Of all the ways in which we can become financially independent and successful, owning a business is the only real means to acquire significant wealth. More effective than property, shares, gambling, or working as an employee – owning a business is the most rewarding, most satisfying and immediate means to creating wealth. The decision to buy (or start) a business is one of the most important decisions ever undertaken. The importance of this decision warrants the most careful planning, attention to detail, and professional consultation. TIP – GET THE BEST POSSIBLE ADVICE! Once you’ve bought a business, you can’t give it back if you don’t like it, or if it’s not right for you. It’s not like buying a car, there isn’t any warrantee, and there is no instruction manual. So when you decide to buy a business you need to get good advice and guidance from experienced, caring, professionals before making the commitment. Be prepared to listen to the advice that is given to you, and be prepared to implement that advice. It’s a fact of life that you get what you pay for, and this is absolutely true in this case. Don’t try to save a few dollars by either not seeking professional assistance, or by choosing an advisor simply because they are the cheapest. Take the time to seek out the advisor that you feel most confident with. Someone that you feel really listens and understands your position, your goals, and your requirements. It can take a long time to find the right group of people but it is essential that you take the time, and seek-out, and put together the right team. The most successful business owners in the world will tell you the same thing – surround yourself with good people.  Do not settle for second best. Don’t stick with a professional advisor just because they have been with your family for years, or because they are a friend or relative – use them because they are the best. You will need to put together a team of advisors which includes: -  A solicitor or lawyer -  An accountant -  A financial planner/superannuation consultant -  A financier -  A marketing advisor, or business planner. -  A business coach Remember to put the best team together. Think of it like putting together a cricket team, or a football team – you are the selector. Have high standards, and expect total attention from these people. You are their client, so expect them to look after you properly…………It will make a huge difference.

Over many years we have found that most buyers are local. In fact, about 70% of buyers are locals. Only 30% come other sources – Many from interstate. We have found that genuine interstate and overseas buyers will have the local papers sent to them, and that they will look at local websites, so advertising overseas and interstate generally does not work. Buyers come to us. If proper preparation and planning are in place the buyers will make a “beeline” to our door. We do not need to chase them, they will find us. When selling your business it is wise to think about what kind of person or company would be interested in your business, and where they would come from. You need to consider what is the best way to let that type of buyer know that your business is for sale. One method of advertising alone will not be successful. A combination of proven methods working together to produce a cohesive strategy is required to find buyers – and to get them looking at our business.

There are many cases where I’ve heard buyers say they are sick of dealing with business brokers. “Why” I’ve asked? Buyer response: “well, they just don’t get back to me”, “they won’t send me all the information I’ve requested”, or “they want all these documents filled out and I just want to know where the business is and what the name of it is” Let me set the scene by identifying the types of buyers we engage… The Buyer & their Actions… Scenario 1. Sophisticated corporate buyer – Is no stranger to business dealings, understands the industry they wish to purchase in, likely to already have a professional team of solicitors, accountants and financial advisers. They see a business opportunity they like, and move in quickly to engage the broker in dialog. They make a quick decision on whether to purchase the business or not without procrastination. From the broker’s point of view, this type of buyer knows what they want and how to get it. Their actions speak volumes on how serious they are to purchase. The buyer is quick to qualify themselves to the broker with all the appropriate information needed such as: what they have previously owned and operated, their assets and how they propose to fund the purchase. Scenario 2. First or second time buyer – makes an initial phone call (sometimes with a blocked/private number) or may forward an online enquiry (no phone number included) or a direct email to the broker that states “send me all the information” The Broker & their Actions… Towards scenario 1. Arranges an immediate face to face meeting with all relevant decision makers, completes the confidentiality agreement and proceeds with a meeting/inspection of the business. The buyer is always happy with this response as they are progressing through the process quickly. Towards scenario 2. A – The broker may pick up the initial phone call or because it’s a blocked number, potentially just let it go and wait for the caller to leave a message. B– The broker may receive an online enquiry with no contact number provided, so the broker will usually request the best phone number to contact you on to discuss your initial enquiry. C – The broker may respond to the email they have received also requesting the phone number to have a brief conversation to understand the buyers business requirements. Suggested actions should be… What could first or second time buyers do to help themselves cut through what seems to be “the red tape” Buyer’s will always want to learn more about a business opportunity, so if you’re a serious buyer it’s important to understand your actions will always motivate the brokers actions. Keep in mind, brokers operate under a code-of-conduct, their clients instructions and prescribed authority agreements. It is through these instructions and requirements that a business broker will qualify who they are dealing with, and act on the enquiry the way they do. Buyer Tips to show you’re serious…

1. Make sure your transparent
2. Send your business enquiry through with ALL the required details to avoid delay, and follow up with a phone call. Better still, make an appointment to meet with the broker.
3. Understand certain documents are required, such as; confidentiality agreement or a buyers registration form prior to any information, conversations or inspections etc.
4. All business partners / decision makers should be included on the required documents mentioned above.
5. Expect to be asked to meet with the broker face to face and all business partners in attendance.
6. The buyer should seek pre approval from their financier (if finance is required) prior to investigating a business or signing an offer or contract. Why? To avoid disappointment, embarrassment, time delays and unnecessary legal and accounting costs for both parties.
7. Understand what you can afford, keeping in mind your legal fees, stamp duty, working capital, stock, bonds and bank guarantees etc.

Conduct yourself as a sophisticated buyer and use these suggested tips above, and the ‘BUYER BATTLES BROKER’ syndrome should be eliminated. Happy business hunting Ian Salter www.ianslater.com.au

It is almost impossible to find the right buyer for your business if you don’t widely promote and advertise to find suitable buyers. The wider the net you cast, the more potential buyers you will have look at your business. More buyers = more demand, and more demand = more value for you. You simply have to expose the business to the widest possible market to sell the business for the best possible price.  That’s a fact. When selling large commercial property or up-market residential property it is common for successful marketing agents to allocate a marketing budget of 1% of the selling price of the property. As businesses are more specialised than property, and it is often more difficult to locate the perfect buyer, and a larger advertising budget will often be required to achieve a sale. Many people think that advertising means placing an ad on the internet – or in the paper. This is not the case. That may have been the preferred method of advertising a business years ago – but not now. Today there are better, more sophisticated, proven, methods available to expose your business to the most suitable prospects. Successful business brokers know that there are at least four basic methods of maximising exposure of the business to a wide target audience. These are: – Database marketing* – Acquisition letters (direct mail) – Optimised website advertising – Press advertising Each of these four categories contains sub sections which are able to be invoked to optimize the exposure to the market. Don’t fall into the mistake of trying to save a few dollars on advertising, it always pays to do it properly. Allocate an appropriate budget towards marketing your business. Often business owners will be seen spending a small amount each week on advertising their business when just a few larger-sized ads will create more response and a more qualified buyers, in a shorter period of time. * Most business brokers have a database of qualified buyers Without exception, every single successful business broker will tell you that a proper marketing campaign will expedite the sales process significantly, and is critical in producing a successful sale for maximum value. Value for any asset is determined through SUPPLY & DEMAND. We can create demand for your business by creating a marketing program that will get lots of potential buyers wanting to know more, in confidence. In fact, the right kind of marketing will give you control. Rather than you feeling like you are inviting the buyer to acquire your business, you will have them asking you to sell them your business. This is called “gaining posture”.

It doesn’t matter what industry you work in, there always seems to be that inside language, “the lingo” which is usually spoken in acronyms. I’m often asked (mainly by first time buyers or sellers) to clarify acronyms within our Business Broking industry, which in recent times has prompted me to be mindful not to use acronyms at all. So what are some of the most commonly used industry lingo acronyms Business Brokers consistently use in their day to day advertising? The acronyms…

1. WIWO – means the price advertised is ‘walk in-walk out’
2. SAV - means the price advertised, is the price plus ‘stock at valuation’
3. ROI – means the ‘return on investment’
4. EBIT – means ‘earnings before interest & tax’
5. PEBIT – means ‘proprietors earnings before interest & tax’
6. EBITDA or PEBITDA – is the same as points 4 & 5 above with ‘depreciation & amortisation’ added
7. P&E – often used, which means ‘plant & equipment’
8. WIP – means ‘work in progress’
9. CPI – means ‘consumer price index’
10. POA – means ‘price on appointment’
11. ABN – ‘Australian business number’
12. ACN – ‘Australian company number’
13. GST – ‘goods and services tax’
14. PA – ‘per annum’
15. PW – ‘per week’
16. PM – ‘per month’
17. ATO – ‘Australian tax office’
18. DD – is referred to as ‘due diligence’

The lingo…

1. Encumbered – means there maybe some plant & equipment that has a chattel mortgage or loan hold over it from a financial institute that needs to be dealt with prior to settlement.
2. Unencumbered – means the reverse of the above. The assets are completely owned outright without any encumbrance or hold over them.
3. Working Capital – the liquid funds available in the business owner’s bank account to operate a business, post settlement / purchase.
4. Plus Legal’s – means the additional cost of a solicitor or accountant’s fee.
5. Plus Stamps – means there is ‘Government Stamp Duty’ to consider (note: this varies from state to state)
6. Will Trial – the seller is willing for a buyer to come in and trail the business to access the financial performance of the business (conditions apply)

I hope these basics help you when searching for your next business venture.   Ian Salter www.iansalter.com.au