Business Broker by LINK Business

Businessbroker The Authority on buying and selling businesses volume 2 no.3

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"How To Make Money! A Lot of Money!" SUCCESSFUL Succession Planning

5 SECRET WAYS TO GROW YOUR PROFITS BUILDING Your BUSINESS in Tough Times

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Businessbroker The Authority on buying and selling businesses volume 1 no.4

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The Road To GRoWTH! survival in a cHAnGinG environment

imPoRTAnce oF cAsH mAnAGemenT

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ALL IS FAIR IN BUSINESS... A shopkeeper was dismayed when a brand new business much like his own opened up next door and erected a huge sign which read 'BEST DEALS.' He was horrified when another competitor opened up on his right, and announced its arrival with an even larger sign, reading 'LOWEST PRICES.' The shopkeeper panicked, until he got an idea. He put the biggest sign of all over his own shop. It read: 'MAIN ENTRANCE' JO

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• • •

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editorial

The Economy of Opportunity!

The team Editor/Designer: Liann Rasera Writers: Catherine Palin-Brinkworth, Tim Craft, Damien Moffrey, Shane Lawler, Brad Sugars, Les Hall, Mark Bunch, David Fitzgerald, Don Gilbert, Paul Boyd-Skinner, Sean Wolrige, David van Herwaarde

People are often fickle in times of immediate uncertainty which is why we are experiencing strong mood swings on almost any topic, especially economically related, that is contentious or has no certain solution. Do we actually have more problems in the world today that need to be addressed? I think not; it is just that through improved technology and much greater communication channels we are aware of more issues.

Cover: Robyn/Shutterstock.com B/Cover: Ambro/freedigitalphotos.net Business Broker magazine is published by Business Sales Corporation Pty Ltd trading as LINK

Being aware of these issues is fine; people should have a good understanding of the economy and a broad general knowledge. However is it unhealthy for people to micro-manage their lives and businesses, and not set clear goals that they wish to achieve short to long term. The follow-on from every economic downturn is an economic up-turn and the best opportunities are often realised during a down-turn or when the market is toughest.

ADVERTISING If you wish to advertise in our magazine please call: Liann Rasera (07) 5572 2122 or email: liannr@linkbusiness.com.au

When the market is booming everyone wants in on the action and there is no shortage of investment guru’s. When the market is going up it is often driven by greed until it gets out of control and no one wants to get left holding the bag; it’s like pass the parcel only the winner becomes the loser and can end up in financial disaster. Making money seems easy or is it?

CONTACT DETAILS BUSINESS SALES CORPORATION PTY LTD t/as LINK The Atrium Level 2, 15 Lake Street Varsity Lakes, Qld 4227 Australia

Smart and successful investors work in reverse to the economic sentiment; they buy and build during the tough times then sell when the market gets too greedy. In 1987 Kerry Packer sold the Nine Network to Alan Bond for a reported $1.05b then bought it back three years later for a mere $250m. Warren Buffett is busy buying into a number of businesses at present as he believes that “it is far better to buy a wonderful company at a fair price than a fair company at a wonderful price”.

P O Box 5141 GCMC Bundall Queensland 9726 Australia Ph: +61 (07) 5572 2122 Fax: +61 (07) 5575 8482

We believe that this is the economy of opportunity and now is the time to drive your stake into the sand and commence building your wealth and improving your lifestyle. In this issue we want to help you get started with some enlightening articles on how to make money in the current economy, which can put you in good stead to make a lot of money in the next economic cycle.

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We hope that you enjoy reading these articles as much as we enjoy passing on great information. If people can improve their businesses and or their lifestyle from the ideas, advice and knowledge that our writers convey, then we are truly satisfied. We want people to make money; a lot of money!

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Business Broker 03

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volume 2 no.3

12 06

"Secret"

Contents 06 Building Your Business In Tough Times Catherine Palin-Brinkworth suggests to improve your skills and enhance your strategies.

07 What Can A Well Prepared Marketing Strategy Do For Your Business Tim Craft provides a good example of a business he has listed.

08 Planning On Selling Your Business? Have you structured the sale correctly so you pay less tax? Damien Moffrey provides his insight.

11 The Lucky Charm The Evolution of Newsagents How newsagencies are making a quantum leap in the way we do business.

12 5 Secret Ways To Grow Your Profits Brad Sugar shares his simple, yet incredibly powerful secret formula.

13 How Peter added $115,000 to His Superannuation Without Decreasing Cashflow!

16 Now Is The Time To Think Outside The Box

Paul Boyd Skinner discusses how to deviate and diversify away from the day-to-day norm.

17 How Do People Make Money? David Fitzgerald provides an insight into business investments and the financial returns available.

22 Meet The LINK Team Our professional Brokers in Queensland and New South Wales.

25 Your Tenant Is Your Investment Don Gilbert explains how to devalue a lease.

26 People = Profits Mark Bunch offers his Top 3 Key Employment Issues vendors and purchasers should not ignore.

27 A Definition of Control KPMG and Family Business biennial survey.

28 Successful Succession Planning Getting it right is important for your future as explained by Sean Wolrige.

Shane Lawler provides some clever strategies to boost retirement savings and income.

14 License To Print Money Les Hall explains how to keep your brain stimulated.

15 Five Top Sales Tips Do you know what they are?

Business Opportunities 30 Queensland 32 New South Wales Business Broker 05

business coach

Building Your Business In TOUGH Times

Catherine Palin-Brinkworth Business and Executive Mentor

Catherine Palin-Brinkworth suggests that you simply need to improve your business management skills, and enhance your sales and marketing strategies.

such a cliché, we groan when we hear it and then dismiss it. “When the going gets tough, the tough get going!”

service lines, and you’ll be able to focus on them and cut the rest, unless they are strategically valuable.

Unfortunately, for those who prefer to moan and groan rather than ‘get goin’, it’s true.

If there is insufficient demand for your existing products or service, you will have analysed whether there is demand for them from other providers (in which case your marketing is at fault) or whether you have missed market signals and you need to tweak/update/modify your offerings.

Facing up to reality and accurately assessing obstacles is intelligent. Focusing on them continually, without creatively seeking solutions with a problem-solving mindset, is stupid. Yet so many do. Waiting, whining and wondering who will bail them out. Wailing down at the pub or over a coffee about the government, and how much better they would manage the economy. And all the while not managing their own businesses with the attitude, energy and positive belief they deserve. A quick search on the web produces long lists of businesses who were born, or built and thrived during recessions in the United States. There’s General Electric, IBM, General Motors, Disney, Burger King, Microsoft, CNN, Apple. So it can be done. And right now, there ARE businesses who are thriving, growing, and making the most of the opportunities that do exist. We simply need to improve our business management skills, and enhance our sales and marketing strategies. It's not a time to lose our nerve, but to go out and get the business others will lose from their negative mindsets. The answer is usually three-fold: 1. 2. 3.

Management Marketing Motivation

1. Management Yes, it’s time to cut back on non-essentials. But let’s be clear what these are - or more importantly what they’re not. They’re not anything to do with marketing, networking, genuine business generation. They are not to do with upskilling or rewarding performance. They are not to do with production capability. They are to do with time wasted, materials wasted, and anything not congruent with your strategic plan. You do have one, don’t you. You will have done an analysis of your most profitable product or 06 Business Broker

You will by now have learned the critical importance of having all your financial reporting up to date and carefully analysed. When times were easy, we may have been careless. Now, we can’t. There’s heaps more money to be made - we need to know where to find it! You’ll be managing your market intelligence; reading business journals, attending relevant industry events, reading between the lines both nationally and internationally, to try to find the jump on others in your local environment perhaps. Now, with the internet, it’s so much easier! Most importantly, you’ll be managing your people. Hire the right ones, and train them the right way. Never throw them into your business assuming they can do the job because they have done it before elsewhere. Always run an induction program for them, even if it’s a day or two. Because you want them imbued in your culture by YOU, not by one of your team members who may be currently disenchanted or just having a bad day. Hire on attitude, and train skills. The latter are learned much more easily than the former. Train them regularly - money spent on training is never wasted. There is a BEST way to train, of course workplace specific, spaced repetition, with management involvement. Look up www.best-training-systems.com if you want more information. You no doubt have a great Operations Manual, with everything systemised. Keep looking for better faster easier ways to do things. They may not be cheaper, but could make more money in the long run. And don’t be afraid to use an expert to come in and help you. It does pay off, or the big boys wouldn’t be doing it.

2. Marketing With real estate we have always been told the three rules are location, location, location. Now, with marketing anything, it’s database, database, database. Your business value, your goodwill, is now in your list. That is your real estate. www.linkbusiness.com.au

photo Stock xchng

It’s

Of course you have a website. It could be a simple brochure site, which impresses the daylights out of anyone who is thinking of doing business with you - because it provides all the reassurance and evidence they need of your capability. Or it could be a full e-commerce site, providing a way for people to do business with you online. I’m continually excited by the borderless nature of the net; my clients are now all over the world, and I no longer have to sit in a metal tube for hours at a time eating cardboard. At the very least, it will have a data capture facility, an encouragement for people to leave their name and email address with you, probably in exchange for a gift, or discount, or other incentive. I’m really frustrated at the number of retailers I visit (and I do shop a great deal) who never ask me for my contact details - especially my email address. I would give them, if I had a good reason. I like a good deal! I like to be kept informed! Please don’t assume in advance that I will say no - just ask me. And create offers, information, ideas, that could be of value to me, so that I get to build a relationship with you. There are probably heaps of things you can provide, that you take for granted. For instance, my local tyre dealer now runs workshops teaching women how to change a wheel. Guess who I go to for my tyres, and to whom I refer all my girlfriends. Your staff are a huge component in your marketing. Do they give your customers the impression you want them to? Have you trained them recently in Sales? Service? Presentation? Negotiation? If not, it could be costing you dearly. We’ve consistently created a 25% increase in sales.

Would that help your business?

3. Motivation As a professional speaker and trainer, I often am asked if I am a motivational speaker, with some cynicism. My answer is always that I hope so, I would rather be motivational than boring. Of course, I focus on high level business content, primarily. I aways loved the quote from the famous Zig Ziglar, who said ‘you’re right, motivation doesn’t last neither does bathing, that’s why we need to do it every day!’ If you are a business owner, you’ll be asking ‘who motivates the motivator?’ I can give you plenty of ideas, places, websites, venues, organisations that can support you. The BIG question is - are you motivating your staff? Every day? To do great work for you? Are you motivating your customers to come back often and spend more each time? By now, you’ve got the picture. You are probably leaving thousands of dollars behind every week. There is still a lot of Money to be made in business. But if you do what you’ve always done, you’ll get what you’ve always gotten, or less of it. The world is changing. Are you? ______________________ This article was written by Catherine Palin-Brinkworth. She’s a speaker, trainer, mentor and entrepreneur. Contact her on 1300 86 56 08 or catherine@palinbrinkworth.com.

What Can A Well Prepared Marketing Strategy Do For Your Business? Tim Craft provides a good example of a recent business he has listed. This example describes a business I am currently dealing with and one of the best ideas of website marketing I have come across.

photo stock xchng

We start with a very well established retail business that has been operating for 26 years with a prominent location on the Gold Coast. This business produces a very popular product made to order on-site. The current owner bought the business 3½ years ago with a turnover of approximately $750,000 p.a. Seeing huge potential for growth in this industry and the products it manufactures, he envisaged taking the product nationally. It was decided the web was the best medium for marketing to a national audience. Subsequently, seven websites were built to promote the different products he sells which www.linkbusiness.com.au

ensured that search fields were optimised to its full potential. Customer information obtained from any of the websites is redirected to the main website which is provided to a sales representative for follow-up. All information is entered into the company database for marketing and newsletter distribution. The customer sales department has a very efficient follow-up process and is highly focused on obtaining an order with a deposit. Once a deposit has been obtained the product is produced and completed within a week and shipped out after full payment has been received. The current owner has successfully grown this business from a turnover of $750,000 p.a. at time of purchase to just under $6,000,000 p.a. in 2011. As you can see, the benefits of using the right

medium to market your product will help expand your business. To make sure that you are using the correct medium it is always best to seek professional advice. To successfully market a business, you need to keep up with today’s modern media trends. Your profit can be affected by your marketing and in most cases the medium will help improve your businesses visibility and your bottom line. In this particular case, the business now nets this owner around $1,000,000 p.a. ______________________ This article was written by Tim Craft , Director, LINK SE QLD. Contact Tim on 0411 874 452 or via email timc@linkbusiness.com.au

Business Broker 07

accountant

PLANNING TO SELL YOUR BUSINESS? Damien Moffrey Director Baker Affleck Moffrey Chartered Accountants

Have you structured the sale correctly so you pay less tax?

By Damien Moffrey

Damien Moffrey provides his insight.

08 Business Broker

Whether your reason for exit is to retire or to commence a new business venture; the first step is to speak to the experts. It’s time to listen to your accountant, lawyer, financier and business broker. Every business owner should have an exit plan, and if your timing is five years or less, you need to focus on making your business attractive to the buyers’ market. The focus should be on improving net profit and cash flow, tax planning, effective organisational structure, marketing plans and efficient processes that ultimately deliver growth and value.

Buyers in the current market are extremely savvy when it comes to figures and opportunity for growth. You will need a full set of financial reports prepared by a qualified accountant, a business plan and the ability to demonstrate the plan in action. At Baker Affleck Moffrey we undertake many business due diligences each year and are often astounded by the lack of structure and planning by many business owners. Poor key performance indicators revealed by a due diligence make it difficult to sell a business. If you are planning to retire, consider a transition to retirement strategy which accesses the generous tax concessions available on exit and the benefits from the use of superannuation funds. Such a strategy can significantly reduce the tax payable on a business exit. Another key factor is an appropriate business structure which provides flexibility in distribution of net profit, asset protection and access to tax concessions on sale. Good accounting and legal advice is required when purchasing a business to www.linkbusiness.com.au

photo stock.xchng IMAGE

A confluence of events has brought us to a time and place where owners of small to medium business enterprises need to be well organised to ensure a successful business exit strategy.

The GFC and property market decline combined with the imminent retirement of baby boomers (45 to 65 years old - 24% of the Australian population) means that the next five years will see a huge peak in businesses listed for sale. When compared to the number of potential buyers (35 to 45 years old - 15% of the population) this will make for an extremely competitive market place.

ACCOUNTANT ensure the best possible tax outcome during both the operating phase and on sale.

The table below calculates the Net Asset Value for CGT purposes (must be less than $6,000,000):

Many businesses will qualify for the Capital Gains Tax (CGT) small business concessions and this can mean that zero tax is payable on sale. You do have to meet a number of basic conditions to qualify for the concessions but they are tax advantageous if you qualify. The concessions which may be available are:

Alternatively, the client could qualify for the CGT small business concessions if its annual turnover was less than $2,000,000.

Option A – Small Business 50% Reduction TP 1 (54 Years)

• • • • •

general 50% CGT discount; 15 year retirement exemption; small business 50% reduction; retirement exemption; and replacement asset rollover relief.

Other Income

The following case study illustrates the benefits of accessing the CGT concessions: • • • • •

Manufacturing business started 1 July 2000 (no cost base) Acquired a competitor for $1,000,000 cost (all goodwill) Business is owned in a Family Trust with a Trustee Company Trustee Company directors and shareholders are 54 and 61 years old Business is sold on 2 July 2011 for $6,000,000 with PP&E $500,000 WDV at date of sale

Asset

Liability

Business PP&E WDV - $500,000

Nil

Goodwill - $5,500,000 Investment Property - $500,000

$180,000

$75,000

Capital Gain ($4,500,000)

$2,040,000

$2,460,000

Less 50% CGT Discount

$(1,020,000)

$(1,230,000)

Less 50% Active Asset Reduction

$(510,000)

$(615,000)

Taxable Income

$690,000

Tax Payable

$294,400

Option B – Use the Replacement Asset Rollover TP 1 (54 Years)

TP2 (61 Years)

$180,000

$75,000

Capital Gain ($4,500,000)

$2,250,000

Less 50% CGT Discount

$(1,125,000)

Less 50% Active Asset Reduction

$(562,500)

Balance of Capital Gain Deferred

$(562,500)

Taxable Income

$180,000

$75,000

Tax Payable

$57,250

$17,175

Other Income

Business Loan - $1,000,000 Bank Loan - $200,000

TP2 (61 Years)

The client has the following assets and liabilities:

photo STOCK.XCHNG image - NKZS

• • •

54 year old has other income in the year of sale of $180,000 61 year old has other income in the year of sale of $75,000 Assume that the clients have never used their lifetime caps or any other CGT caps previously

Asset

Liability

Business PP&E WDV - $500,000

Nil

Goodwill - $5,500,000

Business Loan $1,000,000

Investment Property - $500,000

Bank Loan $200,000

Net Asset $500,000 $4,500,000

The Small Business Rollover allows the client to defer the balance of the capital gain for two years. To be eligible for the Small Business Rollover the tax payer must have acquired a replacement active asset and must meet the basic conditions, ie small business test, net asset value test. This two year replacement period can be extended if you acquire another replacement asset or make capital improvements to an existing active asset.

$300,000

$5,300,000

www.linkbusiness.com.au

Business Broker 09

accountant Option C – Use the Retirement Rollover

Option D – Use the 15-year Exemption

TP 1 (54 Years) Other Income

TP2 (61 Years)

$180,000

$75,000

Capital Gain ($4,500,000)

$2,250,000

Less 50% CGT Discount

$(1,125,000)

Less 50% Active Asset Reduction

$(562,500)

Less Retirement Concession ($500,000 cap)

$(500,000)

Balance of Capital Gain Deferred

$(62,500)

Taxable Income

$180,000

$75,000

Tax Payable

$57,250

$17,175

In this case we have assumed that: • • • • •

The business is sold on 2 July 2015 Both taxpayers are over 55 years of age and the CGT event happened in connection with their retirement As we do not know the tax rates for 2015/16 we have not accounted for other income of the taxpayers in this example If the CGT 15-year small business exemption applies, any capital gain is disregarded The trust must make all payments to the individual CGT concession stakeholder within two years of the CGT event for it to be tax free to the individual

TP 1 (58 Years)

As TP1 is under 55 years of age, the trust must contribute $500,000 into TP1’s superfund within seven days after you: • •

choose to disregard the capital gain (must be in writing); or receive the capital proceeds from the CGT event.

TP2 (65 Years)

Capital Gain ($4,500,000)

$2,250,000

Less 15 year Exemption

$(2,250,000)

Taxable Income

Nil

Tax Payable

Nil

The above options are a simplified example of the application of the small business CGT concessions. This article should not be taken as personal advice as so many criteria must be met. You should always consult a tax professional who is familiar with the CGT concessions. Failing to plan for a future exit may reduce the marketability of your business and result in a higher tax bill. ______________________ This article was written by Damien Moffrey, Director, Baker Affleck Moffrey Chartered Accountants. For more information or to make an appointment to discuss your plans, please contact Baker Affleck Moffrey Chartered Accountants on (07) 5538 3088.

The Authority on selling businesses™ Are you looking for businesses for sale, general business information and knowledgeable advice? It’s all in one place __ on LINK’s website!

BUYING | SELLING | VALUATIONS | EXIT STRATEGIES | www.linkbusiness.com.au

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advertorial

The Lucky Charm

The Evolution

of Newsagents

The Lucky Charm Newsagents (TLC) is a family owned, dedicated franchise model with over 25 years experience in the newsagency industry. Having owned and operated their own stores, owners Mike and Helen Kentros understand the everyday workload involved in operating these types of businesses. “We have a very high compliance standard and this sets a benchmark for all our stores in regards to pricing, suppliers, marketing and promotional activities. We understand that the industry is changing and are committed to innovation and directly helping our stores and business partners achieve their goals”, says Mike. TLC has followed the progress of other industries that have changed, butchers, bakers and travel agents and taken note of the emergence of new retailers like Leonards, Bakers Delight and Flight Centre. TLC believes that in order to maintain sales and grow their business, newsagents need to move forward and use more retail and marketing based strategies to continue to grow their business. “We were very early in adopting and recognising Ink and Printer Consumables as an avenue for sales. We offer much better prices than the retail giants and have showcased this in our marketing and advertising strategies” says Mike.

TLC’s hard-hitting ink and stationery sales and adverts have been such a success that TLC has invested heavily into this category. “We recognised the growth that we were experiencing in ink and stationery and decided to take it to the next level and really give our Franchisees something to work with. We have developed a unique online stationery shop and catalogue, featuring over 10,000 items. Our franchisees can use this to target a corporate or small business client base. The online shop will give our retailers the ability to grow their business outside of the walls of their existing shop. This can potentially be the next big break for any existing or new members,” says Mike. With expanding product ranges being introduced into service stations, convenience stores and supermarkets and the dominance of retail giants like Coles and Woolworths, TLC has recognised the increased competition and implemented innovative marketing strategies to combat this. “With the increase in competition we wanted to focus on changing customers spending habits and increasing their loyalty towards us”, says Helen. “After many years of development we are proud to introduce TLC Rewards™. The first interactive, pos based, scannable loyalty card design specifically for the newsagency industry”, says Mike.

rewards and benefits for shopping with us. Each time they shop customers will have the opportunity to win one of our quarterly $10,000 dollar major prizes. Our first prizes is $10,000 off your home loan, or take the cash”, says Helen. TLC plans to offer lots of minor prizes from their key suppliers and will also be giving away prizes like coffee machines and iPads. “Our franchisees love our personalised support and are really getting behind our innovative business model and industry changing marketing strategies. At the end of the day we want our franchisees to achieve their goals, grow their businesses and achieve an excellent return on investment”, says Mike.

To learn more about The Lucky Charm franchise call 1300 582 592 or visit www.theluckycharm.com.au

photo shutterstock image

“TLC Rewards™ is designed to drive customers back into our stores on a more regular basis with an increased spend on each visit.

Office Supplies Catalogue For all your office product needs www.theluckycharm.com.au

www.linkbusiness.com.au

It is also designed to drive a new client base into the stores that was non-existent or had been lost to other retailers”, says Mike. “TLC Rewards™ isn’t a points based program. We prefer to offer our customers real tangible Business Broker 11

business coach

5 "Secret" Ways To Gr Your Profits

Brad Sugars Chairman of ActionCOACH

For years I’ve taught a simple, yet incredibly powerful “secret” formula to massively grow profits in any business. Brad Sugars reports.

ne of the reasons it’s so powerful is that it gets you out of the idea that only revenues and expenses can ever be manipulated to increase profits.

Not only will you see more bottom-line growth than your competitors, you’ll let others be stuck on the idea they have to “cut their way” on the expense side to boost profits.

So what is this “secret” formula? It’s called the “5 Ways” … and it pinpoints the five key factors that drive profit and exist in every business – including yours.

What are they? Simply:

In this company, let’s say we have either estimated or fully determined the following numbers: 4,000 x 25% = 1000 Customers 1000 x $100 x 2 = $200,000 Revenue $200,000 x 25% = $50,000 Profit This means the business converts one in four leads into paying customers, who average two purchases at $100 per purchase each year and the company enjoys a 25% profit margin on revenues of $200,000. It also means total profit for the year is $50,000. So what would happen if, over the course of the next year, we could increase results by just 10% in each of the five areas?

____________________________________________________________ Let’s do it, and see what happens:

Leads. The total number of leads (those people who have contacted or who have been contacted by the business) – over the course of a year. Conversion rate. The percentage of people who actually buy. If 10 people walk through a store and three people buy, that store’s conversion rate is three out of 10, or 30%, for that day. Average dollar sale. This is the average dollar amount per sale – estimated over the course of a year. It’s just an average, and can range from $5 or $10 (for a discount retailer) up to tens of thousands of dollars (for a car dealership). Average number of transactions. This is the number of repeat purchases the average customer will make in a year. Again, this can be an estimate. In a retail setting, this will probably be larger than those companies that operate in a professional services industry. Profit margin. This is the profit percentage of each and every sale. Simply put, if a business sells something for $100, and profit was $25, the profit margin is 25%.

So how does this all relate to top line revenue and bottom-line profit? Let’s see. If we had a sample company, we can use the formula to multiply the factors we’ve just discussed: Leads x Conversion Rate = Customers Customers x Avg. Value/Dollar Sale x # of Transactions = Revenue Revenue x Profit Margins = Profit

12 Business Broker

4,400 x 27.5% = 1210 Customers 1210 x $110 x 2.2 = $292,820 Revenue $292,820 x 27.5% = $80,525.50 Profit Examine the numbers closely and the 10% increase is incremental. That means we can easily nudge them up that amount over months or even weeks. But the new bottom-line looks interesting, doesn’t it? Even though we’ve increased each factor just 10% (including revenue), we boosted bottom-line profit by 61% or a total of $30,525.50. What could you do with an extra $30,000 in your business this year? Think 10% is impressive? Do some math and see what the numbers look like if you increase 30%, 50% or even 100%. Work the formula and see for yourself. The “5 Ways” isn’t a complicated numbers game, just a new way of looking at your business with factors that exist in every company. So, work the numbers … then brainstorm ways you could increase leads; get more repeat business; how much and how often they buy, and raise your profit margins – and you will be miles ahead of most owners successfully operating businesses today. ______________________ Brad Sugars is the founder and chairman of ActionCOACH, the world's number one business coaching firm. Contact Brad at 1800 508 364. www.linkbusiness.com.au

FINANCE

Fight back the tax increases and use clever strategies to massively boost retirement savings and income, writes Shane Lawler.

How Peter added $115,000 to his superannuation without decreasing his current cashflow!

Over the next few articles I will discuss several strategies that we often use with our clients. We will use Peter and his wife Julie as a case study to show how using several different strategies could potentially add more than $200,000 to their retirement savings. Today we will discuss the transition to retirement strategy.

PHOTOS stock.xchng images - superfloss

We had several discussions with Peter and Julie about their retirement plans, budget, financial goals, and their attitude to investing. Peter is a small business owner; he has just turned 55 and had superannuation of $250,000. Peter wants to sell his business and retire at the age of 65. He does not have any spare cash flow to salary sacrifice or invest. We decided that the transition to retirement strategy would be suitable for Peter. This strategy enables an employed person, who has reached preservation age, which in Peter’s case is the age of 55, to be able to withdraw a maximum of 10% of their superannuation each year. From the age of 55 to 60 there will be some tax payable on these withdrawals; however a 15% rebate applies. From the age of 60, withdrawals are tax free. To enable these withdrawals, we need to transfer Peter’s superannuation to an allocated pension structure. Peter now has $250,000 in an allocated pension and is able to drawdown www.linkbusiness.com.au

10% or $25,000 per year. Peter does not need this extra income. So Peter can instead pay the entire surplus into his superannuation by salary sacrificing. By salary sacrificing Peter will be able to skip his 30% taxpayer marginal tax rate and instead just pay 15% superannuation contribution tax. For example, if Peter was to earn $1,000, Peter would pay his marginal tax rate of 30%; therefore he would pay $300 tax. However by salary sacrificing $1,000 to super, Peter only pays $150 in contributions tax. He saves $150 in tax. Please be careful about salary sacrifice rules. As Peter requires exactly the same cash flow as before the strategy, we need to balance this out. So by taking $25,000 from his new allocated pension, he could salary sacrifice $32,000 back into super and still have exactly the same after tax cash flow. Note, please be aware about new contribution limits. Another bonus is that his new allocated pension now has a 0% tax rate as opposed to his superannuation tax rate of 15%. Peter has a $250,000 superannuation account, if it earns 6% or $15,000 it will be taxed at 15% or $2,250. However in an allocated pension the tax rate is 0%. There is no $2,250 tax to pay and the tax man loses out.

would potentially add approximately $115,000 extra to Peter’s superannuation. Importantly Peter’s family would still get exactly the same after tax income as they are getting now. His allocated pension payments are automatically paid direct to his bank account each month. We can also use this strategy to enable a client to work part time and receive the same income as before, or even to assist with cashflow when income has fallen. However naturally this is not ideal as then superannuation savings are depleted. You can start improving your retirement financial situation right now. Life is very busy and we are all focused on running a business in a very tough environment. But please take time today to consider how you can fight back against increases in taxation and expenses and look after yourself and your family's future. Please note I cannot stress highly enough that this article is simply for information purposes only. It is not intended to be financial advice and you should not act upon this. You need to speak to a fully qualified financial adviser, who can assess what strategies are best for you. ____________________ This article was written by Shane Lawler of Lawler & Associates Financial Advisors Ph 07 5572 5229 shane@lawler.com.au www.lawler.com.au

Over 10 years, till Peter is 65, this strategy Business Broker 13

marketing

Being in business can be completely fulfilling on every level, however for many the stress of the highs and lows, staff, cash flow, financial commitments, all takes a toll, and tends to reduce the amount of “fun”. The best way to have “fun” and ensure that your business remains “fun” on a daily basis is to ensure that you focus all of your business activities on marketing. Now, I can already see the surprised look on your face regarding my comment, “focus all of your business activities on marketing”. It is my belief that everything, every single thing that you do in your business is related to marketing. From the way the receptionist or “greetings liaison officer” answers the phone or welcomes people to your business is all marketing. The way you communicate, respond via email, and every touch people is all marketing. Each and every single one of these elements is essential marketing where you, and your company, your brand, your products and services will be judged and a brand perception will be created. If your receptionist, or key salesperson is having a bad day and the way they respond to an enquiry is rude or abrasive, either intentionally or otherwise, this action has a flow on effect that will impact upon your bottom line.

The internet is impacting dramatically on business where competitive prices on tangible products are easily sought out and then delivered to your door. The consumer now is increasingly net savvy and competitive pricing is essential. The real “edge” however is superior service that goes above and beyond, and an integrated marketing strategy. An integrated marketing strategy simply means that everything – every single element – seamlessly complements each other so as to reaffirm the message that the company wishes to present. I want to get back to the market sectors that are in my opinion under siege. I have chosen for the sake of this exercise the old Friday night tradition of a family pizza and a Video (VHS) or DVD from the local video store. The internet, and the ability to download the latest movie – together with Telstra’s push into this market with Big Pond Movies and T Box, in addition to the growth of Austar and Foxtel’s popularity, as well as new additional free-to-air channels have all chipped away at the small market share available.

The growth in many market sectors, new competitors makes it even more important than ever to be vigilant with regard to how you integrate a complete marketing mix. Many business owners simply believe that an advertisement in the local newspaper, on radio, or on television, is all that needs to be done with regard to the company’s “marketing”. There have been many times over the years that I have heard, “if it ain’t broke, don’t fix it”. This is true in a number of instances, however it is not always the case. If your competitor is doing much more for your customers and at a lower price to the customer, then it is broke, and you do need to fix it. There are so many market sectors that have been impacted by the changing technological advancements and the way that we use the internet and our mobile phones especially.

Wouldn't that be a good thing?

To Print

It would solve a whole lot of problems that's for sure, but how would you keep your brain stimulated? Les Hall explains. 14 Business Broker

MONEY www.linkbusiness.com.au

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LICENSE

Pizza and in fact all take away food choices have expanded dramatically. The consumer is faced with a plethora of choice. Who survives? The company that is vigilant about every single element of their marketing mix. New products and new product development is all marketing. Remember when McDonald’s didn’t sell fish or chicken? Remember when the Pizza choices were simply a Supreme, Pepperoni, and four or five others? NPD or New Product Development is an essential component of your marketing mix. I am very aware that it has been a tough year for business owners and many are looking for guidance as to how they can improve their business and make more money. Every single market sector is different. There is no magic wand, nor is there a book or manual that can help develop marketing strategies that a business owner can utilise to increase sales that are a “one size fits all”.

FIVE TOP SALES TIPS By Catherine Palin-Brinkworth CSP MAppSci

HAVE A PROCESS Not a script, because you’re not a parrot, but a clear and well thought through sales process which you discipline yourself to follow in every circumstance. A process with simple steps allowing you to assess and measure your own performance after every interaction, so you know where you went well and where you fell over. We’ve developed what we call The BEST Selling System (of course!) with four seriously essential components for continual professional development.

TAKE RESPONSIBILITY

So how does a business owner attract more customers and make sales, and what can a business owner do to increase profits? The answers obviously differ dependent on whether you operate a service business or manufacture products or manufacture and service. It is essential to remain visible, and top of mind to your target market and really know and understand everything about your customer. If you haven’t spent considerable years developing proven effective marketing strategies, be honest with yourself and engage a professional. Do the research. Find out who has a proven track record and has been there and done that and more importantly is prepared to provide references with regard to their claims. There are many ways that a great creative mind with experience can help small business owners grow their businesses to become large corporations. A good marketing strategist, brand and advertising professional can assist in helping you to generate and attract more traffic and increase sales. Marketing is an investment that should pay a dividend. If your investment is not paying a dividend, go back to the drawing and start with a fresh look at what you are doing and what you are not doing that perhaps your main competitor is doing. ____________________________ Les Hall is the CEO and Founder of AdMarketing Australia. Les has more than 35 years experience and has worked on the marketing, advertising and growth of some of Australia’s largest brands. He can be reached via www.AdMarketingAustralia or email Les.Hall@AdMarketingAustralia.com.au or at 0408-888-537. www.linkbusiness.com.au

Your success in selling will be entirely up to you – never blame the economy, the pricing, the marketing department, the government, your manager, or anyone else for that matter. If what you are doing isn’t working, do something different. Go and learn how. Stay humble, stay learning and stay in a service mindset. The only person who has all the answers on how to sell to them is your customer.

IDENTIFY VALUES Your customers will always buy what they believe to be value to them. Your primary success as a salesperson will lie in your ability to identify their definition of value and provide it to them. What somebody believes to be valuable, depends on their own set of values. It would be really useful for you to find out what your customers believe to be valuable, don’t you think? We work with SPACER – a simple set of six – as the primary buying drivers. Have you got a system for determining value?

BUILD TRUST Three really essential components to this one. Firstly, your customers need to feel really comfortable with how you relate to them. Understanding different ‘behavioural styles’, and cultural diversity – not only ethnic, but business and personal environments - are both important. Secondly, you need credibility. Proven trustworthiness, reliability, consistency, honesty and integrity. Thirdly, you need established expertise in your product or service area. Some sales can be made without trust. Repeat sales and referrals never can.

PUT THEM FIRST With only one area of exception – your personal integrity and wellbeing. In every other question of choice – time, money, loyalty, discretion, etc. – the customer must come first. If they know they do, you’ll be making more sales than you have time to manage. If they’re not sure, they won’t be sure whether to deal with you. We all want validation and nurturing from all of our relationships. If you can provide it to your customers, your success statistics increase superbly.

One extra one. Keep working on it. School’s never out for the professionals. Business Broker 15

Now Is the Time To Think...

FINANCE

One of the keys to the running of a very successful business is the ability to be able to deviate and diversify away from the day-to-day norm. Paul Boyd Skinner provides his insight.

A prime example of the need and ability to change is the GFC and its ongoing effects. The GFC has been a major contributor to the general downturn within some businesses and this has left a lot of them with a very common problem, ATO Debt. There are very few Banks and other Non- Bank Lenders that will finance business for every day needs when there is a current outstanding tax debt. Needs such as, stock finance, new equipment purchases, overdrafts, property mortgages, etc… are all difficult to fund because of the debt. In these circumstances, some business owners feel that their only solution is to seek out Liquidators or Receivers about winding up and selling down the business. The good news however is that Private Finance is often a viable alternative solution. If you as a business owner, own Real-Estate or are paying off a Mortgage and have sufficient equity in either Commercial or Residential property, a Private Lender has the ability to assist you with a cash-flow solution to be enable you

to payout outstanding ATO Debt as well as other business expenses.

Short Term Finance can assist businesses with a private loan restructure or second Mortgage to enable them to clear off outstanding accounts. Most of the products and facilities that are available have all fees and charges built into the entire loan (This is known as a capitalised loan facility). Some offer unlimited cash out for business use as long as the loan does not exceed set “Loan to Value Ratios” (LVR). In addition to providing businesses with a quick cash-flow solution, a good financier will assist in putting together a strategy to restructure the mortgage. This will allow the clients to be placed back into a mainstream or second tier lender before the expiry of the Short Term Mortgage term with no Tax Debt hanging over their heads. A recent example of this strategy was when a very distressed business owner was referred to our finance department. The business owner has an excavation company that had a tax debt of $320k, a creditor’s ledger of $480k, a fantastic debtor’s ledger of $930k with only a small percentage out at 90 days+. They needed to purchase some new equipment due to new contracts at hand.

“It is not all doom and gloom out there for businesses, there are other alternatives.” 16 Business Broker

BOX They went to all of the Banks and various other institutions just to be told no go due to the tax debt. The other thing that they were told by the bank was that they believe that they should talk to a liquidator and sell down to pay the debt. Our solution to their predicament after seeing their Assets & Liabilities as well as their Debtors and Creditors ledgers was to place a second mortgage behind their commercial property for the $320k tax debt plus interest for four months plus some other associated costs at a fair rate, we then settled this loan within seven days. Next, we put them with a debtor finance company to get them the cash flow needed to purchase the equipment as well as pay some suppliers (creditors) early for a discount. The next thing was to place them back through a Non-Bank funder to pay back the second mortgage as well as consolidate some of their other commitments. Problem solved. It is not all doom and gloom out there for businesses, there are other alternatives. You just need to think outside the square. ___________________ Paul Boyd Skinner is Director of AusWise Finance Pty Ltd. He can be reached via 0409 366 335 or www.auswisefinance.com.au

www.linkbusiness.com.au

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You must be in a position to offer your clientele additional related and non-related products, particularly when the environment or elements you are accustomed to suddenly change outside of your control.

Outside of the

LINK

How Do People Make

$100

All investments are usually valued according to risk and return then priced on supply and demand. Usually the greater the risk, the higher the return, and if supply and demand are not equal then the price will favour the lesser. In our present economy the supply of income bearing assets is greater than the demand therefore the value is affected accordingly with the returns being much greater for the buyer.

MONEY?

By David Fitzgerald

The three most common investments are real estate, shares and businesses; all of which are valued and priced differently. Real estate is perceived as the safest investment however the returns are quite low and liquidity can be very difficult in an uncertain market.

photo www.simpsoncrazy.com

Shares are liquid, returns are higher however the current market is extremely volatile and bad news affects the share market faster than Homer Simpson can plough through a plate of donuts. Long-term real estate and shares will probably do well, however in the meantime the returns may be little and the wait could be quite a while. www.linkbusiness.com.au

17 Business Broker

LINK Businesses are a whole different kettle of fish; the returns are much higher, the volatility can be measured based on previous financials and the income generated can often ensure that your investment works hardest for you during uncertain and slow economic times. While businesses are not immune to economic cycles in many instances you have a lot more control over your investment than you have over real estate or shares. Through owning a good business you learn to adapt to the economic climate, analyse and refine your business plan more diligently and implement the necessary strategies that can ensure profitability and growth. Furthermore there is an abundance of companies and skilled professionals available that can assist business owners to grow and develop their businesses. What baffles me is that most people don’t realise how good an investment in a business can be, especially during tough economic times. The return on investment for a business is much higher in tough economic times than it is during a buoyant economy. While sales and profits in a business may be down due to the current economic climate; the return on the amount you invest in buying that business is much higher than you would receive in a growing economy. For example, in 2007 we sold a café making a net profit of $106,000 (after all expenses and allowing for a managers wage) for $365,000 which is the equivalent of a 29% return on investment; today you can buy a similar

business making $110,000 for just $260,000 which equates to a 42% return on investment. In some instances sales and profit may have dropped however the prices are reduced accordingly and often you are receiving a much higher return on your invested amount. In this economy you can get an excellent return on your investment in a business which can also give you a great advantage to make even more money when the economy improves. With the high return you are able to get from a business this allows you to pay your borrowings off much quicker and have more money to invest in other assets for the future. You would probably be aware that there are many people that have made a lot of money from real estate and shares; have you ever wondered where most of them got the money from to get started and pay off these investments. Many very wealthy people have a business; think about it, how many wealthy people do you know that own their own business? Banks favour loaning money to people with profitable businesses and strong cash flow.

So! What kind of money can you make and how much do you need to invest? We have gone through our list of businesses that we currently have for sale in Queensland and New South Wales and prepared a range of “Businesses for Sale” that have a proven return on investment. From this you can gain an excellent understanding of the investment amount required, the current return on investment to the owner and the different types of businesses available.

The businesses are listed by type and as you will notice the return on investment can differ quite substantially dependant on the following: • • • • • • • • • • • •

Business Type Location and Facilities Historical Earnings Income Risk Desirability Competition Marketability Employees Industry Growth Business Growth Terms of Sale Transferability of Goodwill

All of these components are evaluated when determining the sale price of a business in which risk, return, supply and demand are the prime factors that ultimately ascertain the price. When buying a business you need to consider a lot more than just price and return on investment; you need to buy something that you are passionate about or that you could get interested in. People tend to be more successful in a business that they enjoy and are skilled in; furthermore people that are passionate about a business tend to pick it up very quickly and instinctively become very good at it. If you buy a business that you love then the money and lifestyle usually look after themselves. -------------------------------------David Fitzgerald is a Director of LINK SE QLD and Registered Business Valuer (RBV). Email: davidf@linkbusiness.com.au

Quote

“Rich and poor are first created in the mind. A poor man asks, How much will it COST me? A rich man asks, How much will it MAKE me? Which one are you?” ~ Bryan Kumar

18 Business Broker

2. 3. 4.

PEBIT = Proprietors Earnings Before Interest & Taxation. Basically this is the amount that the owner makes through working in the business full time. EBIT = Earnings Before Interest & Taxation . This is the amount that the owner makes from the business through employing a manager to manage the business full time. % ROI = % Return On Investment. Which is amount that the owner makes (EBIT) when expressed as a % of the asking price. All earnings quoted are after legitimate add-backs have been accounted for.

Definition of an Add Back An add back is a legal expense that appears in the financial statements of the business such as the profit and loss statement or tax return but has no true economic value in the performance of the business. A negative add back or add in to the financial statements of the business is a legitimate expense that would be deemed necessary to ensure the economic performance of the business; where a business is managed by an owner operator, who does not draw a salary, then the cost to replace the owner with a manager at a reasonable market cost is necessary to ensure the economic performance of the business.

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Notes to Businesses and Return On Investment figures

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Businesses for Sale With Proven Earnings

The financials of these businesses as stated have not been subject to audit and have been compiled from the business and vendors records. We accept no liability, as to the accuracy of these figures, and as such they should be used as a guide only. Verification should be conducted by the prospective purchaser and his/her accounting representative.

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Business Broker 19

LINK

Businesses for Sale With Proven Earnings

20 Business Broker

www.linkbusiness.com.au

LINK

Businesses for Sale With Proven Earnings

www.linkbusiness.com.au

Business Broker 21

South East Queensland

David Fitzgerald, Director LINK South East Queensland David is a specialist in Business Valuations and Mergers & Acquisitions for SME’s that include a vast range of industries and a diverse client base of Business Owners, Accountants, Solicitors and Corporations. David is a Registered Business Valuer with the AIBB and has the necessary experience, knowledge, credentials and results that have gained him a solid reputation within the industry. David is passionate about business and thrives on helping people make informed decisions.

Tim Craft Director LINK South East Queensland With just over 16 years experience in selling businesses Tim is already considered a veteran of the Business Broking industry. He has sold businesses in almost every conceivable category, with previous buyers and sellers returning to him time and again. His main expertise are in the areas of Import/Wholesale, Distribution and Manufacturing. Tim is a member of the Australian Institute of Business Brokers (AIBB) and a member of REIQ.

Guy Cooper Director LINK South East Queensland Guy has been selling businesses in SE QLD for over 16 years; prior to this he was involved at a senior Management level with David Jones for over 13 years and worked as a Divisional General Manager with Pacific Dunlop for 15 years importing apparel products from China, Poland and Korea and selling/distributing to Major Retailers throughout Australia, and owned and operated a retail franchise. Guy specializes in the Retail & Food franchise, Mergers & Acquisitions.

Peter Jackson Has been a Business Broker for 16 years. Peter is originally from South Africa where he owned a shoe Manufacturing business. He arrived in Australia in 1994 and has sold many businesses to Business Migrants. His niche specialisation is in the professional services, food cafes/restaurants, wholesale/distribution sectors as well as a generalist in a range of other industries. Peter is always willing to advise new migrants. He is a fully REIQ licensed broker and does yearly training to update his knowledge.

Leo Kalathas Has a love and passion for the Hotel/Pub and Hospitality industry that spans over four decades and three states having managed and owned many strategic well known venues and groups. Over the last eight years he has been marketing and selling Pubs, Motels, Management rights and licensed venues here in Queensland and will continue to involve himself in the “people’s” industry for years to come. He is proud to be servicing our good hard working owners/sellers!

John Kyriazis Joined LINK in November 2009 and moved swiftly into his area of expertise, restaurants and cafés. John grew up working in his family’s restaurants from a young age and since moving to the Gold Coast has spent time both working in and enjoying the finer restaurants here on the Gold Coast, and also becoming well known in the industry and associated areas. John’s other areas of specialization are Professional Services and Manufacturing businesses.

Myron Plumb Myron specialises in the sale of all distribution, wholesale and manufacturing type businesses. Having owned and operated his own businesses both overseas and within Australia, Myron’s knowledge and experience of 12 years in the product industry allows him to understand and prepare businesses for sale in today’s market. With great communication skills and extreme professionalism, Myron strives to achieve the best possible result for his clients.

Deirdre King Deirdre has owned and operated her own business from the age of 22 giving her vast knowledge and experience in the challenges facing Small Business Owners.

22 Business Broker

While Deirdre's background is in Cafes and Restaurants, since becoming a Business Broker four years ago, she has gained considerable knowledge of the Hair and Beauty industry. Deirdre has had the pleasure of dealing with leading industry figures such as Marcus Edward. www.linkbusiness.com.au

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LINK BUSINESS BROKERS

LINK

South East Queensland Greg White Greg been involved in small business for the last 40 years. He will be concentrating on selling businesses in the Northern Rivers of New South Wales on the coast from Kingscliff to Ballina and inland from Murwillumbah to Casino. His specialisation given his past experience is in General Retailing including Food, Cafes and Restaurants. Greg also has a solid knowledge and understanding in Wholesaling, Distribution and Manufacturing.

LINK

Glen Dixon Glen has over 35 years of business experience specialising in the Accommodation, Hospitality and Tourism Industry. During this time Glen has owned and operated a successful Restaurant and Bar in the heart of Sydney for six years, a Backpacker / Motel in North Queensland and Management Rights in Brisbane. He has consulted in Food Franchising, large Catering Organisations and Charter Vessels. Glen is based in Brisbane.

Professionals & Specialists Our team of business specialists are not only business brokers that sell businesses they all have an enormous amount of knowledge and first hand business experience. While their backgrounds may vary they all possess a skill set in managing and owning businesses. Whether you are buying a business or selling a business you need to ensure that you get the right advice the first time round as mistakes can be costly. We all get great satisfaction from helping people achieve their goals and realise their dreams. Being in business should be fun, exciting and rewarding; owning a business should be your gateway to a better lifestyle for you and your

Put your passion for sales to work

family. Selling a business should be smooth and just as rewarding. Getting the right advice from the people that know and specialise in achieving these results is your first step to success. Thinking of selling? Thinking of buying? Talk to us first! We are all very approachable and only happy to pass on our hard earned knowledge and experience. Our specialists cover a vast number of industries and territories throughout South East Queensland and New South Wales. For a confidential discussion call 1300 763 668 or visit our website at www.linkbusiness.com.au

Join LINK's premier Business Brokers For more information call us on:

1300 763 668 www.linkbusiness.com.au

Opportunity is Knocking! www.linkbusiness.com.au

Business Broker 23

LINK BUSINESS BROKERS

link

New South Wales

Mark Jason Director LINK NSW Mark is a Registered Business Valuer, a NSW committee member of the Australian Institute of Business Brokers (AIBB) and an associate member of the International Business Brokers Association. He has extensive background in accounting and finance in both London and New York. Since his return to Australia in 2004, he has been directly involved in the sale and valuation of hundreds of businesses in a wide range of industries mainly focusing on wholesale/distribution, franchising and professional services.

John Bentley John has had over 30 years corporate experience managing Australia, New Zealand and Southeast Asian operations of International businesses in the region based in Australia. He worked as a Marketing Manager at 3M Australia then moved to Managing Director, Letraset Australia and then to Managing Director, Collins Debden. John has been responsible for numerous acquisitions, business sales and has considerable experience with issues that arise in selling/purchasing a business.

Matthew Page Matthew has a wealth of hospitality and management experience. Over Matthew’s 25 year career, he has successfully been hands-on management in the hospitality industry include controlling businesses with multimillion dollar turnovers such as Hamilton Island Resorts and Sizzler Restaurants Australia. He has owned and operated restaurants and cafes as well as catering businesses. Matthew has been instrumental in hospitality business sales as large as $2,000,000 to as small as $45,000.

Canaan Lim Canaan has worked in the sales and marketing industry for over 13 years, giving him a strong ground in all aspects of sales and marketing in different industries. The experience from owning his first business at the age of 25 has enabled him to understand the challenges and responsibilities of owning a business. Canaan specialises in the Chinese market and he can speak fluently in Mandarin, Cantonese and English.

Ray Jason As a master salesperson, Ray started and operated Sydney Brokerage for 21 Years. Being involved in thousands of business and real estate transactions his wealth of knowledge is almost second to none. Ray has been a licensed Business Broker, Real Estate Agent and Stock and Station Agent since 1979. During Ray’s vast career he has completed transactions covering the manufacturing industry, Wholesale operations, retail and many others.

Simon Salotti Simon previously started, operated and sold his own transport business. He was able to acquire a sizeable share of the market within a short time frame and learned a lot about customer service and operating a business. Along with his business education and hands on experience, Simon has a strong sense of empathy for the needs and wants of business owners. He strives to help his clients achieve their goals.

Sean Wolrige Sean has over 10 years of hands-on experience as a director of a professional services company. He has been instrumental in the success of numerous professional services businesses, having guided the transformation of the businesses with his expertise in business management and marketing. Sean’s advisory and coaching experience extends to the acquisition and divestment of a range of businesses. He specialises in business sales for professional services, manufacturing and café/restaurants.

Peter Gordon Peter has been involved in business for over 31 years, the last 19 of which has been in business advice. He has been the NSW Justice of Peace since 1986, the foundation and Board Member of the Australasian Institute of Enterprise Facilitators (AIEF) and a past member of the ACT Government’s Business Advisory Council. Peter is a Licensed Business Broker covering Regional NSW & runs business workshops in regional areas.

24 Business Broker

www.linkbusiness.com.au

LEASE CONSULTANT

YOUR Tenant Is YOUR

INVESTMENT

How To Devalue a Lease? that most of his leases (generally 35% to 45% gross profit margin businesses) have 7.5% percentage rent clauses in them! I asked him whether he had an underpinning mechanism to prevent rents falling and he said “No”. I suggested he might think about it as the retail arena could tighten up significantly and this could be to his detriment. He has since started with a minimum rents set below the average percentage rent that each business typically achieves.

In my last article I covered factors that are causing vacancies (dysfunctional) in the retail arena. These include: • • •

The economy, consumer paying off debt; Structural imbalances in leases, rent now a disproportionate fixed cost; Lack of tenure/flexibility.

Queensland Government has again passed legislation forbidding ratchet clauses in Retail Shop Leases that occurred via a court decision due to poorly written legislation. In this article, as a consequence of a previous article, a shopping centre landlord contacted me, seeking advice how best to set the rent and not devalue his leases. How the landlord adds value to his leases. Over the last four or so years I have taken several calls from the landlord. He has followed many of my articles over many years. I asked him whether I could use his proactive approach as an example; there is a lot of negative news at present. He said that I was welcome. He has some 10 retail tenants in a 3,000 square metre centre. He is a business owner.

His view is that he wants his tenants to trade as well as they can, so that if they are making money, he can as well.

A pattern of behaviour developed in that they increase rents by: CPI; then CPI + 1.5%; now CPI + 2%; for 5 yearly leases, but with significant increases at each renewal. With no end of lease dispute resolution mechanism as a pressure release, lead by institutional landlords they have devalued leases further by introducing significant competition into the malls (called loss of derogation of grant).

Why is this formula successful? The reason why this formula adds significant value to the lease is that it is simple. The base rent is below the average rent each business trades at. The percentage is uniquely linked to each highly specific permitted use under each lease; this recognises that although all the businesses are all retail, that inputs, margins and outputs all differ, hence the capacity to pay rent is also different e.g. is it 7.5c or 8.5c/$1.00?; and if the economy is growing, the landlord benefits vice versa.

What this has done is that: • Investors/shareholders have been misrepresented into believing this is/will be their ongoing return; • Properties have been “valued’ up, because the risk of the income streams have not been quantified and valued down properly; • Properties have been on-sold (new “investors” have not done due diligence) with subsequent investors expecting a steady return Plus growth.

Now the reader might regard my using 0.01c/$1.00 as pedantic, but what is the threshold of what should be the reasonable income (and return) attributed to the business and what should be attributed to the landlord by way of rent? 0.01c in the dollar on a $2.5 million turnover = $25,000 either in the landlord’s pocket or in the tenant’s pocket.

I submitted to the 1997 Fair Trading Inquiry an end of lease dispute resolution mechanism. A better version was adopted into the ACT legislation. Had that been adopted across the country, this behaviour would have been largely averted. There would be no asset bubbles in this long-term investment vehicle.

Two further major advantages: 1. The centre and business can compete against any other in the catchment area (major regional town) with some up +20% this year; and 2.

In our first discussion he said he only charges percentage rent and believes the gross rent should never exceed 10% of turnover and www.linkbusiness.com.au

What many landlords including the A-REIT (Australian Real Estate Investment Trust sector) have done, is repeatedly use leases as a gambling instrument. Now their pants are down (and are feeling exposed) as the economy contracts.

The property has never been overvalued (acquisition or finance), has not used leases to gamble with, nor is it unproductive with vacancies.

Landlords will continue to devalue their leases as long as the legislators fail to legislate and the regulators refuse to regulate for the market to operate. Properly. ______________________ Don Gilbert is a specialist retail valuer and arbitrator. Contact him on (07) 3162 0682 or via email: qldleasecons1@optusnet.com.au Websites: www.aaapc.net.au or www.leaseconsultant.com.au Business Broker 25

SOLICITOR

People=Profits (An dP ote nti al

Los Mark Bunch from Aitken ses ) Legal explains the TOP THREE KEY EMPLOYMENT ISSUES that both vendors and purchasers should not ignore during the business sale process.

However, consideration should also be given to relevant employment issues as some of the decisions made in this regard could have a significant impact on the profit (and potential losses, both in monetary and operational terms) once the buyer assumes control of the business. Here are our top three key employment issues that both vendors and purchasers should not ignore during the business sale process. 1.

Should all employees be offered ongoing employment? A due diligence undertaken in relation to employees will assist buyers to make an informed decision as to whether they wish to offer employment to all or some of the employees. This will also influence the terms and conditions contained in the business sale agreement. This process will also be of some interest to vendors given the possible redundancy implications for any employees that do not receive an offer of employment from the buyer. 2.

Transfer of industrial instruments, employment contracts and policies In some instances, it may not be beneficial to the buyer’s overall business to have a particular industrial instrument transfer from the vendor to its business on the transfer of employees. 26 Business Broker

There are steps the purchaser may be able to take to remove the obligation to abide by the transferring instrument, although the starting proposition is always that the Fair Work Act 2009 (Cth) (Act) provides that an industrial instrument will transfer with employees where there is a transfer of business and the employees work remains substantially the same. Buyers should also check any existing employment contracts and policies and make sure that they are comfortable with their terms, particularly any termination clauses, in circumstances where the employment contracts are novated to the buyer through the business sale process. 3. Recognising continuity of service If there is a transfer of employees through the business sale process, then the Act generally imposes an obligation on the buyer to recognise the transferring employees’ period of service for the purpose of such entitlements including annual leave, personal/carer’s leave, long service leave, notice and redundancy payments and unfair dismissal. However, an often overlooked section of the Act also provides that if the buyer decides not to recognise the employee’s service with the vendor, then there will be no continuity of service with respect to annual leave, notice and redundancy pay. Additionally, the buyer may, by notice, require the employee’s period of service to start again for the purposes of the unfair dismissal provisions of the Act. This, in effect, means the transferring employees would need to serve another

minimum period of employment (probation) – a handy option to allow buyers an opportunity to evaluate the employees of the business after settlement. Summary When considering a business sale, decisions taken with respect to employees can have a direct impact on the profitability or otherwise of the business after settlement. In particular, the impact of any transferring industrial instruments and the flow on effect to any existing businesses or employees of the buyer should be given great weight. Also, a decision on whether or not to recognise transferring employees’ period of service can have a significant impact on both the buyer and the vendor, not only in relation to adjustments to be made to the purchase price, but the possibility of allowing the buyer greater flexibility in evaluating employees post-settlement without the risk of an unfair dismissal claim. As such, the parties should consider and treat employees just like any other asset of the business during a business sale process and ensure that the due diligence process does not overlook or underestimate their impact on the business both before and after settlement. __________________________ Mark Bunch is a Partner of Aitken Legal, a law firm specialising only in employment law for employers. www.aitkenlegal.com.au. The information in this article is intended as a guide only. Liability limited by a scheme approved under professional standards legislation. www.linkbusiness.com.au

PHOTOS stock.xchng images

We have all heard the saying that the most important asset of any business is its employees, and yet, when it comes to buying a business, employment issues are commonly overlooked with due diligence usually focussed on financial performance.

ACCOUNTANT

A definition of David van Herwaarde KPMG Partner

KPMG and Family Business Australia’s biennial survey has found that maintaining control of the family business is the highest priority for more than 60 percent of family business respondents. The survey, run in May 2011 with 658 family enterprises from across Australia, was designed to seek knowledge and understanding about family businesses, their owners and the attributes that equate to their

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success. In a business context, control is often equated with ownership and the ability to control decision making in the Boardroom. Yet our focus groups held across five states found some ambiguity in this response. An overwhelming verdict was that control is more often about the ways in which the family encouraged and preserved a desired ‘culture’ within the business. It was about ensuring the maintenance of their family values and attitudes, which so many believed was instrumental in sustaining their competitive advantage. As one participant put it, “control is not only about equity. It’s about the management and the culture”. It follows then that 88.5 percent of survey respondents thought their family values www.linkbusiness.com.au

L O R T N O C

affected the way their businesses were conducted and focus group participants agreed that the culture of their family business created a degree of competitive advantage. This advantage was felt to grow from the personalisation of customer and supplier relationships, financial flexibility and resilience. That competitive advantage was also highlighted when asked whether being a family business had helped them deal with the post-GFC economic downturn. Fifty-six percent of survey respondents agreed that being a family business had helped while only 10 percent actually disagreed with this proposition (the remainder were unsure). Justin Craig, Associate Professor at Bond University’s Australian Centre for Family Business believes that family businesses are better able to absorb business setbacks and financial distress than their non-family counterparts. “Factors at work here appear to include high levels of trust between family members engaged in the business, alignment of financial and non-financial business objectives, planning flexibility, commitment to notions of stewardship and the existence of patient capital”, he says.

“I think that the owners have a perspective on where they want to take the business, that is not necessarily financially driven.” Participants also felt that the appointment of an external CEO or other senior executive or board member often resulted in the cultural distillation of the family business. Philippa Taylor, CEO of Family Business Australia, said that “whilst acknowledging that such appointments usually signified a firm’s scale and complexity had outrun relatively informal family control practices, many family businesses also felt that outsiders possessed limited understanding of the family’s values and were most driven by a desire to improve short-term financial performance”.

“It’s not about surviving this year, or next year, or whether we make a profit this year, or next year. We’ve always said that family business is differentiated by its long-term view, its 10 to 20 year decision making horizon, which I think is a testament to how different family business is to a public company.” Of course it might be that the business is being prepared for sale or going through significant change, necessitating an emphasis on selected financial performance metrics. The juxtaposition here is that, when asked whether family or business issues were of higher importance, 71 percent agreed business issues would always prevail and a ranking of key business strengths also found that designation as a family business was ranked very low, with less than five percent supporting that preposition. Given these conflicting interests, it is little surprise then that 60 percent find balancing family concerns with business concerns to be a high priority. The KPMG/Family Business Australia Report is available now from www.kpmg.com.au or www.fambiz.org.au _______________________ David van Herwaarde is a partner at KPMG. He can be contacted on (07) 5577 7555 or dvanherwaard@kpmg.com.au Business Broker 27

LINK

Successful Succession Planning Retiring from your business which you have built up for many years can not only be an emotional milestone but also a financial and legal challenge. Sean Wolrige suggests getting it right is important for your future well being in retirement as well as the continuation and growth of your business. Recently I came across some very interesting statistics that showed that 31% of all small business owners are aged over 50. Additionally, in another survey, it confirmed that 40% of small business owners surveyed indicated they planned to sell their business in the next five years.

__________________________ Sean Wolrige, is a Business Broker at LINK in NSW Sean can be contacted via phone (02) 9899 1999 or email seanw@linkbusiness.com.au

Succession planning is becoming more and more relevant and important now than ever before. Get it right and you can extract maximum value from your business. Stay too long and self sabotage can set in and diminish the value of your greatest asset very quickly.

We see this as the early transfer of both management and control of a business, which may not mean a complete exit. It may well mean the sale of the business outright or the owner/ partner retaining equity and receiving profits after withdrawing from management. However, in essence it is a focus on redundancy for the right reason. The key is firstly to strengthen the business in terms of sustained profitability and asset building built on a platform of solid systems, quality client base and a high performing team.

There are a number of different options when it comes to succession planning. They could include: 1. 2. 3. 4. 5.

Sell the business - consider a logically planned process? Manage a team buy in, perhaps phased – is the team competent? Family succession – is the skills and enthusiasm appropriate? Merge - are the values, attitudes and ethics similar or complimentary? Close the business and sell off the assets – consider a structured plan?

Clearly if we are to maximize the value we should consider: having a clearly articulated exit strategy that firstly embraces as to when you want to exit; taxation and financing issues have to be addressed; development of successors; and essentially having the business in a strong saleable shape. In summary, a succession plan will enable the business owner to extract maximum value and needs to be laid down well in advance of retirement generally two years or more. 28 Business Broker

Steps to Successful Succession Planning Sound succession planning can be considered in five steps:

Assess the current business in detail and obtain an appropriate valuation and also consider including shareholder and employment agreements for current directors and owners, Keyman insurance and an assessment of risk management issues, etc.

2 3

Develop comfortable time frames to exit and where appropriate heads of agreement. Build a strong strategic plan to enhance ultimate value, build current profitability and have an early foray into a enjoyable lifestyle change (e.g. only work four days a week perhaps). Consider a strong team of advisers: lawyers, accountants, financial planners, insurance brokers, and a solid business development coach. This is to cover all the legal, financial, tax, insurance and business development matters.

Implement the plan, as obvious as this seems, it is critically important that the succession plan be managed whilst the owner continues to work in the business.

www.linkbusiness.com.au

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What is succession planning?

LINK

Business opportunities Here is a selection of businesses LINK has for sale. For more business opportunities visit www.linkbusiness.com.au

photo Supplied & SHUTTERSTOCK images

30 South East Queensland 32 New South Wales

www.linkbusiness.com.au 29

South East Queensland

Outstanding Freehold Motel & Business

Excavation/Construction Industry Icon

Expected Net Profit $240,000 & Under Mgmt

Under Full Management

• On six acres of land in the foothills of Toowoomba

• Highway position with • •

thousands of vehicles passing by daily Easily operated by husband & wife team plus one casual Strong future with proposed Toowoomba by-pass meters away!

• Licensed restaurant on site • Opportunity to increase

number of units in order to increase the net and value of the business

Asking $2.3 Million WIWO Ref 10790 Contact Peter Jackson 0418 986 991 Leo Kalathas 0402 117 722

• Established many years and

• Asking price reflects the quality

•

• Vendors willing to assist new

• •

very busy Under full management with manager to stay on Current and future work contracts in place YTD financials and valuation on plant & equipment will be made available to qualified buyers

of this business

owners with transition period

• Ideal Merger & Acquisition Asking $3 Million WIWO Ref 10796 Contact Leo Kalathas Ph 0402 117 722

Manufacturing Business - Located on the Gold Coast Net Profit $568,052pa - Under Full Management

• Established 12 years with • • • • •

strong trading history Solid customer base Australia-wide and overseas Recognised leader in marketplace Simple systems and procedures in place Easily managed with loyal dedicated staff Huge opportunity to increase sale & profit

This is a fantastic opportunity for a new owner to reap the rewards and plan for a comfortable retirement! For more detailed information via confidentiality, please call Myron Plumb

• Solid return on investment

Asking $1.35M + SAV($100K) Ref 10687 Contact Myron Plumb Ph 0415 303 370 Some images shown are for illustration purposes only and are not necessarily examples of the business’ products or services

www.linkbusiness.com.au

Phone 1300 763 668

South East Queensland

Home Based Water Filtration System Master Territory

•

• As Master Territory owner in

your home state you are able to spread your wings and

Territories in SA, VIC, TAS, ACT, NSW & QLD

• Outstanding opportunity

• Now is the ideal time to enter into this very lucrative and essential water filtration system market Master Territories available in QLD, NSW, ACT, VIC, TAS, SA and NT

Lucrative Home Goods Rental Business

•

"TAP" into as many retailers and plumbers as you like State Master Territory comes with enough stock to retrieve at least 50% of your initial investment!!!

Asking $150,000 Ref 10698 Contact Leo Kalathas Ph 0402 117 722

•

to get a start in this fast growing home goods rental market Territories on offer will have a population minimum of 100,000 people

• Proven & established systems •

- secured territories Home based business - no staff - no rents!

• Excellent returns on investment (ROI)

• Impressive report available (IBIS) with industry past, current & future growth in Australia

Great Lifestyle! Asking $75,000 + $50K working capital Ref 10753 Contact Leo Kalathas Ph 0402 117 722

This Business Keeps Getting Better!

Looking for a True Lifestyle Business?

Net Profit $536,988pa

Net earnings last 3 years avg above $120,000pa

• Home based business on the

• Skilled contractors in place

•

• • •

Gold Coast - est. 5 years Supply & fit of a niche product in an extremely lucrative industry Very little competition throughout SE QLD Quality product & service has given this business a well respected name Extremely low overheads

•

providing quality results Solid figures prove a fantastic ROI with plenty of room to expand Little to no marketing has been done - huge opportunity for new owner

Asking $885,000 Ref 10290 Contact Myron Plumb Ph 0415 303 370

Here it is! Tick all the boxes!!!

• Export Wholesale/ • • • • • •

• Double income streams; sales and commissions

Distribution Established for 21 Years Work from home Live anywhere you choose Set your own hours Travel the South Pacific Islands region Nothing to handle, stock or warehouse

• Long term and well known suppliers

• Stable and loyal customer base

Asking $480,000 Ref 10786 Contact John Kyriazis Ph 0404 155 984

Some images shown are for illustration purposes only and are not necessarily examples of the business’ products or services

Phone 1300 763 668

www.linkbusiness.com.au 31

New South Wales

LOOKING FOR A BUSINESS FOR SALE? Look Here for the right business

www.linkbusiness.com.au Turn-Key Property Development Business Opportunities! Profit up to $30,000 per basic package sold by your house and land package development business Full company set up including: • State-of-the-art management system • Business tools - laptop, ipad • Website and Marketing materials • Extensive in-house training

• Products & Services Network • Live access to package listings Established by The Symond Group. Be part of the lucrative property development industry today!

1300 763 668

Asking $29,000 + GST Ref 10780 Contact Sean Wolrige Ph (02) 9899 1999

Exclusive Rights Import/W'sale/Retail

Business 2 Business Document Service

Net Profit $232,000pa

Net Profit $420,000 - $550,000pa

• Same owner 24 years. • • •

Retiring! Exclusive Australian Distribution Rights Established 1989 Government contract Est.1995 Long consistent trade history where vendor has not looked to push the business forward

• Huge potential to increase • •

sales via Web, wholesale and retail opportunities Strong internet presence Full training and handover provided

Asking $595,000 + SAV Ref 10730 Contact Mark Jason Ph (02) 9899 1999

• Turnover $1,500,000pa • Same owner 22 years

• Potential to initiate

•

wanting a sea change/semi retirement 200 clients bringing in 65% of work + 35% awarded contracts

• Low skill set requirement, long standing staff & full training

marketing program and SEO for website both not presently in place Freehold also available

Asking POA Ref 10771 Contact Mark Jason Ph (02) 9899 1999

Some images shown are for illustration purposes only and are not necessarily examples of the business’ products or services

www.linkbusiness.com.au

Phone 1300 763 668

New South Wales

Ristorante Sydney CBD Fringe

Distinctive Italian & Northern Regional Bite

• Industrial hard edges • • • •

softened by lighting and reflections and white tablecloths Wood fire pizza oven imported from Italy Quality fit-out and kitchen Excellent turnover and great returns Very reasonable rent

• Can be run under •

management with long term staff in place Suit investor, chef wanting to make a name or continue as is

• Initial 100 units pre-installed • Commercial clients only with • • •

massive growth potential Unique water filtration system 70% cheaper than bottled water Earn guaranteed $$$ from day one! Call to find out more

Asking $125,000 Ref 10712 Contact Sean Wolrige Ph (02) 9899 1999

• Small space so effective rental • • • •

4 Master Territories in Sydney Available

•

Net Profit in excess of $400,000

•

Asking $370,000 Ref 10779 Contact Matthew Page Ph (02) 9899 1999

Successful Equipment Rental Business generating instant income of $44k from day one with potential to triple quickly Great lifestyle business with flexible work hours Full training, support and business tools included Established QLD & NSW territories

Three (3) x Kiosk Style Mobile Phone Accessories Shops and good leases No competition in centres Simple operation - fully staffed, you just do the orders Very profitable with huge mark-ups on products Would suit most business migration visa requirements Will deal on separate sales for

each business or buy all three There are more mobiles in Australia than people, and everyone needs a sparkly case or new battery. What a market to be in! Asking $650,000 Ref 10697 Contact Matthew Page Ph (02) 9899 1999

Only Hair Salon in Busy Shopping Centre Profitable location in Sydney's West

• 90% repeat customer base • Loyal experienced and qualified staff

• You are able to own the • • •

business and not cut hair like many franchises do. New 5 year lease in place Royalties are a fixed amount Not to be missed!

Asking $185,000 Ref 10718 Contact Matthew Page Ph (02) 9899 1999

Some images shown are for illustration purposes only and are not necessarily examples of the business’ products or services

Phone 1300 763 668

www.linkbusiness.com.au 33

New South Wales

Freehold Motel - Going Concern

Quality Children's Furniture Store

Forster, NSW

Located in Sydney's Eastern Suburbs

• Prime coastal location • 500 metres to the beach • 200 metres to lake • 11 rooms plus manager's residence Pool and parking Development site

• • • Turnover $168,000 with steady growth

• 3 Star Rating • Owner negotiable

Asking $1,295,000 Ref 10762 Contact John Bentley Ph 0418 288 117

Choice of two (2) Sydney locations

• • •

Management. More if Owner/Manager No industry experience required Proven Franchise group with strong Franchisor support Lucrative industry boasts exceptional growth

• •

Haircare Products Franchise

• Nets owner $165,000 Under

• Full training & management

• Finance available • Prime locations • Multiple revenue streams

Asking $490,000 + SAV Ref 10740 Contact John Bentley Ph 0418 288 117

Be part of this exciting, growth brand in the world of children's furniture! Call today.

delivery van and warehouse Current strong sales growth

Asking $140,000 + SAV Ref 10777 Contact Sean Wolrige Ph (02) 9899 1999

• Existing installation team, •

and excellent potential

support provided Ideal for owner/operator or partnership High quality products with exclusive designs

Sportco - NSW Franchise Opportunity Over 70 Stores Nationwide

• Full training and support • Fantastic first business with margins

If you are looking for a low level entry into a successful, growing Australian franchise, look no further! www.sportsco.com.au

including "3iD" foot type and gait analysis technology

Asking $50,000 + SAV Ref 10580 Contact Sean Wolrige Ph (02) 9899 1999

low barriers to entry

• Exclusive brands with 60% • TV, Radio & Print Marketing • Exclusive brand assets,

Some images shown are for illustration purposes only and are not necessarily examples of the business’ products or services

www.linkbusiness.com.au

Phone 1300 763 668

Business A

“ “ “ “ “ “ “ “ My Business sells Widgets

My Business is worth a lot of money

My Business sold for over $1,000,000

I got advice from LINK

Business B

“ “ “ “ “ “ ““ My Business sells Widgets

My Business is worth a lot of money

I can’t sell my business

I didn’t.

Business A and Business B may look the same however, looks can be deceiving and its the results that count.

Want the Best Results? Call LINK today

1 300 763 668 BUYING | SELLING | VALUATIONS | EXIT STRATEGIES | www.linkbusiness.com.au