Business Advice

If you could sit down with some of the most successful people in business and learn all the lessons of success that they had taken a lifetime to gather. Do you think that would help you to be more successful   What if you could sit down with one hundred of the most successful people who ever lived and learnt their rules, their lessons and their secrets of success? Would that help you be more successful in your life? What if you could sit down over time with more than a thousand highly successful men and women? How about two or three thousand?   Action is Everything   You probably answered spending time with these extremely successful people and learning what they learned to achieve their goals would be a great help to you. The truth is, all this advice and input would do you no good at all unless you took some specific action on what you’ve learned.   If learning about success was all it took to do great things with your life, then your success would be guaranteed. The book stores are full of self-help books, each one loaded with ideas to make you more successful. The fact is however, that all the best advice in the world will only help you if you motivate yourself to take persistent and continuous action in the direction of your goals until you succeed.   The probable result of reading this article has been that you have made some specific decisions about what you’re going to do more of and what you’re going to do less of.    You have set certain goals for yourself in different areas of your life, and you’ve made resolutions that you’re determined to follow through on. The most important question for you now is simply. Will you do what you have resolved to do?   Self-discipline is the Core Quality   The single most important quality for success is self-discipline. Self-discipline means you have the ability within yourself, based on your strength of character and willpower, to do what you should do, when you should do it, whether you feel like it or not.   Character is the ability to follow through after the enthusiasm with which the resolution was made has passed. It’s not what you learn that’s decisive for your future. It’s whether you can apply discipline to yourself to pay the price over and over again until you finally get a result.   You need self-discipline to set your goals and make plans for their accomplishment. You need self-discipline to continually revise and up-grade your plans with new information. You need self-discipline to use your time well and to always concentrate on the one most important task you need to do at this moment.    You need self-discipline to invest in yourself every day, to build yourself up personally and professionally, to learn what you need to learn so as to enjoy the success of which you’re capable.   You need self-discipline to delay gratification, to save your money and organise your finances so you can achieve financial independence during your working lifetime. You need self-discipline to keep your thoughts on your goals and dreams and keep them off your doubts and fears.    You need self-discipline to respond positively and constructively in the face of difficulty.   Persistence Is Self-Discipline in Action   Perhaps the most important demonstration of self-discipline is your level of persistence when the going gets tough. Persistence is self-disciple in action. Persistence is the true measure of individual human character. You persistence is the real measure of your belief in yourself and your ability to succeed.   Each time you persist in the face of adversity and disappointment, you build the habit of persistence. You build pride, power and self-esteem into your character and personality. You become stronger and more resolute. You deepen your levels of self-discipline and personal strength. You develop in yourself the quality of success, the one quality that will carry you forward and over any obstacle.   The Two Essential Qualities   Orison Swett Marden says in his book that “there are two essential requirements for success.    “The first is to get to it, and the second is to stick at it.”   Confucius said, more than four thousand years ago, “Our greatest glory is not in never falling, but rising every time we fall.”   James J. Corbett, one of the first heavyweight boxing champions said “You become a champion by fighting one more round. When things get tough, you fight one more round.”    Yogi Berri the great American baseballer said “It ain`t over till it’s over.” And that it’s never over as long as you continue to persist.   Elbert Hubbard wrote, “There is no failure except in no longer trying. There is no defeat except from within, no really insurmountable barrier save our own inherent weakness of purpose.”   Vince Lombardi said, “It’s not whether you get knocked down. It’s whether you get up again.”   All these successful people have learned how critical the quality of persistence is in achieving greater goals and objectives. Successful men and women are hallmarked by their incredible persistence, their refusal to quit, no matter the circumstances.   The one quality that absolutely guarantees success in business and finance is this indomitable will power and the willingness to stick with it when everything in you wants to stop and rest, or go back and do something else.   Perhaps your greatest asset is simply your ability to keep at it longer than anyone else.   For further info call Bob Lyon on 043 883 0937.

The fundamental principles of selling a business are the same as selling anything, including whatever the business sells. The best businesses have a sales system and documented processes. They also sell on value rather than hourly rates or other ‘per widget’ metrics. But most business owners have either never sold a business or only very rarely. It comes as no surprise then that many will achieve a lower sales price than the business is potentially worth, because they start doing things differently to what has made them successful in the first place.   Paul Lange founder of “The Hedonist Entrepreneur Initiative” has bought and sold many businesses over his more than thirty year career as part of the private equity and venture capital industry. Lange says that “Higher sale prices can be achieved by selling the sizzle of the business and not just the the crunchable data; it’s not rocket science. You start the process by positioning the business in a Sale Deck, very much like a Pitch Deck when seeking investment.” He adds, “When we invest in a business we’re always planning for the exit from the start, usually before the ink is dry on the share certificates. The majority of our exits are via a strategic sale. We rarely go IPO. Our way of building an asset we acquire toward an exit includes acquiring and assimilating one or more other businesses before we go for the ‘big sell’. When we do, we lead with the Sale Deck every time.” Although there is no magic formula for success and maximising the sales price of a business for sale, Lange suggests there are three fundamental steps you can follow to increase your chances of a better return on your time, money and other resources invested in growing your business to the point of a sale. These are: 1. Position the business as valuable asset Investors and high net worth people buy assets. An asset works for you and gives you a return. Whether your prospect knows it or not they want to buy an asset.  They don’t want to buy a job. Buying the business from you is attached to many personal aspirations that are unique to each purchaser. An asset will help the purchaser achieve these. A job won’t. 2. Have a system for selling the business Building a successful and scalable business requires systems. Having documented systems and processes for running the business can help achieve a better return when you come to sell and exit. Sales systems and processes focus on presenting the value of the offering and eliminating possible objections, by addressing them and closing doors on them, as you step through the process. Sales systems are always selling the next step in the process. When selling a business, you need a system to present value, close doors on objections and sell the next step. 3. Approach the sales process psychologically more than logically Selling a business like selling anything requires describing the item for sale. However only presenting the logical and analytical facts of the business for sale is like selling based on features and benefits instead of value. When you present value in terms that the purchaser gets, you connect them with their emotions; their aspirations and all of the reasons why they want to buy a business. Selling a business won’t be achieved on emotional responses alone, but presenting the value in terms the purchaser gets and supporting it with the cold hard facts for them to consider goes further than the facts alone. When you have a business for sale, the Sale Deck showcases the business and the value in a concise and compelling way, and sells the prospect on taking the next step. It avoids providing information that is overkill in the beginning. If a potential buyer wants more information, make sure there is just enough in the addendum information, or dataroom, you provide with the Sale Deck. The full documentation can be offered up later for full due diligence to occur. Lange says, “When we acquire a company to roll into an existing investment, we mostly receive these large business for sale documents that describe the facts of business in great detail and provide reams of financial data for the analytically minded to paw over; and that’s it! No warm up? Just wham bam! There’s nothing wrong with having complete data available for presentation in your dataroom, but making that your opening move, with a prospect, is like spewing your life story over a partner within the first few minutes of a first date.” He goes on to say, “A good Sale Deck will have no more than 18 slides and they have to be in a specific order.  The order needs to be such that each slide builds psychologically, not logically, on the previous slide. I know that sounds weird for traditional thinking about business for sale documents, but selling is psychology. Don’t have more than 18 slides. You can have less than 18 so long as you have them in the right order. We prefer 18 when we’re selling a business; it’s just a magic number we’ve found works really well for us.” If you’re thinking of selling your business, consider the possibility of creating a Sale Deck in addition to the traditional more complete documentation, and make it part of your system for selling your business. Use the Sale Deck as the initial touch point with potential buyers to present your business as a valuable asset. Layer the information you present in the Sale Deck and in your overall process using a psychological approach supported by logic. For more information on the how to create a compelling Sale Deck using a formula that has been tried and tested, visit www.hedonistentrepreneur.com/businessforsale

Selling your business can be stressful, but it’s also the chance to move onto new ventures. This process involves considering what you want the future of the business to look like, what assets you want to sell, and the taxes you may be liable for. Regardless of how you choose to sell your business, make sure you follow these 3 steps when searching for the right purchaser. 1. The future of your business and employees Selling your business inevitably means that any current employees you have will be affected. Further, you will have to decide whether you want to maintain a connection to your business or completely sever ties. Once you have decided to sell your business, it’s important to let your employees know that a change in ownership will be taking place. If the new owner plans on retaining the employees, this notice will help maintain the status quo and current culture.  Conversely, not informing your employees of a change in ownership can lead to disenfranchised staff. If the employees are being retained for their skills and knowledge of the business, it’s important that you also undertake a proper handover of your business to the new owner.   If you want to maintain an interest in your business, there are also arrangements where you can maintain an interest in your business. For example, an earnout arrangement means that you can receive additional income based on the performance of the business after you have sold it. If you want to ensure that your business is carried on according to your wishes, a buy or sell agreement will protect your interests. 2. Purchaser and seller taxes Over time businesses gather assets such as cars, machinery and office equipment. When you transfer or sell a business it’s important to remember that you may have to pay GST on upon the sale of these assets.  The other tax to consider is Capital Gains Tax (CGT). If the business was classified as a small business you may be able to apply for CTG exemptions. There are also exemptions if the business is being sold upon retirement, or if a CGT asset has been held for 15 years or more.  Furthermore, there are specific tax issues such as superannuation and PAYG Withholding that may arise upon the sale of your business. This also includes retained earnings and if they need to be paid out as dividends to shareholders before the sale.  You also need to take debts into account depending on whether the business still has any. This will not only relate to transferring debt but will also likely impact the marketability of your business when you sell. 3. Hosting and selling Being prepared and on top of everything is very attractive for buyers. You may find that a potential buyer approaches you and asks for employee contracts, financial records and sales records. Therefore, you need to be ready. The more organised you are, the more likely it is that you will secure a deal.  When you are hosting and advertising your business, transparency is always encouraged. Highlight the things that would be important to a buyer. This includes records such as turnover, the state of equipment and even potential competition. Ultimately, it’s about the purchaser as they are the one handing over money. A business sale lawyer can help you ensure that you provide all the required information to any potential purchasers of your business.  Conclusion When selling your business, it’s important to be realistic, organised and ready. Set the value of your business at a realistic price and you will find a buyer. Have an organised collection of financial and sale records and you can speed up the sale process. Finally, be ready to deal with issues around culture, your business’s legacy, the future of current employees, and taxes.   About us:LawPath is Australia’s leading provider of online legal services for businesses and individuals, providing technology powered legal solutions at a fraction of the time, cost and complexity of the traditional system.

Being successful in securing equity investment from private investors is about more than just the nature of the deal, the team, the financial viability, and the supporting market data. You also need to understand the mindset of investors because it should influence everything you do to present your deal in the best possible light. For the last thirty years, Paul Lange, founder of The Hedonist Entrepreneur, Exit Strategist and Investor has created, operated and exited businesses, raised investment for his businesses, connected businesses to investors and invested in ventures himself, both in Australia and internationally. In his experience, the bottom line for securing investors is that you need a lot of common sense, some good timing and most importantly, you need to keep it real. Lange believes there are five steps to securing equity investment for any business. These include: Step 1: Understand who you are pitching to An investor uses their capital or leverages their assets to grow wealth by using the work and effort of others. This means an investor wants their money working for them, instead of them working for their money. They take an informed decision to put their money at risk for a limited period, after which they want it back to reinvest elsewhere. Show them how your proposal will make them money, how the risk is balanced, how they will receive their capital back and the upside for backing you. Step 2: Put yourself in the investor’s shoes When people sell to you, you are most likely to buy if you feel like they understand you and see the world from your perspective. The same applies to securing investment. You have to understand the investor’s mindset by putting yourself in their shoes. Most investors will have some core thing that is important to them and they may focus on opportunities from various industries that satisfy that. If you can identify what is core to a specific investor you will have a better idea of your chances of success, and may be able to structure the offer to suit both the venture and the investor’s interests. Step 3: Get the value right Put a hundred accountants, wealth management advisors, business brokers and other financial services professionals in a room and you’ll hear a hundred different opinions and variations on how to value a business. There is no one solid way to value a company. One party will use one rule to justify their ridiculous asking price and the other will use another to justify their low-ball offer. When you say to an investor you are offering 20% of the equity for one million, you are suggesting that the company has a value of five million, right now. No matter how you choose to value it, your company is only worth today what someone is prepared to pay for it today, or for the piece of it that you negotiate to sell to them. Step 4: Check your list before you go to an investor Do you have the information that’s needed? Whilst there are always common elements to due diligence processes, the contents of due diligence lists vary from one investor to the next, the industry being targeted, and the type and size of investment sought. You will almost always find headings such as compliance, corporate structure (legal and capital structure], material contracts and agreements, financial data, management and employees, markets and competition, products and production, assets (property and non-property], information systems, intellectual property, tax status, litigation, environment, health and safety, regulatory compliance, joint venture agreements, channel partners, and insurance. Other items that were once scarce or at best less common and are starting to gain attention are social responsibility, giving, and performance and talent leadership. If you are not prepared and able to answer these questions, don't start until you can answer them or you have a plan to be able to. Step 5: How to speak to investors If you’ve made it into the room it says something about the value of your proposition to the investor. An investor’s most valuable asset is their time, so do not cause them to waste it. Know your stuff, be clear and articulate. Practice your pitch, identify as many questions and objections that you and your team can think of, and then document and practice your responses. Then practice again until you don't make mistakes. Step 6: Keep it real If you’re upset or disoriented that the title of this article says 5 steps and this is number 6, you’re probably not ready to pitch to an investor. Alternatively you could just see this as a bonus insight. When you start to adopt the mindset of an investor and think like they do you will look at your opportunity differently. As the late Dr. Wayne Dyer said often “If you change the way you look at things, the things you look at change.” Know the extent of your own capabilities and be honest about them. Find people who complement them and build a killer team that gives investors the confidence that you can pull off what you propose. For more information about equity raising go to www.hedonistentrepreneur.com

Business plans are not a new concept, most of us have seen them and have a fair (if theoretical) idea of their value. Despite a lot of interest from business owners who seem enthusiastic, what I have seen over the last 15 years is a long way from that enthusiasm. My estimate is that less than five percent ever had a business plan. Gurus and experts love to spruik all sorts of doomsday outcomes from not having a business plan, but business plan / business failure are not the only two, mutually exclusive outcomes. This ridiculous line actually undermines the value of business planning as those who would benefit simply tune out, as they don’t think they’re about to fail. In reality, there is a continuum of outcomes for businesses with and without plans; most small businesses don’t do any kind of planning and haven’t failed. If avoiding failure is not the pinnacle of business planning, what is the point? To me the whole point is about improving the outcome from what would otherwise be done without any kind of planning. Sometimes that means saving the business from oblivion, but not often. Usually, it means making more money, a clearer direction, better engagement, and doing less dumb things. Businesses are very high risk, yet “seeing what happens” is the most common approach. Getting out of operational mode for a short time to decide where you want your business to go gives clarity and certainty for the whole team when they are in-the-trenches every day. Analysing the business also uncovers a lot of problems that business owners may or may not know about: low margins, poor marketing, failing strategy. It’s like looking in the mirror that forces the owner to address reality. A common misconception about business plans is that it’s all about the business plan and the total focus is on creating a polished document. But the real value of a business plan is the process that goes into creating it – the document creates a record of the analysis and the decisions made. We spend 2 to 4 weeks analysing the business, researching the market, creating projections and targets, reviewing the strategy, understanding pricing and margins, understanding the business owner, marketing and human resources. We take the business apart and put it back together again. Outcomes we have seen at The Business Plan Company include a plumbing company that cut out half of their non-profitable business, a pest company that learnt to deal with seasonality, a kitchen company that stopped wasting many thousands on advertising and a consulting company that eliminated bad debts. Even for business owners who have been in business a long time, we challenge the way they think about their business. Most small businesses don’t do business planning; it’s not useful, it’s too hard, too expensive, they don’t need it or even don’t understand it. From what we have seen, a short, sharp, action-oriented business plan can unleash enormous value in a business. If an effective business plan generates more than $2,000 extra profit than not having a plan, why wouldn't you invest that to get the professional help to create one? From the businesses that we have worked with, they generate that value with their eyes closed. For More Information: Warren HarmerEmail: [email protected]: 1300 171 534Website: www.businessplancompany.com.au

  Many small and medium sized businesses experience regular cashflow problems. It is more common than you may think and it becomes a balancing act, or a poorly choreographed juggling attempt. A clear head is the number one ingredient, not yours, your thinking is hampered by stress. You need someone that offers substantial business experience and sound advice. Don’t look at the usual suspects for support. No job can match the business experience you gain in the insolvency sector. Financial Crisis is what we deal with and learn from with every new case. As an insolvency consultant, I see first-hand what can go wrong. I also often get to learn what would have made a difference, but by now it is too late. This is frustrating, knowing so much of financial pain could be eased or avoided altogether. Not all insolvency consultants focus on helping clients avoid insolvency. A1 Debt Assistance does, as I lost my chain of retail stores during the Keating recession. I now help others avoid my mistakes. You need to expand your horizons.  There are a multitude of reasons for your business to experience challenges. Often these are not obvious until the business undergoes a due diligence process. Don’t have your first due diligence as part of the sale of your business. This is likely to turn into the purchaser being able to walk away from the deal. Run your own check, or get help. Address the issues and establish which ones you can fix and which ones you can’t fix. How would this situation look under a new ownership? Can we turn weakness into strength? Is it your personal debt that is dragging down the business? There are solutions and under some circumstances you may be able to go bankrupt and still operate your business. Freeing up cashflow. Be honest when you sell After losing my small chain of 5 retail stores, I ended up in Commercial Real Estate – selling businesses. I was shocked when going through the listings. Many business listings, with substantial asking prices had no more than junk value. The prices reflect the owners financial needs to get out, not the value of the business. Don’t let your business become such a listing. I started to help struggling business owners who had nothing to sell, to turn things around and stay in business or finally be able to sell. Buyers need to know if it’s a basket case and the asking price needs to reflect this. This does not stop you from selling, it stops you from cheating. Don’t ruin someone else in the process. The No-Go zone. Basket Case and over-priced.  The figures must stack up so the buyer can borrow against the business.  A cash buyer is rare. Whenever it seems’ a buyer is ready, the accountant or the bank manager will pull the plug. Due diligence is there for a reason. I never understood why agents would even run with shonky listings. Fix them first and you actually have something to sell. What are your options?  At A1 Debt Assistance we receive calls from business owners ready to enter into some form of insolvency. Often, we help them avoid this. We approach it similar to a due diligence process. Our motivation is to detect the main culprit causing your business problems and develop remedies. A purchaser does not have the same overheads than the current seller. This relates to existing car loans, business loans, over drafts etc – all such figures are called add backs. Running through this process will tell you if you have a business that could be viable to a particular purchaser. It also will determine your asking price. For tax reasons we are encouraged to make business purchases on finance and use the finance costs as write downs. Unfortunately, when the turn over drops, your repayments remain. The tax saving is now killing your business. There are insolvency options that may actually help you, whilst still being able to keep your business. How does this help you to sell your business? People generalise things and overlook the detail. To establish your best sales options for a difficult business, get someone that has the skill to look at the detail. Numbers tell a story, they don’t just add up. Get professional help to decipher the story for your business. Different buyers have different reasons to purchase a business.  Your business may have major flaws, but someone does put value to certain parts. This could be your data base, or a contract that is not viable under your structure. It could well be managed effectively by a larger player. Your store could be in an ideal location, just not for your type of business. Sell the lease to the right business or chain. Once you understand the true selling points, you get a better understanding of who the likely buyer is. Don’t let them know they are your last hope! Now you can create your hit list of targeted buyers. You have approached a competitor and they are interested. Trust me, they will find out how tough it is for you. Their approach will likely be the waiting game. They are not paying, they just wait for you to close the doors and they are on the phone to the landlord – taking over your goodwill for nothing. Why advertising the sale of your business is so important? To avoid the above scenario. Your buyer should fear they could miss out. You could be dealing with multiple buyers. This will give you a much greater chance to sell your business and get the best possible price under the circumstances. Create the balance of supply and demand.   If you need help with your business – feel free to contact me via email [email protected] or visit my website www.a1debtassistance.com.au.

Although bank interest rates are at record lows in Australia, many potential franchisees still can’t raise the finance to acquire a franchise and are increasingly turning to non-bank lenders, particularly their parents and family members. The Franchise Advisory Centre estimates around 10% of new franchisees are now funded or underwritten by family finance, which it terms the Bank of Mum and Dad (BOMAD). BOMAD financing is very different from traditional bank lending. Banks will methodically and unemotionally evaluate a loan application, and will ultimately price their risk based on the security offered by the borrower, and their capacity to service the loan. The security requirement will normally boil down to bricks-and-mortar real estate (usually the borrower’s home], and the servicing requirement will be assessed on the business’ capacity to generate enough cash to repay the loan and meet all its other obligations (as well as pay a reasonable rate of return to the operator). BOMAD financing on the other hand, is often based on emotional, rather than purely financial considerations. If the Bank of Mum and Dad underwrites a loan provided by a bank by giving personal guarantees, or putting their house up for security, they bear secondary risk if the franchise goes bad and the loan is not repaid. However, if the Bank of Mum and Dad is the loan provider themselves, they bear the primary risk if the loan goes bad, which can have a flow-on effect to the relationship between the family members involved. There are a number of advantages and disadvantages of BOMAD financing for franchisors and franchisees. Here are a few: Advantages for franchisors: Access to younger, potentially more talented candidates With Baby Boomers approaching retirement age, more and more franchisees are coming from the ranks of Generation X and Generation Y. Generation X are often mortgaged to the hilt due to the rising property market, so have some real estate equity for security, but often not enough to buy a business. On the other hand, Generation Y can’t afford to enter the property market, so rarely have any real estate equity to offer. However both of these generations bring youth and vigour to franchising and are desirable candidates for franchisors. BOMAD financing may be the only way they can afford to get into business for themselves. Disadvantages for franchisors: The loan is not treated as seriously as bank finance A franchisee risks all manner of adverse consequences if they miss repayments or default on a bank loan. These consequences are often absent for a BOMAD loan, which may not even be documented with a loan agreement between the parties. Therefore if the cost of failure to a franchisee is low, their drive to succeed may also be low. This is not a strong recipe for success and if the franchisee loses money, they may simply treat it as an advance on their inheritance, which might upset the family dynamics for a bit, but is often nowhere near as severe as what will happen if a bank doesn’t get repaid. Mum and Dad might end up running the business If the business underperforms badly, the franchisee’s parents may become so concerned about their investment that they step in to influence the operation of the business, or are forced to take control altogether. This form of reverse inheritance (ie. the kids passing something to their parents) is a nightmare for franchisors, and even though it might be a breach of the franchise agreement, may be tolerated in preference to shutting down the outlet altogether. The parents who end up running the business might never have attended franchise training, or fully understand the operations and culture of the business. Often for the franchisor, this makes a bad situation worse. Advantages for franchisees: Potentially easier access to finance on more favourable terms Borrowing from the Bank of Mum and Dad may not require any securitisation, and may involve other more favourable terms (such as a lower rate of interest) compared to a bank loan. This can make life a lot easier for the franchisee, so long as they treat the loan seriously, which means at the very least they should still prepare a business plan and agree to minimum repayments over a set timeframe just the same as they would need to for a bank. Plus, Mum and Dad as proud (and invested parents) will always be more supportive and interested in the franchisee’s success than a bank. Disadvantages for franchisees: Interfering parents Just as Mum and Dad are proud of their child’s achievements in business (with their money], so too will they offer unsolicited advice, guidance and other assistance that may be counter to the franchisee’s training or intuition, and be far less helpful than intended. Often this unsolicited support will be an unhelpful distraction to the smooth operation of the business, and at other times, it will be extremely useful. The key for the franchisee is to take the rough with the smooth, filter appropriately, and understand that all help offered by parents is generally made with the best of intentions. Lack of proper documentation BOMAD loans are often undocumented, meaning they are not written down but are loosely based on a handshake or mutual understanding. If they are written down anywhere, they are rarely anywhere near the standard required for a bank loan. To eliminate the opportunity for future family arguments over money, BOMAD loans need to be documented via a formal loan agreement between the borrower and lender, indicating the principal to be lent, the term of the loan, the rate of interest to apply, and the consequences of default. Additionally, the parents should amend their wills to acknowledge the loan as an asset of their estate, and outline whether the loan should be offset against any other inheritance due to the child in the event of their passing.  This helps reduce the potential for ugly disputes between siblings when dealing with their parents’ estate, or the risk of an executor calling-in the loan to settle the affairs of the estate. A franchisor would be wise to ensure that any BOMAD-financed franchisee has a proper loan agreement. It may even make it a condition of granting the franchise that it be provided with a copy of the loan agreement to ensure that the franchisee is committed to repaying the loan and that the conditions of the loan are consistent with those of the franchise. The bottom line This is not an exhaustive list of the pros and cons of BOMAD financing, however it does highlight some key considerations for both franchisees and franchisors. BOMAD financing is expected to grow in future and those franchisors who learn how to embrace it whilst managing its associated risks wiill potentially accelerate their growth compared to those who don’t. Jason Gehrke is the director of the Franchise Advisory Centre and has been involved in franchising for more than 25 years at franchisee, franchisor and advisor level.

With time becoming an increasingly scarce commodity, employees are now placing greater value on their own personal time. For businesses to prosper, employers need to pay great attention to employee conditions and remuneration. Flexible working arrangements allow a greater choice of ways for employees to access the necessary time to complete their tasks. This shows that the employer is respecting the value and importance of the employees’ time and life away from work. The most common arrangements to improve work flexibility are job sharing, working some days at home, rostered days off, and making up any time off on other days. The key part of the arrangement is that it must be conditional upon the employee reaching agreed Key Performance Indicators (KPIs) and other performance targets. That way, everyone is better off. Flexible working arrangements are a low-cost exercise that produces a small but long-term return for the employer. Training to improve an employees’ physical and emotional wellbeing increases the employees’ capacity to perform and adapt. Here are some tips for employers to improve employees’ work life balance: Ask your employees what support they would like from you to help their work life balance. Adopt  healthy  eating  and  drinking practices during working hours and business lunches. Be honest, caring, knowledgeable and inspirational. These leadership traits reduce employee work stress and reduce sick leave. Provide ongoing learning and safety sessions that cover a wide variety of topics including work-life balance. Provide  your  employees with opportunities  to participate in physical activity. Walk your talk. Be the example of good health and a healthy life balance. Creating more flexible working conditions gives your employees greater choice on how to use their time by improving their capacity to do more with their working time, enhancing productivity benefits and leading to a healthier balance sheet for the firm. For further information contact Paul St. Clair on 02 9221 4088.

Have you started to eat lunch or have a snack during a busy day when you get interrupted? Have you ever taken a couple of bites from of an apple and have to put it down to take care of something? The problem is when you come back, your apple has started to turn brown and just doesn`t look as appetizing as it did. The same thing can happen to your labour margin. If you “put it down” or don`t pay attention, you`ll find your labour margin going bad and just doesn`t look as good on your bottom line. A complete understanding of what affects your labour margin – and how to hold 60% margin fully loaded with benefits - is essential to maintaining a profitable business. One of the major contributors to a declining labour margin is your payroll when compared to your labour rate. Labour is a commodity that you buy and sell, much like your product inventory. The major difference is that, like the apple, labour margins go bad constantly. Labour is perishable; you purchase it for a short period of time and when the time is up, you have to re-buy it. One of the problems is like our big juicy apple, top staff don't \"grow on trees,\" so when that talented person comes along, we have a hard time not bringing them on board. The only problem is that the big juicy apple comes with a big juicy price - and rightfully so, given their skills and talent. But do we need them and can our labour rate support them and still give the business the profit that it needs to make? Many owners need some help keeping things in line - a good accountant who understands the business sector or some type of professional coaching, for example. It helps prevent the tunnel vision that occurs when running a busy business. Analysing the Situation We need to look at our labour rate and see whether it has the ability to support the staff that we have and still give the business the return it needs. A Labour Rate Analysis is a simple way to check on your more expensive employees and see whether your labour rate can support them. Take your most expensive staff member’s flat rate (or their hourly pay, if that is your pay system], then add to their pay for that one hour the additional costs involved in having the person there. You have to keep in mind that they cost you more, sometimes much more, than just their basic pay. ake into consideration payroll tax, superannuation, work cover, unemployment insurance, any health insurance, vacation time, sick pay, uniforms, etc. Take all these factors and add them to the hourly rate for the one hour. This gives you the actual cost involved for that big juicy apple. Now, remembering that this labour is something we buy so we must sell it to make a profit, we take the total that we have come up with and multiply it by 2.5 to give us a 60 percent margin on that person's labour. The number that you come up with should be at or lower than your current labour rate. If not, then you either need to raise your labour rate or you may not be able to afford that apple. Shopping the competition will let us know whether we are charging a competitive price for our labour. If we are lower than those around us, we can raise our rate and that may help, but if we have a labour rate at or above the competition and the magic number that we found at the end of the exercise is higher than our current labour rate, guess what: You can't afford the big, juicy apple that you have! Remember, we divided the expenses by the amount of time the person is standing on the floor. So if they are billing out less hours than they are on the floor, this will increase your actual cost per hour. The majority of businesses I consult with are making a 60 percent profit on the first hour, but by the time they calculate their profits on the 40th hour, they are making only a 15 percent profit margin. This is where most owners are getting hurt. Many of our clients have a labour rate that is higher than the competition and their business is thriving. The reason for this is their clients are willing to pay more because they trust them completely and like the experience of visiting their establishment. Be careful attempting this strategy, however, unless you have done an extensive customer satisfaction survey and satisfied yourself of your customer approval rate. Selling the right mix of products and labour will help. Making sure that you have your maintenance items priced properly and giving good margins. Another guideline is to watch your team and make sure you have the right staff for the job. The expensive \"A\" technician is offset by your lower-level technicians who make less but are able to perform maintenance items. Keeping your less expensive technicians productive will help your labour margin, plus you are building for the future. Having the right mix of high to lower skill-level technicians is a huge key to maintaining the 60 percent profit on labour. How do we know if we have the right mix? Too many times, owners/managers just go with what they think \"feels\" right. Instead of guessing, try this exercise: Take all the invoices for a certain time period - the longer, the better. Break them down into piles based on what level of skill was needed to perform the task that that task. Then count up the number of labour hours on the invoices for each function. This will give you a good guide on what type of staffing you need, compared to what you have. Remember that the big juicy apple looks good, but once the day has started and you’ve just taken a big bite. Make sure the last bite of the day tastes as good as the first. For further information on how your business can benefit from these and other exciting business and marketing tactics call Bob Lyon direct on 043 883 0937 or get your FREE report entitled “How To Sell Your Business At Your Price … And Cause A Stampede Of Prospective Buyers Literally Begging For Your Time” by simply going to  www.betterbusinessreport.com/ab4s1.htm  

While more people are taking up franchising as a way to buy a job, a communications expert is warning franchisors to think carefully about who they sell a franchise to, rather than focussing on simply selling a licence to anyone keen to buy it. Mike Irving of Advanced Business Abilities says some franchisees lack the right personality profile and disposition to make their franchise a success, which is why there is such a high churn rate in the industry. It’s estimated the number of franchises who sell up because it’s not working out as they hoped is between 11 and 18 per cent according to an industry survey in 2015. “Franchisors often have the mindset that they are in the business of selling franchises, thinking that the more they sell the better off they are.  However, my observation and the statistics of what’s happening in that industry indicate to me that they would be wise to take a more analytical approach to who they’re selling to; focusing more on the longevity of the enterprise rather than simply the sale of another franchise,” said Mr Irving. “A successful franchisee is someone who is trustworthy, has high integrity and is keen to support the franchisor – they are intrapreneurial rather than entrepreneurial,” he said. “This means they are willing to do work within the system of the business to make it a success, rather than charging off in a new direction for their own gain, which often ends in failure.” “Successful franchisees are those who see the opportunity as a way of leveraging the established system of the franchise but will ultimately take full responsibility for growing the business.” “Unfortunately, some franchisees can be bullish but then blame the franchisor when things don’t go as planned.” “A successful franchise has a track record of success due to the personality and skills of the franchisor, so it would be a mistake to think their success can be replicated by someone who lacks the right kind of personality and attitude.” There are 79,000 franchise units in Australia and that figure is growing. Nearly half a million Australians are employed directly in franchising and the annual sales turnover for the country’s entire franchising sector is estimated at $144 billion. “Buying a franchise can be a safe path to having your own business because it is a proven system but it’s up to the franchisee to build on sales, know their competition and build relationships with customers and staff.” Mr Irving offers the following advice for those thinking about taking on a franchise and those wanting to sell the opportunity. Franchising is based on conformity and uniformity, not creating your own system. The whole idea of the franchise is that the system to follow is already in place, so you are not starting from scratch.  It also means that in buying into a franchise, you’re saying yes to following that system.   Ensure the personality suits the franchise. For example, a book keeping service is suited to someone who is analytical and organised.  While for a service like mowing might be good for someone who is expressive and social and can deal with customer’s day to day. Be supportive of the brand itself and respectful of the overall image of that organisation.  Remember you are in business for yourself, not by yourself. A franchisee will have good communications skills; they’ll be willing to reach out for help or with questions, and to collaborate and cooperate with the main franchise organisation. Mr Irving said success was largely attributed to the personality type of the franchisee rather than any business acumen. “While the founders of Boost Juice and Star Car Wash may be amongst the richest in Australia, there are plenty of franchisees who go bankrupt or become involved in a legal battle to extract themselves from a franchisor.” Research shows that half of franchisees go into a business based on their ‘gut feeling’ without seeking any legal advice.  Franchises can fail more often than independent small businesses and that’s why website based support groups have been set up for angry and frustrated franchisees. Mike Irving is a trainer, business owner and leadership performance coach and has been helping local businesses grow through soft skill development and emotional intelligence. Mike offers unique and practical insights into communication, HR and recruitment processes.  For information on Mike Irving’s workshops covering these topics visit www.advancedbusinessabilities.com

Considering what your business is worth is essential for any business owner in making decisions. But it’s not just good for identifying the purchase price in the event of a sale or acquisition; it can also be used to establish partnership agreements or dissolution, resolve disputes relating to estate and gift taxation or even assist in something as left-field as divorce settlements and proceedings. Most usefully though, as we’ve talked about before, you can use a business valuation to grow your business. In this post we discuss how your business might be worth different amounts depending on how you look at it. Why does the value of a business change? As business valuation is an extremely versatile tool, there are many ways in which a business valuation can be performed. Depending on the way the valuation is conducted, the outcome may change. How do I decide which kind of valuation is right? To decide what method of valuation is right, you need identify the main reasons a valuation is being performed. This idea is known as the 'premise of value'. This is basically the assumptions one has made about where in the business the most value lies and will determine the method of valuation. Assumption one: the value of the business You can make one of two assumptions about the business itself which will determine the focus of the valuation. Is the business worth more in its 'liquidation' (termination, breakdown and sale)? If this were the case, one would choose a valuation method that would focus on the asset value of the business and discount the ability of those assets to generate wealth in the future. Is the business worth more as a 'going concern'. This refers to the assumption that the main value of the business is in its ongoing operation. In this case, one might choose a valuation method that focuses on the return of investment over time. Assumption two: fair value for more than one party If the valuation is being used to determine value for more than one party (for example in a purchase situation, or when a partnership is involved], you need to make an assumption about in relation to the ‘fair value calculation’. Basically, what is going to result in the fairest valuation for all parties. Again, you can make one of two assumptions about this: The business' value is 'in exchange', meaning that the business is most valuable to all parties when considered alone because the individual assets of each party do not confer inequality in the value of the business. The business’ value is 'in use', which refers to the assumption that the business is most valuable when considered in combination with other related assets, for instance specific competitive advantages one party may have over others. A more simple way of valuing your business For those business owners who are simply interested in gaining insight on the 'problem areas' within the business, the valuation method is less important than the ratio analysis. A ratio analysis is a key part of any valuation process, and one that should be done regardless of any other considerations. Essentially this process is where you would look at the books to see what the cash-flow, turnover and profit-margins are. The ratio analysis alongside the assumptions about the premise of value provide deep insight into the inner workings of the business and clarity as to what areas need improvement to increase the outcome value of the valuation. - Andrew Quinn Andrew Quinn is the CEO / Founder of My Business Path, www.mybusinesspath.com.au

After more than 25 years in franchising, I’ve seen both franchisees and franchisors achieve spectacular success, and others lose it all. There is no such thing as a sure bet in business, but franchising helps reduce the risks of small business by providing a supported environment utilising both the resources of the franchisor, and the community of franchisees operating under the same brand. Franchisees do not invest in businesses to lose money, but by the same token they don’t always do enough to mitigate their risks either. If their business fails, the franchisor is the obvious target for the franchisee to blame, and on occasion, this is justified. However, franchisees are often the architects of their own misfortune for a variety of reasons that they can’t or won’t acknowledge in time to save the business. So between franchisor-related reasons and franchisee-related reasons, here’s my top 10 list of causes of franchisee failure (and which can occur in any order, depending on the business): Franchisor causes: 1. Bad business model The franchisor’s business model might be the first thing that franchisees would like to blame for their failure, but this is not always the case. Underdeveloped business models are likely to be found in new, start-up networks, and this should be factored into a potential franchisee’s assessment of the risks of joining. While the business model risk may be greatest for a new franchisor, it can also re-emerge as a potential cause of failure in mature networks unable to match the pace of change set by nimble competitors, or which have otherwise failed to evolve with their market. 2. Inadequate training & support Failure caused by poor training or subsequent levels of support is also likely to occur in newer, start-up systems compared to mature brands. Training and support is typically limited to operational matters in new brands, with little or no general business training provided. Franchisees can better protect themselves from training and support problems by better understanding in advance the nature, content, frequency and assessment of training and support provided by the franchisor, and if it doesn’t seem adequate, to either ask for more or look for another system altogether. 3. Insolvency When franchisors go broke, often their franchisees will be unable to survive because functions such as marketing, supply chain logistics, IT and other core activities that hold the network together may be wound back or cease altogether. Again, the greatest risk of franchisor failure is among newer, start-up franchisors, but even mature brands on occasion can fail, such as Angus & Robertson in 2011, and Kleins and Kleeinmaid in 2008. Franchisee causes: 4. Wrong fit A potential franchisee may love a business from a customer’s point of view, and from this, decide that the business is one that they would like to run (because they love the products or services so much). Unfortunately there is a big difference between loving the products or services, and loving the challenge of running a business that sells those products or services. Sometimess franchisees, no matter how passionate they are about the product, the brand or the industry, just are not suited to the business. They may not be dynamic enough to evolve with the business over time, incapable of managing or retaining staff, or a whole bunch of other reasons that is best summarised by simply being the wrong fit for the business. 5. Insufficient planning A failure to plan is a plan to fail. Despite the obvious wisdom of this saying, many franchisees still fail to prepare a business plan before commencing their franchise (and on the flipside, many franchisors fail to insist on one either). A business plan should be a road map that shows the way to achieve profits by certain milestones. The franchisor should be involved in the planning process and should analyse and constantly monitor business plans submited by franchisees to ensure that the franchisee operates their business acording to the plan. 6. Insufficient working capital & reinvestment A lack of working capital and a lack of reinvestment are among the most common causes of all business failure (not just franchising). Franchisees who start operating businesses without adequate working capital will be unable to pay their bills when they fall due if the amount of cash coming into the business is not greater than the amount of cash going out. Even if the business is profitable, it can still fail if its customers have not paid it on time and it runs out of money to pay its own bills when they fall due. Understanding the difference between cash flow and profit can mean the difference between surviving and failing. Likewise with reinvesting in the business – a failure to do so progressively could eventually result in massive reinvestment works that can send a franchisee broke. 7. Unrealistic expectations The best way to test whether or not a franchisee has unrealistic expectations about the future of their business is to examine their business plan. This will provide an essential insight into their financial expectations (and when they expect to achieve them], but there may be other unrealistic expectations based around training, support and the flexibility of the business model, among other things. The problem with assessing expectations in advance is that they are rarely articulated to the franchisor until after the expectations have failed to have been met. 8. Other distractions (stealing from themselves) Sometimes the cause of a franchisee’s business failure is not related to the franchise at all, but something else altogether. If a franchisee is comfortable with the performance of their business, they may look elsewhere for a challenge and find another business or interest to keep them occupied. Often this will take too much of the franchisee’s time (and their money) away from the franchised business to suit the new venture. Where this occurs, franchisees effectively steal from themselves by taking valuable capital and human resources from one business to support another. When the left hand robs the right hand, both hands risk losing the lot. 9. Failure to evolve (complacency) The market in which the franchisee’s business operates is constantly changing, and if the franchisee doesn’t change with that market, they will ultimately become irrelevent.  Fortunately for the franchisee, they are not alone on this journey of constant change, as the franchisor must also evolve to keep up with the market as well. However if the franchisee is too complacent with their business (or has their attention elsewhere) to adapt to change, their business will inevitably suffer. 10. Failure to follow the system Despite investing in a franchise with a prescribed way of doing things, some franchisees think they can do it better and instead of following the franchise system, they buck the system and try to do their own thing. Franchisors are the first to admit that franchisees can come up with excellent ideas to improve a whole system, but if some of their ideas are completely at odds with the brand offer and values then the franchisee may as well have bought an independent small business instead. Not only do franchisees who fail to follow the system risk censure and even termination by their franchisor, but they often sabotage their own business in doing so, causing sales and profits to decline. This is not an exhaustive list of reasons why franchisees fail. Nor are these reasons independent of each other, and sometimes two or more are responsible for a franchisee’s business to collapse. So now that you’ve read the top 10 reasons for a franchisee’s business to fail, what are you going to do differently to make sure that none of these happen to you? Jason Gehrke is a director of the Franchise Advisory Centre and has been involved in franchising for 25 years at franchisee, franchisor and advisor level. He provides consulting services to both franchisors and franchisees, and conducts franchise education programs throughout Australia. He has been awarded for his franchise achievements, and publishes Franchise News & Events, Australia’s only fortnightly electronic news bulletin on franchising issues. In his spare time, Jason is a passionate collector of military antiques.