in a carefully planned way. appraisal of your business Our business brokers have a combined experience of over 50 years and we can assist call: (07) 5572 2122 by providing impartial advice on how to manage the sale of your business in a planned, orderly manner ensuring that confidentiality is maintained, uncertainty avoided and the best price is achieved in the shortest time. TM Furthermore, LINK has a large database of www.linkbusiness.com.au buyers seeking businesses which can often help accelerate the sale process.
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