DUE DILIGENCE

When you are considering buying a business, conducting due diligence ensures you have access to important information about the business you're buying. It's the best way for you to assess the value of a business and the risks associated with buying it. Through the due diligence process, you thoroughly investigate all aspects of a business for sale. You look at the business's operations, financial performance, legal and tax compliance, customer contracts, intellectual property, assets and other details, often within a time period specified in a letter of intent. You usually conduct due diligence after you and the seller have agreed in principle to a deal, but before signing a binding contract. The information you collect during due diligence is highly sensitive and confidential. The seller will want you to sign a non-disclosure agreement before you access this information As part of the due diligence process when you're investigating a business to buy, you should thoroughly review the business's fixed and intangible assets. Knowing exactly what's for sale will help you accurately value the business. It is a good idea to consult a professional adviser to help answer the following questions: Assets

• Do you know exactly what you are buying and not buying? Are there lists of assets and have you checked them?
• If the business is a limited company, are you buying the shares or the assets? Legal advice is probably necessary if you're buying a company.
• What is the book value, the market value and replacement value of the fixed assets? Which will you pay?
• If you're going to buy inventory or work-in-progress, has a value been agreed on? Have you agreed on how it will be adjusted at the time of settlement, and within what limits?
• Have you decided what intangibles you want such as mailing lists, business name, exclusive rights, or leases? Can they be transferred?

Stock

• Are you sure that the rate of stock turnover is in line with industry practice?
• Are you sure that the existing stock does not include slowly moving items from another business?
• Has inventory been correctly valued in cost of goods sold statements?
• Has an item of inventory been sold but not shipped

  Equipment

• Is the equipment in good repair? Is it efficient? Is it in danger of becoming obsolete or difficult to service? Are parts available? Could it be sold easily?
• Is depreciation claimed for the equipment and, if so, is it reasonable (particularly for the price you'll be paying)? Is it based on an accounting or tax viewpoint?
• Is any equipment leased? Do you know the terms and the cost of all equipment leases?
• Will you get ownership when equipment leases expire? What are residual values?

Written by Mathew Hartley

Brian Sander from Benchmark Business Brokers Adelaide office reports that once again the crazy start to the year in Adelaide has brought tourists flocking by the thousands to the City. During the first few months of each year Adelaide hosts it’s  prestigious Festival of Arts, The Adelaide Fringe that now is second only to the Edinburgh Festival in World standing, The “Womad’ World Music Festival and the roar of V8 racing cars speeding through the City in the Clispsal 500. Follow all of this with the Horse Racing Festival leading up to the Adelaide Cup and the City is abuzz with activities and visitors. The net result of all this, says Brian, is an annual upsurge in demand for cafes, coffee shops and food businesses in and around the City. Benchmark, Australia’s largest Family owned Business Broking company with over 40 Brokers operating from 5 offices across 4 States, regularly finds a sharp lift in demand for businesses in South Australia from local and interstate buyers alike during this “crazy “ first few months of the year. We are continually struggling to meet the buyer demand for Coffee Shops, Cafes and food businesses at this time says Brian, a veteran broker with over 35 years’ experience selling Food Businesses. For anyone considering selling, now is an ideal time to get a free appraisal on their business and find out what it is really worth.   Brian Sander Senior Benchmark Broker  

It is important when signing an agreement to purchase a business that you know what you are getting. In most cases businesses will sell at a price +SAV (Stock at Value). This is not what the product will sell for but rather the cost of the product. When buying a supermarket it is important to set the parameters for the stocktake process to ensure the stock you are buying is still in a saleable condition. That is in date and also properly packaged. The average benchmark for use by codes from date of stocktake is 30 days for grocery and frozen items and 7 days for perishable items such as dairy and bread/bakery products. This is either determined by the company performing the stocktake or an agreement between the two parties at time of stocktake. If you sign an agreement that is a WIWO (Walk in Walk out) price then you run the risk of buying stock that is unsaleable This is a risk for the purchaser as the seller has no responsibility for ensuring sellable items and can reduce stock levels which ultimately affect the trading ability of the business. For added piece of mind it best if when buying a business that you buy it with + SAV   David Zampech Supermarket Specialist    

• 3.5% increase on 2014 represents strongest sales growth in five years
• European market growth a key contributor
• Entry into 4 new countries in 2015 in Asia, Africa and Middle East
• 12,100 Stores in 42 countries worldwide serving 13 million customers a day

AMSTERDAM, 11th APRIL 2016: SPAR International, the world’s largest voluntary retail chain, has today announced global retail sales for the year ending December 31, 2015 of €33 billion, representing a 3.5% increase on 2014. Growth in 2015, the strongest in five years, was characterised by the growing pace of recovery in Europe, in addition to the continuing expansion of the SPAR brand in emerging markets. Growth for the brand was particularly strong in Africa and SPAR continued to grow its presence by entering into four new countries on four continents during the year including store openings in Indonesia, Cameroon, Oman and Azerbaijan. Commenting on the 2015 results, SPAR International Managing Director Tobias Wasmuht said, “The 2015 figures show the continuing strength and attractiveness of the SPAR brand globally. With a presence now in 42 markets around the world, SPAR continues to be the partner of choice for independent retail partners keen to embrace retail best practice and fast-track their development in the face of international competition. “The continuing growth of the brand in new and emerging markets in Asia, Africa and the Middle East, as well as the quickening pace of recovery in many of our traditional European markets, is testament to both the adaptability of the SPAR brand and the entrepreneurial drive of our retail partners. The last five years has seen SPAR continue to grow despite volatile international economic conditions. This sustained growth has been achieved by meeting the needs of the local communities we serve with a commitment to deliver excellence in fresh, a passion for quality and best in class customer service. It is very pleasing to see this focus and investment paying dividends.” Performance highlights for 2015 included:

• Europe: Recovery in traditional European markets has gathered pace with strong retail sales growth reported by SPAR Austria +2.4%, SPAR Belgium +6% and SPAR Hungary +2.9%. SPAR UK increased store numbers to over 2,600 with turnover up 2% to GBP £2.6 billion.

• Central & Eastern Europe: Central & Eastern European markets showed strong growth with SPAR Croatia +15% and SPAR Poland +17%, with both adding significantly to their store footprint. SPAR Russia reported a 19.2% increase in local currency.

• Asia: Significant developments in Asia with entry into the Indonesian retail market in partnership with Ramayana – opening 15 stores in 9 months. Continuing growth for SPAR China which reported sales up 6.8% to €1.9 billion and, following re-entry into the market in 2014, the rapid growth of SPAR India.

• Africa: SPAR now has a presence in 12 African markets accounting for 17% of SPAR’s global retail turnover. SPAR South Africa continues to perform strongly, up 18%, with significant potential for growth shown in Nigeria and Namibia.

• Middle East: SPAR strengthened its presence in the Middle East by opening its first stores in Oman, in partnership with Khimji Ramdas, and expanding to 13 stores in the UAE.

Commenting on the outlook for the year ahead Tobias Wasmuht said, “With recovery in Europe continuing and considerable untapped potential in many emerging markets we see significant potential for future growth – both short term and long term. As part of our future strategy we shall continue to drive forward into significant new and high potential markets during 2016, having already in place partnerships that will see the SPAR brand grow in Asia and Africa in the second half of the year”. SPAR International’s multi-format strategy sees its Partners operate over 12,100 hypermarket, supermarket, neighbourhood and convenience stores serving the needs of 13 million customers daily.   Mathew Hartley Supermarket Sales Specialist

Checking your finances Buying a business is a significant investment, so you need to sort out your finances early and be well prepared and professional when applying for a bank loan or approaching potential investors. This will give them confidence to back your business and convince the seller you are serious. When checking your finances, consider:

• the purchase price of the business and the additional costs
• stamp duty, usually payable by the purchaser
• the working capital requirements for your business (your cash flow projections will show that figure)
• professional fees and charges related to the purchase
• any loan repayments and servicing costs, if applicable

All commercial lenders use the following criteria to assess loan applications:

• your ability to service loans (interest and periodic repayments)
• security (most banks require a 1st mortgage on real estate security and may lend up to 65% of the real estate asset being offered as security)
• the management and business skills of the borrower
• the trading history of the business (at least three years prior to purchase)
• The profit and loss and cash flow forecasts for three years (forecasts need to be supported by realistic assumptions about future trading).

It is important that you are able to supply the necessary information to the lender assessing your request. Remember, every funding proposal will have its own unique features. Therefore, you should seek professional advice from your accountant or business adviser about the best way to organise funding. Starting your research Early research of potential businesses could include:

• scouting the location
• researching your competition (what do they offer that is different)
• checking the business's website and marketing materials
• trying the business's products or services
• checking demographics
• finding out why the business is for sale
• talking to the business's suppliers
• talking to the business's customers
• researching customer reviews about the business online
• performing a credit and historical search on the business's legal structure and/or its owners/directors
• researching industry and market trends.

For more information on buying a Supermarket contact Mathew Hartley on 0400 412 593.

DUE DILIGENCE When you are considering buying a business, conducting due diligence ensures you have access to important information about the business you're buying. It's the best way for you to assess the value of a business and the risks associated with buying it. Through the due diligence process, you thoroughly investigate all aspects of a business for sale. You look at the business's operations, financial performance, legal and tax compliance, customer contracts, intellectual property, assets and other details, often within a time period specified in a letter of intent. You usually conduct due diligence after you and the seller have agreed in principle to a deal. The information you collect during due diligence is highly sensitive and confidential. The seller will want you to sign a non-disclosure agreement before you access this information As part of the due diligence process when you're investigating a business to buy, you should thoroughly review the business's fixed and intangible assets. Knowing exactly what's for sale will help you accurately value the business. It is a good idea to consult a professional adviser to help answer the following questions: Assets

• Do you know exactly what you are buying and not buying? Are there lists of assets and have you checked them?
• If the business is a limited company, are you buying the shares or the assets? Legal advice is probably necessary if you're buying a company.
• What is the book value, the market value and replacement value of the fixed assets? Which will you pay?
• If you're going to buy inventory or work-in-progress, has a value been agreed on? Have you agreed on how it will be adjusted at the time of settlement, and within what limits?
• Have you decided what intangibles you want such as mailing lists, business name, exclusive rights, or leases? Can they be transferred?

Stock

• Are you sure that the rate of stock turnover is in line with industry practice?
• Are you sure that the existing stock does not include slowly moving items from another business?
• Has inventory been correctly valued in cost of goods sold statements?
• Has an item of inventory been sold but not shipped

Equipment

• Is the equipment in good repair? Is it efficient? Is it in danger of becoming obsolete or difficult to service? Are parts available? Could it be sold easily?
• Is depreciation claimed for the equipment and, if so, is it reasonable (particularly for the price you'll be paying)? Is it based on an accounting or tax viewpoint?
• Is any equipment leased? Do you know the terms and the cost of all equipment leases?
• Will you get ownership when equipment leases expire? What are residual values?

For more information and assistance contact Mathew Hartley on 0400 412 593.

“You can’t Sell a Secret” It is common knowledge that vendor paid advertising of a business is no different to that of selling a residential home, and this concept has been adopted by the real estate industry in selling homes for years. Individual business owners would find it very difficult to advertise their business themselves through major websites for the period of time required to sell the business. In fact, an individual seller/vendor could only market their business for a certain amount of time before their listing expires or a request to upgraded the listing comes through, which means paying more money. In most cases vendor paid marketing to Benchmark will remain in place until one of two things happens; 1. The business is sold, 2. The Vendor terminates the listing, The benefit to a business owner for marketing their business through a reputable brokerage firm, is that the brokers can advertise the business on many major websites, and can use their company data base to find suitable buyers.  Included in the marketing fee would be the ongoing administration to ensure the listing is reposted to keep the page ranking up, updating Information Memorandums & Executive Summaries Let’s face it – It’s a user pay world we live in, and you can get what you pay for in life and in business. In most cases we find that the marketing fee (as a percentage) is usually less than 1% of the listed sale price – and all marketing fees are tax deductible. It takes 4 elements to sell a business.

1. Price
2. Data collated
3. A comprehensive marketing plan
4. A pro-active broker

Without all four present, a business will simply not sell.   Ian Salter

Ready to buy a Business? Buying a Business is one of the most significant financial & lifestyle decisions you’ll make in your lifetime. From figuring out pricing to why you should choose a certain type of Business, there are many factors to consider before you purchase a business. Out of all the questions we have when buying a business, one stands out. “How to Spot a Good Business?”  Here are few tips we hope can help you in making the right choice. Use a trusted Business Broker: We all know that Business Brokers get a cut of the sales price of a business which makes some buyers hesitant to use a broker, because they believe it drives up the business cost & they can make it cheaper by directly dealing with the seller. Keep in mind that the seller, not the buyer, pays the commission. Yes it might be true that a listing agent (the agent representing the seller) is there to protect the seller’s interests, it doesn’t mean that you’re not saving money. A good Business Broker who works for you can protect your interests and guide you through the buying process, from negotiating a price to navigating through inspections, clarifying details, contracts, up until the completion date when you take over. Don’t necessarily buy for the market conditions today: Buying a Business will be one of the bigger financial commitments you’ll make in your lifetime. Before you buy what you think might be your dream business, consider your long-term plans and future. Don’t just assume that the market for the business will grow 10 years from today, just because it has in the past. Do thorough research.  Determine whether the business can survive as it is in the future.  If not, how much more should be invested to increase or sustain growth? If the market conditions change what can I hold on to? What will be the eventual value? “All Weather” Business: A good business should be capable to sustain in any market conditions, there can be increase or decrease in profits, but it should never “go South” in any market condition. Take Milk Bar’s for example, they were the most sought after by Mum & Dad business buyers for many decades. But today after the supermarket price revolution, milk bars are hard to find, some have gone broke, some have been converted into houses, & some (yes some) still survive and run with good profits. Those who survived were able to adapt to the market, integrate other offerings, and are able to make good profit even today. Those who spotted the good milk bars and differentiated from other milk bars, are reaping the benefits even today. All Good Business are expensive, no that’s not true: If you are willing to open your outlook, you will find good business even cheaper than a bad business. What is good business to you might not be the same for others. How do you say a business is a good business: Just by profits for today? Profits in the past? Location? Managed or Owner operated? A good business in general should be a business with good profit record in the past, current & with a reasonable future expectations, a business where you have knowledge or experience in managing, a business where the location doesn’t have room for any more competitors than it already has, a business where there is opportunity to improve and most importantly a business where you have enough funds to invest with less or no loan repayments. Consider all these when you buy your next business, it will help you in Spotting the Good Business!   Karthik Arasu Business Broker – Melbourne If you are looking for the best business brokers Melbourne, then click this link Businesses for sale Melbourne

The Franchising & Business Opportunities Expo …is an exciting event that brings together the best franchise and business systems with potential franchisees and investors. It is the only exhibition endorsed by the Franchise Council of Australia and has been delivering results since 1987. Exhibitors from large and small franchise companies come together to exhibit their unique brand offering . Benchmark is pleased to announce that our Franchise Division will also be represented this year at the expo at stand B26, feel free to come and have a chat with our specialist franchise business brokers. Important Details Name: Franchising & Business Opportunities Expo Dates: Brisbane 23^rd & 24^th of July 2016 Venue: Brisbane Convention & Exhibition Centre Exhibitors: Featuring franchise systems, business and investment opportunities, consultants and key industry suppliers See you there!   Ian Salter

Just like housing, why does one home in one suburb sell more than the same home in another suburb? There are number of reasons why stores that trade similarly sell at a higher price than the other. These can be location, age of store, type of centre, size of store, Gross Profit, competition, and also rent. Not all stores are the same. A store that has a lower rent and lower GP could sell for more than a store with higher GP but average rent.  A bit strange isn’t it? It is important that when comparing stores that these items are looked at individually as a store that is say 6 years old would potentially have less maintenance and repairs or equipment to replace than a store that is 15 years old and has had little or no equipment upgrade completed. To ensure you maximise the return on your business you should review how old your equipment is, and look at investing in new equipment each year. Make sure all current refrigeration and equipment is serviced regularly. Ensure that when the opportunity comes to have a rent review completed if you feel you are paying too much, or there has been a dramatic downturn in the area. Present your business well with a fresh coat of paint and new polished floors, stocked shelves as this will make difference on the number of buyers potentially interested in your business. The more buyers interested the better chance of selling your business at the best price.   David Zampech Supermarket Specialist Mobile: 0422 671 375 Email – davidz@benchmarkbusiness.com.au PAY FOR THE PAST, BUY FOR THE FUTURE