Overseas buyer scopes up a magnificent waterfront restaurant in far north Queensland. After the buyer made contact with me, the entire sales process from start to finish took eleven and half weeks. The business attracted many buyers within Australia and from overseas, and in the end it was sold to an overseas buyer with plenty of experience in hospitality. Keeping the deal going (and on track) required constant daily communication from me to all parties because the; buyer, seller, solicitors, accountants and the buyers advisers were either in a different country or in different cities within Queensland. As the broker, my key role in all of this, is knowing what is going on and what to do next – this is what gets deals completed.   Franchise Specialist Ian Salter  

What do you need to do to get your business ready for sale? You need to plan for the day you wish to sell your business on the day you either establish your business or purchase it. Getting your business ready for sale can have a positive effect on the price that you can achieve; it can also have an effect on the time it takes to sell. The pricing and timing are important reasons to have a plan for getting your business ready for sale. However there are also other quite significant reasons that you should be planning. You never know what opportunity is around the corner; you never know when a sale might occur. You might not have thought of selling but you have an approach from a potential purchaser. We have all heard someone say, “Got an offer I couldn’t refuse”. If you have planned from day one then an opportunity can become a realisation. There is also the potential of a need to sell due to personal circumstances such as illness or injury. Once again if you have been planning you can move relatively quickly. Putting in place a plan for the sale of your business can take time, which means that you need to get this started well in advance of your decision to sell. Having a plan will give you peace of mind and a feeling of confidence that you have presented your business in the best possible light. The reward for the work that you have put into the plan is the feeling of confidence that you can attract the interest of more qualified buyers quickly and hopefully achieve a better selling price. You will also know the business that you have worked long and hard to grow, will be handed over in the best possible position for the new owners to take to the next level. Business owners become very emotionally attached to their business and want to see their baby grow. A well-presented business will also mean that will be less hiccups during the contract process. You will have more likelihood that the contract will proceed to settlement and you won’t have the frustration of contracts falling over, and the business needing to be replaced on the market for sale. When this occurs some buyers are understandably cautious, as they perceive there may be something wrong with the business.   Jo-Anne Wilson – Café Broker

Recently, The Real Estate Institute of Queensland found rental vacancy rates fell 0.6 per cent to 1.7 per cent in the last quarter to September – similar to rates at the same time last year. Searching for a rental property between September and January is always hard for applicants with many properties before being vacated, as people rush to move to the Gold Coast during summer. Owning a property management company for 7 years, when the squeeze is on, some applicants will offer to pay up to a year of rent upfront, and even give up their family pets is sad but true. Families with pets and more than two children struggled most to find a home, as owners were reticent about wear and tear on property. Family homes in Southport are amongst the scarcest, with some properties attracting more applicants than ever. Elsewhere, couples are finding it hard to find a home. Younger people can be forced to look for months before finding a property. Interstate families are can pay up to months in advance to secure a Gold Coast property. They then leave the property unoccupied (to avoid missing out) before the new school year. Vacancy rates in Coomera had been at about 1 per cent for most of the year. “There is a lot of new development and people are moving there because it’s affordable, not too far from Brisbane but still close to the Coast” a spokesperson said. Properties with pools, those close to the water, and units on the beachfront were also among the hardest to find. Prestige properties in Hope Island or those in new developments at the northern end of the Gold Coast attracted longer periods of vacancy. The average Gold Coast weekly rent has increased from $328 to $340 since 2012, but remains at 20 per cent of the gross household income, according to the Australian Bureau of Statistics. When I started my rent roll company Australian Mobile Property Managers, it was on the cusp of a rental crisis….so I know personally what a great opportunity the current rental crisis will provide to property managers on the Gold Coast.

Want to find the perfect business for you? Sorry it does not exist. No matter how hard you look, or where you search, you will not find the perfect business for you. Whatever you look at, and whatever business you consider there will always be something that is not “just right”. Remove any thoughts of finding the perfect business, as the search will be futile. What you are really looking for is something close to perfect. A business that you can live with. You will need to compromise somewhere, and once you comprehend this fact, you will be liberated from the paralysis that afflicts many business buyers. Because the perfect business does not exist it is often tempting to look at starting a business from “scratch”. There are many benefits in this approach. No goodwill. No compromise. A fresh new start. And more. There are also many challenges with the start-up approach, for whilst it seems like a simple process to start a business, it is actually far more complex, and risky, than buying an existing business. Have you ever heard that statement that “most small business fails in the first three years”? What they are referring to is new start-up businesses, not existing businesses. An existing business has a historical track record, it has all the administrative infrastructure in place, the systems, the clients, the suppliers, existing advertising, phone numbers, known location, staff, processes, and more. All these things are in place to allow you to focus entirely on running the business, and growing the business. You have a platform from which to build on. In a start-up, you have to create the platform. When you start a new business from scratch, you add a competitor to the market. This creates more competition for the same client base, and eventually makes each competitor’s share a little smaller. Acquiring an existing business to build upon does not have the same effect. For these reasons it is suggested that an existing business is usually going to be a safer, more successful option.

THE INTERESTING STUFF

1. DO SOMETHING THAT YOU LIKE

Acquiring a business (or starting from scratch) is your opportunity to create a 'new start' for yourself. It's an opportunity to start over again in many ways. So don't get into a business that you won't like. This is your chance to do something that you'll like to do – something that defines you.

2. DON'T LET THE KNOCKERS AND DOUBTERS CONTROL YOU

Many well-meaning people will try and talk you out of chasing your dreams. Listen to all the advice that you receive, but in the end, it's your life, and you need to make bold decisions if you want to succeed, – and if you want to accomplish your goals and targets. Business owners must be bold and a little selfish if they are to succeed. Look at successful people like Mark Bouris, Richard Branson, Steve Jobs, Elon Musk, they all followed their own vision, and didn't allow people to talk them out of doing what they knew was the right thing for themselves.

3. KNOW YOURSELF

You must know your own strengths – and weaknesses. Be honest with yourself. Don't "overstep" your ability. If you have weaknesses, get help in those areas. Don't try to do everything yourself.

4. HAVE FUN

Life is short. Have fun. Sometimes having fun is more important than making loads of money.

5. ALWAYS BE LEARNING

Those people who think that they know everything and cannot learn any more are headed for failure. Don't be too proud to admit that you don't understand something. Be humble. Keep learning. Life is a journey of constant learning, and learning is fun.

6. BE THE PERSON THAT YOU WANT TO BE

Many business owners unintentionally become someone that they don't want to be. Angry, stressed, serious, boring, complainers……. Don't let that happen to you.

7. CHOOSE OPTIMISM

Nearly all successful business people are positive and optimistic by nature. It is rare to find a successful self-made business person who isn't positive and happy. This is not an accident. Their attitude is often the reason why they have been successful. A positive attitude and a great outlook will help you to have a successful and positive business. THE BORING STUFF When considering whether to buy or start a business , it is important to make an informed decision. Consideration of alternative choices, and application of informed decision making, plus an overall understanding of opportunity cost, will allow you to avoid the potential pitfalls on the path to success. Issues Prospective Purchasers Should Consider Before you set your sights on a specific target business to acquire, undertake a comprehensive analysis of the target's business and industry – and your relative position with respect to such factors. A strategic objective should be sought as a potential outcome of the proposed transaction. This objective may be as simple as "owning and operating a coffee shop business because I can make it a success and the business provides me with a sense of personal satisfaction", or "I want to buy company X and merge it with company Y in order to achieve a 52 % market share in widgets". As part of your initial planning, you must develop and implement an acquisition strategy that addresses:

1. Why you want to purchase a specific business or enter a specific industry;
2. Your plan to achieve the overall acquisition strategy (i.e., should I buy the target's shares or only its assets?); and
3. What are your plans for the business once it is acquired (i.e., I will merge the operations with my other hardware store, or, I will sell the tools that my tool production company makes in the hardware store).

The acquisition strategy must be part of your overall vision. It is advisable to identify a variety of suitable targets and initiate contact with the targets on a confidential basis to assess the possibility of a transaction – usually through a business intermediary (or business broker). After you make your initial assessment, you can start implementing your strategy (with the use of professional advice from your business lawyers and accountants) and then begin to lay the groundwork for the transaction. Basic Questions a Purchaser of a Small Business Should Consider Asking

1. Why do I want to buy this particular business? What is the value of this business to me?
2. What are the advantages and disadvantages of purchasing this business? Have I compared the cost of buying the existing business with the cost of starting a new business within the same industry?
3. Can my resources (time, money, capital etc.) be utilized in a more productive alternative investment which better suits my goals, requirements, skills and vision?
4. Have I obtained enough information, conducted enough research and properly evaluated all the data to satisfy my informational requirements regarding this particular business, the general industry and the overall economic value of the business?
5. What skills and resources can I bring to this business to make it more profitable, efficient and productive?
6. Do I have the time and access to the knowledge, skills and resources required to enhance the value of the business? How easily accessible are the required knowledge, skills and resources?
7. What is my previous exposure to this industry? What lessons have I learned from my past dealings within this industry and, if applicable, with this particular business?
8. Do I have the network to provide the base of contacts required for this business venture or will I have to develop a new set of contacts?
9. What am I willing to give up in terms of price, assets and financial capital in order to acquire this business? What do I expect in return? Are my expectations reasonable?
10. What financing arrangements should I make? Have I raised enough capital to sustain the business in the early stages? It is important not to be undercapitalized and in search of financing when you should be spending time managing the business, especially in the early stages.

What is the Best Way to Acquire the Business?

1. What is the most effective way to acquire the business that you are buying? Is this going to be a purchase of the business by way of assets, or shares? Do you understand the difference and corresponding benefits and risks between an asset or share transaction?
2. How will the purchase price of the business be determined and allocated (i.e., will it be based on multiple of earnings, revenues, goodwill, book value etc.)? How has the transaction been structured, is it for cash, shares, property or some other form of consideration or a combination thereof? Have you considered all potential closing costs and expenses when calculating the purchase price and required capital? What is the adjusted cost base of the shares (if it is a share transaction)?
3. To obtain a comprehensive understanding of the business, use a number of sources including the vendor and if possible, the vendor's customers, competitors, present or former employees or business partners. This research should be done in addition to the market, industry and other research required.
4. What liabilities will you be assuming if you acquire the shares in the company?
5. What legal obligations will you inherit by buying this business? What licenses and permits do you require (i.e., liquor license if a bar) and what environmental and other standards have to be met in order to operate the business? Do you require any governmental approvals or consents in order to purchase or operate the business?
6. What tax issues should be considered with respect to this business?
7. Who is the vendor, and why is he/she selling the business? For example, does he/she feel that the industry has matured and there is no further potential for growth? Does he/she have alternative business opportunities that they wish to pursue? Does the target or its principal(s) have a good reputation in the industry, and is the target having trouble generating business (and if so, will you inherit that bad reputation)? If you can understand the vendor's motivation for selling then you can design and implement appropriate strategies to counter any setbacks or capture any opportunities when you buy the business.
8. What critical information can you extract from the vendor regarding the business? How can you extract such information if the vendor is not motivated to provide it?
9. What strategy are you going to pursue for this business post settlement? It is vital to have a clear, concise and coherent strategy before you purchase the business. The proposed strategy should be proactive and further your vision and goals for the business and the relevant industry. Essentially this is your Business Plan.
10. Have you and the vendor agreed upon the general terms of the transaction? If so, what are the terms? How have you papered the transaction thus far (i.e., letter of intent, oral agreement, correspondence)?
11. Have you obtained the advice of professionals such as business lawyers, business consultants, accountants, and others with specialized knowledge? If so, who are the advisors and what is their experience, knowledge base and track record? Do they have experience within the specific industry in question?
12. What legal structure should you use to complete the transaction (i.e., sole proprietor, partnership or a new/existing corporation)?

Other Issues to Consider                                                 

1. Is the property leased? If so, what is the term of the lease and the rent? What are the terms and conditions for remaining at the current location of the business? Will the landlord give consent to transfer the lease? Will you be able to execute any renewals at the expiry of the lease? How soon will the lease terminate? Can you negotiate a renewal as part of the transaction and if so, should you negotiate a renewal and at what rent?
2. What proportion of the value of the business is tied to its specific physical location? If you are required to move locations does the value of the business diminish significantly or is the business flexible in its viability to move to different locations and still generate the required client base and revenues?
3. Is the value of the business based on its tangible or intangible assets? Is the equipment/inventory modern and in good condition? Do you have a complete list of the assets? Which assets are not for sale and why? Have the assets/equipment in question been appraised to determine their value? Has the target protected its intellectual property by using trademarks, patents and copyrights?
4. Have you talked with other business owners to determine their thoughts and input with respect to the business and the general economic viability of the area/ business/industry?
5. Who are the key employees of the business? Do you require their services in the future? Who are the leaders and who are the followers among the employees? What is their relationship with the vendor? Can you successfully transfer the vendor's employees without losing value in the relationship (and the business)? If not, what can you do to minimize any negative consequences that will arise due to the transfer? How do you plan to terminate employees that do not meet your requirements? How do you maintain the balance between employees you want to retain and those you want to terminate without diminishing value from the business? Is there a union involved? Are the employees' compensation arrangements and government withholdings up-to-date and is their compensation in line with industry standards?
6. Who are the critical suppliers to the business? What is required to ensure a long term supply of these goods/services? What terms exist with the business at present for supply of goods and services, and if they are favourable, will the suppliers continue providing you with such terms? Are there better alternative suppliers to consider (e.g., more cost-effective, better quality or logistics)?
7. Who are the competitors of the business, and what are their strengths and weaknesses? What opportunities and what threats can you map out for the business? Can the competitors use the transfer of the business from vendor to purchaser as an opportunity to take advantage and acquire customers, goodwill and suppliers from the business How can you attract business from the competitors? Can you identify clients and customers of your competitors?
8. Are the vendor's required during a transition period? Is the vendor willing to sign a Consulting Agreement to provide support and training for you for a defined period of time and on defined terms if required post-settlement?
9. What is the bargaining power of the target's customers? What credit terms do customers enjoy? What is the quality of the target's receivables? Does the business suffer from bad debts? Does the business demonstrate consistent sales throughout the year or is it subject to seasonal sales?
10. Are there opportunities to find growth and expansion of market share, client base, and product/service lines? How will you capitalize on such opportunities and what resources will be required? Have you prepared strategies to immediately seize upon any such opportunities?
11. Can any synergies be identified and quantified which will assist you in calculating the purchase price? Can you immediately exploit such synergies post closing without added expense or resources? If not, what expense and resources are required to realize such synergies?

Financial and Fiscal Basics

1. Have you been provided with financial statements (or pro-forma financial statements) for the business? Try and obtain financial statements for the past three fiscal years if available.
2. What do the projected calculations and forecasts for performance indicate about the first year? Have you developed detailed and quantified projections and forecasts based on reasonable assumptions and expectations? Have you had the forecasts checked by a professional, and if so is there any bias in the reporting or is it an arm's length calculation?
3. In your projections/forecasts, are there any periods when cash flow will be tight and supplementary financing may be required? Is there a margin in the financing you have available to cover fixed and other costs in case of a downturn?
4. Will additional investment capital be required, and when will such investment be required? Do you have a list of specific priority based investments to apply cash and capital towards that will provide immediate dividends in terms of productivity, marketing, sales or other valuable aspects of the business?
5. Do you have the finances required to maintain your lifestyle without having to divert funds away from the company?
6. How sensitive is the business to certain risk factors (such as industry and/or economic downturn)? What strategies can be put in place to cushion such risk factors (i.e., can the business' assets and resources be utilized in another capacity to generate revenue if the core business is suffering from a downturn)?

Financing the Business

1. Upon completion of the transaction, it is important to ensure that the business can meet its commitments. Therefore, prior to purchasing the business you should assess whether the business will be able to meet its financing obligations.
2. What is the suitable level of debt to equity in the industry for this business (will your ratio be within industry standards)?
3. Have you considered all transaction costs (i.e., professional fees, taxes etc.) in determining the necessary financing and overall costs of the transaction?
4. Will you need Vendor Finance to complete the transaction?

Due Diligence

1. What is the "quality" of the financial statements/other information that you have been supplied with? Does the information meet your requirements ? Is the information current or out of date? Who prepared the information – was it prepared by a professional accountant, or was it prepared in-house? Does the balance sheet reflect fair values or is there a risk of an overstatement of assets and/or an understatement of liabilities?
2. Remember that Due Diligence is more than numbers. Conduct legal searches and make enquiries with as many regulators and parties as possible.
3. Ensure all forecasts and projections are 'normalized' and adjusted to realistic market-based standard, and that all facts, figures and numbers used are reasonable.
4. Have you engaged in "feet on the ground" research . Do some legwork and try and gather a "real world" perspective on the entire operation of the business. Speak to stakeholders in the business such as customers and suppliers about all aspects of the vendor and its business.
5. Who in your organization will be responsible for due diligence?
6. Do you want to interview employees of the business? Will it be better if employees are kept out of the due diligence examination, and allowed to focus on their duties?
7. Have all the material contracts been examined thoroughly?

This year the Australian Institute of Business Brokers (AIBB) held a National Conference for professional business brokers involved in the facilitation of transfer of business ownership from one party to another. The conference is designed to provide support services to brokers, strengthen their network team, and train them with the most “up to date” professional development skills in business broking, to ensure they are providing the best possible services to both buyers and sellers of small/medium businesses. The conference included guest speakers (professional experts in their field) Dr John Hewson, Patrick McMichael, Phil Chapman (Australia’s leading retail shop lease advocates), Catherine DeVrye (best-selling author of eight books and past winner of the Australian Executive Woman of the Year Award) and our very own South Australian Benchmark broker Brian Sander (one of Australia's most experienced business brokers). Benchmark has had an impressive result at the 2015 AIBB National Conference in Cairns this year, with two Benchmark brokers nominated for Senior Business Broker Of The Year and one nominated for Rookie Business Broker Of The Year. Brian Sander won the National Chair Persons Award for services to the AIBB and business broker Yiling Tang was awarded the SA State Chair Award! Nominees for awards were Ian Salter, Lincoln Bridge and John Kasapi. All in all a fantastic result for Benchmark.

How much is a business worth? How much should you pay? The simple answer is that a business is worth what the market will pay for it. This is also the legal definition of value. But this definition doesn’t quantify the value of a business, or help determine what a business is worth.   Here is a quick & simple guide: When considering what a business is worth you need to start thinking about what kind of return you expect from your investment. It is usual for us to want to receive a return of between 25% & 50% on the investment. So if a business is earning $100,000 per year, on this basis it should sell for between $200,000 (50% return) & $400,000 (25%return on investment).   The next step to consider is risk. If a business is considered to be really “safe” and relatively risk-free a lower return on investment is usually acceptable. An example of this kind of business is a Post Office. These are considered to be safe, have government support, an exclusive area, no competition, and only trade for five days. Therefore, these businesses have a return of around 20% (or five times earnings).   Another kind of business is a café. These are considered to be less “safe” and therefore a greater risk applies. A café buyer will expect a 50% return on investment (or two times earnings).   So if the Post Office and Café are both earning $100,000 per year, the café will sell for $200,000 (50% return) and the Post Office will sell for $500,000 (20% return).   Be aware that businesses in capital cities will sell for more than in rural areas. Many specific industries have peculiar rules that apply to what they will sell for. Some examples are: Newsagencies, Taxis, Childcare Centres, Supermarkets, Franchises and Rent Rolls. Experienced business brokers, accountants and financiers will be aware of the market forces and what a business should be worth. It is recommended that you always seek guidance from a qualified professional to assess the value of the business that you are looking at.

Two of the biggest mistakes people make when acquiring a business are that they either: 1. Underestimate the total investment required. 2. Overestimate the amount that they have available to invest. To avoid these two basic errors you simply need to be aware of them, and calculate the total amount you can afford to invest, and the total cost of every business that you look at. It is often more than the asking price plus stock. When buying a business you need to allow for the following acquisition costs: -  Purchase Price -  Stock At Valuation (Wholesale Value) -  Stamp Duty (varies from state to state) -  Assignment Charges (franchise, lease, other) -  Legal Fees -  Accountant’s due diligence, advice -  Loan establishment fees -  Set-up costs (stationery, uniforms, signs, advertising) -  Capital improvements -  Computer hardware & software …… and more. These are often broadly referred to as “working capital”. To avoid overestimating your financial capacity, it is wise to start off by arranging to meet with several finance brokers or bankers to determine what your limit (or budget) should be. Once you have set your budget it makes it easier to find the right business, and move forward with the acquisition without delay. Remember that most experienced bankers and financiers will be aware of what to look at when buying a business. They are therefore a great source of free advice and assistance in appraising a business, and its value. After all they won’t lend you the money if the business is not going to be able to repay the loan. Remember also, to calculate the “working capital” required.

“Dear Yiling Tang, How time flies. It has been over three months since we have known each other. I learned a lot during the process of buying a business with you. I came to Australia in May this year. I experienced an overwhelming amount of pressure in my everyday life, language and business hunting. Fortunately, I met you when I had no idea on how to deal with all those difficulties. It is you that gave me unlimited help and encouragement! I know you carried even more pressure when I was under all this pressure. You considered my urgent visa time frame, business investment and profit, business location, qualifications and my English barrier. When I experienced numerous failures whilst business hunting, it was you that always stood by my side to comfort me and encourage me. You have always been considerate of me. You knew I missed my daughter, and even suggested I bring her to Australia after a smooth business take over to benefit both of us. Our relationship has actually been far beyond an agency relationship. I have long before considered you a best friend and sister from the bottom of my heart. I am comfortable to talk to you about anything and everything close to my heart, and will continue to share many more happy moments with you. I will condense a thousand words from my heart to simply, Thanks a Million! Thank you for choosing a business that not only suits me, but a business I genuinely like as well. I will try my best to run this business to its full potential. Yiling, it is not only my luck, but destiny for us to meet and I hope we will be friends forever! In addition, I want to let the team at Benchmark know that they have genuinely possessed an excellent broker and team member who treats her clients as friends and delivers sincere help and guidance. I believe your company will only get stronger having such a great member of your team! Lastly, I wish Yiling Tang and her family good health, along with great success for your company!”   Thanks again! S. Wu

Nearly every business will demonstrate at least one of five “negative attributes”. Being aware of these negatives can assist you to prepare for the purchase of a business. What are the Five Negative Attributes? They are: 1. Need To Hold Stock 2. Debtors 3. Managing Staff 4. Long Trading Hours 5. Key person, product or client. Most businesses possess at least one or two of these “negatives”, and thinking about these areas can help make your acquisition of the business smoother and more successful. How can this benefit you? Well, first of all you need to bear in mind that there is more to buying a business than just the price, and how much profit you will make out of running the business. It is in these five areas that you also need to consider: -  How much stock can you afford to carry? -  How can you keep debtors under control, and to the lowest possible level. -  How to best manage staff. Is this something you are good at? -  Does your lifestyle allow you to trade long hours? -  Try and ensure that your business does not rely too heavily upon either one employee, the sale of only one or two products, or sales to only one or two clients. Looking to buy a business is a “process of elimination”, and by identifying which of these areas concerns you most, you will start to put together an outline of the kind of business you will buy. Together with an analysis of your own personal skills and weaknesses, you will start to understand what type of business is going to be right for you.