Buying a Business? Don’t make these mistakes

I have been in business now for many years, and over those years I have started many new ventures. I’ve experienced success, and have also had some spectacular failures! I often think back to those early days in business, and ponder what would have happened if I knew back then what I know now.

I would like to share with you 10 lessons that I wish I had known before I started.

So here we go:

Lesson 10. It is going to be hard. Very hard. But…..

If you love what you do, and go into business for the right reasons, then the rewards can be significant! Don’t ever get into business for the sake of making lots of money, because that is almost always going to lead to failure. 

Lesson 9. What is a simple business? 

There is no such thing as a simple business! Don’t be fooled by ‘simple sounding’ ideas. All businesses have complexities which can trip up the unprepared business owner. 

Lesson 8. Winning Strategy

Business plan + Marketing Strategy + Financial Spreadsheets + Money Management = Winning combination. 

Using these tools, you significantly improve your chances for long term business success. Don’t use them and you may as well put on a blindfold… 

Lesson 7. Business Partners can make or break a business. 

It is important that you understand that in reality you will end up spending more time with your business partner than your life partner; be it a girlfriend, boyfriend, husband or wife. It is essential that you have an excellent working relationship which is open, transparent and built on honesty and constant open communication. Without the right person and the right attitude towards the relationship, you will hit rock bottom pretty fast! 

Lesson 6. Confidence is a pre-requisite! 

Confidence gives you an air of authority, which in turn helps build trust and helps convince your prospect to buy from your business. And so I ask you this: At the end of the day, if you are not confident in yourself, your abilities or your business, why should your customers have confidence in you, your abilities or your business? And once a customer has a seed of doubt in their mind, guess what they will do? Shop around and compare you to others! So be confident. Just make sure you keep confidence in check and you don’t go overboard! 

Lesson 5. You must have profit margins 

A business without profit margins is a charity at best. And a business where paper clips have to be counted to maintain profitability is questionable in its viability. So this is lesson number 5 – if you are going to build a business, then build one with decent margins so you can grow and prosper without the constant stress and anxiety that accompany poor margins. 

Lesson 4. Potential income does not equal real money. “Cash is king” 

Have you ever heard the saying ‘cash is king’? Do you know what that saying means? You would be amazed how few business owners understand the true power of this fact. Without real cash sitting in your bank account your business will go absolutely nowhere. 

Lesson 3. Build relationships with customers 

Without customers you have no business. So treat everyone with respect and courtesy, and you may end up finding your customers becoming your unofficial sales reps, sending you so much work that you don’t ever have to do any marketing! 

Lesson 2. You will fail – So embrace failure 

At some point in business (and in life) you will fail badly at something. There is nothing wrong with failure – provided you learn from your mistakes and you don’t keep repeating them time and again! In fact, my personal motto is testament to this belief: ‘Success is the product of one’s ability to learn from failure’ 

Lesson 1. Become a doer. 

Become someone for whom the word procrastination is non-existent. Become the person who does as they say; who pushes forward day in, day out, maintaining high activity levels even when things are tough, and not sitting back and resting when the momentum kicks in and the business really takes off. And trust me, if you become a doer, the momentum will eventually kick in. It’s inevitable. And when it does, just make sure you keep doing!

Benchmark Business Sales and Valuations 

Science, Not Luck!

So what makes a business owner or entrepreneur successful?

Is it:

• Hard work?
• Good luck?
• Being in the right place at the right time?
• Being clever?
• Genius?
• Teamwork?
• Belief?
• Persistence?

Business success could be due to all of these things, one of these things, or none… In years gone by business owners have been successful for as variety of reasons, but in the future business ownership will not be as simple or easy as it has been in the past, and therefore business owners need to eliminate a reliance upon luck, and rely upon “science” to find success.

In the past many people have approached business ownership like gambling, or the same way that gold prospectors did in the 1800’s around the world…. And while some people were successful, like gold prospectors, many people were unsuccessful.

At Benchmark Business Sales we see many business owners every week who operate their business on the “luck” principle, rather than planning the way that the business will operate. If you rely upon good luck for survival, you will eventually be disappointed. Good luck cannot last forever.

How do you turn your business success to a science?… and eliminate the reliance upon hard work and good luck?

The answer is to take these steps.

The first step is to apply research.

The second step is to produce a thesis, or a hypothesis

The third step is to test the thesis

The next step is to implement the plan

The last step is to continually measure and test results.

Research is the first step in applying a scientific approach to business. Research the market (who are the potential customers and clients), research their habits, their likes and dislikes, produce a “profile” of the type of client or customer that the business will serve. Research competitors, barriers to entry, financial metrics (profit margins, KPI’s, typical operational costs), the future of the venture, ability to recruit and retain staff, .. there is a lot to learn from researching.

Once the research is completed and collated it is time to produce a business plan. A Business Plan is like a thesis on how the business should operate. The plan is based upon the facts uncovered in the research phase, and it covers the way the business will operate financially, operationally, and how marketing and advertising will operate. It also provides a clear plan for how the business is to be operated. A plan which could be handed over to anyone, who could implement that plan and run the business.

With the plan completed it can be tested.

Once the plan is implemented and tested the results can be measured and tested against the research, and the thesis. If the actual operation of the plan produces unexpected results the plan can be altered and tested again…. This is the scientific approach to business ownership and management, and this is the best way to take the risk out of business ownership and operation.

Don’t rely upon “luck” for business success. Turn to science and make sure that your business isn’t just successful, but your success is sustainable.

Benchmark Business Sales & Valuations 

The Business Lifecycle comprises:

• Start Up
• Operation and Improvement
• Wealth Management
• Exit

Business Purchase or Start Up 

Whether starting a new, or buying an existing, business, the following should be considered to ensure you make an educated decision before proceeding:

• Pro's and Cons of the industry
• Business Planning
• Marketing strategy
• Registration and licence requirements
• Name registrations (including ASIC and Domains)
• Tax Structuresand Asset Protection
• Workplace Health and Safety
• Tax Office Compliance
• Intellectual Property / Trade Marks
• Insurances – Prof Indemnity, Contents/Building, Public Liab, Workcover, Life, Income protection, Key Man
• Finance & cash flow requirements
• Staff and employment requirements and obligations
• Fixed and Variable expenses, break even analysis
• Management and reporting systems.

Operations and Improvement 

Sound business operations require the right foundations. This means access to accurate numbers and key measurements in a timely manner so you know what is happening in the business at any point in time. Business owners must be able to regularly review and monitor performance, and make changes quickly. Three main areas for business improvement are:

1. Increasing Gross Profit margins
2. Reducing overheads, and
3. Growing sales. Regular meetings, monitoring and implementation of your strategies enable you to quickly see improvements to your profits.

Many businesses fail because of a lack of planning.  It is imperative that business owners manage, monitor and measure business performance to know where changes can be made, and to see that business plans are working.   

Wealth Management

 What is wealth? To be wealthy simply means you can afford your lifestyle, now, and into the future. Business owners should manage their affairs to grow and build wealth.  They should also aim at reducing their input into the business and ultimately retiring.

Exit

There are many ways that this can be achieved.   A succession plan or exit strategy will help your business transition smoothly to the new owner – and derive more value. It clearly outlines your timeframe, expected sales value and who your targeted purchaser is. It is highly recommended to plan your exit early, the sooner the better. That way, you have time on your side to maximise the value of your business for sale. Once your timeline is set you can then clearly set measurable targets to reach your business’s full sale potential.

It’s also important to know who your targeted purchaser is, being your family, an investor, a new working owner or your business team. There are many different strategies and planning solutions depending on your ideal purchaser… So start planning your exit strategy now!

If you’re thinking of selling your business, send an enquiry to admin@benchmarkbusiness.com.au.

One of our brokers will be happy to assist you.

Every Business goes through a Lifecycle starting as a Start Up Business, to the Operation and Improvement Stage, Wealth Management and Exiting the Business.

Benchmark Business Sales and Valuations

OK, you've been running your business for a while now. And it's going … well, the way it's always gone.

Like many other business owners I work with, you might be feeling that there must be a better way of doing things. There are glitches, annoyances and recurring problems keeping you awake at night. So you dare not turn your phone off. (On that subject, think about it now. What would happen if you turned off your phone for 48 hours? Or a week? If that thought scared you, you’d better keep reading!)

When you start a business, you begin with the basics and work out from there. It's easy to forget that actually, the basics always remain absolutely central to how well your business performs. How easy your job is. How good your staff retention is. How smooth your cash flow is. And how well you attract and retain customers.

So here are eight areas which are the basics of your business drivers. Answer ‘yes’ to all or most of these, and you have a thriving, valuable business. You are ready to sell for a very favourable outcome. Answer ‘no’ to half or more, and you have a right to be scared!

1. A quality product. Are you still focused on offering products or services you genuinely believe in? This isn't just a driver of business, it's a driver of you and your staff. If it's become diluted or compromised, now is the time to realign with it.
2. Get noticed where it counts. Do you have a clear message about why your product or service is so good? And do you communicate that message to the right markets?
3. Make the most of what you have. Are you taking full advantage of the opportunities already available to you, like the location of your premises, the expertise of your staff, the equity in your business?
4. The bottom line. Is your cash flow regular and plentiful? Are you paying no more than you should for some supplies, or charging no less than you should for some products? Do you chase defaulters? Thank prompt payers?
5. Treat your customers well. Do you have a broad and loyal customer base? Nothing annoys a customer more than indifference. So are you acknowledging your customers’ loyalty?
6. A growth strategy. Do you have ideas about how you might extend your product range or services into new markets or new offerings?
7. Eliminate constraints. Do you have the time, funds and appropriate staff or other resources to act on your ideas for the business?
8. Internal support. Do your back-office systems actively help your business sell products, implement improvements, receive money and keep customers?

And if you’re working towards selling your business, think about this for a moment…

Will your business run without you if you're hospitalised for a month? If it won’t, you need to work towards making yourself dispensable. Future buyers will discount a business built around a key person.

The good news is that there are many ways to turn any one of these areas around.  It’s likely to be easier than you think and, in most cases, one solution will improve many areas. 

Benchmark Business Sales can help you to get it right so you achieve the best price possible for your business.  Remember, you only get one opportunity to sell your business. So give yourself the chance of attaining the healthiest outcome.   

Benchmark Business Sales and Valuations

Here are some business models to consider.

Whether you are seeking to start a purely online business, or to expand an offline operation online, there are several business models which you can consider. In this article I wanted to outline some of the various online business models that exist in order to give you some ideas to further research and ponder over if you are considering entering the 'e' realm. Note that this is a basic overview only and I have only listed the most common models. 

1. Direct sales – physical goods: In general, direct sales (particularly of physical products) is usually what people think of when they think of ‘selling’ online. Direct sales of physical products is where you sell a physical widget to customer A via your e-commerce store, and you deliver those goods to the customers chosen location. It is important to understand that the online version of the direct sales business model is different to that of an offline physical shop based business model, and you will need to make adjustments to your procedures in light of the differences should you wish to move online with your physical store. Some of the variations within this online business model include:

You pack and ship– this is self explanatory. You manage the entire process, from inventory management to packing and handling. This is the model I initially used for my online bookshop, and unless you have good processes in place the chance of making an error is very high!

Drop shipping– This is where you sell a product which you physically do not see or stock yourself, with the order being processed by a third party. In this model you don’t see any products, and if you get it right it can be quite lucrative given the effort involved. Expect your margins to be low however, and if your third party supplier stuffs up then you will be the one blamed by the customer. Drop shipping is sometimes combined with white labelling in order to hide the third party involvement from your customer, making it all seamless in the front end.

2. Direct sales – virtual goods:This is a direct sales model where you sell ‘virtual’ goods to your customers on an item by item basis. The virtual goods can be anything from ebooks, to audio files, videos and anything else digital. The beauty of this model is that once you create your virtual products, you can flick the switch and in very very general terms ‘make money while you sleep’. Variations can include:

You produce– This is involves you producing the goods for download/distribution, or where you provide the services being offered.

White labelled– This is where you use material produced by someone else, but the customer only sees your branding and does not see the third party in the process, nor do they know that you didn’t actually produce the product.

3. Direct sales – services:Yes, even services can be sold online in single transactions. For example, an accountant could sell personal end of financial year tax returns, with full payment made online in advance of the service being completed. The customer then simply sends the firm all the relevant required information for completion. Why do this? The firm gets immediate payment upfront, no chasing required, no managing accounts etc. There are many many combinations for service based businesses who wish to take advantage of online sales. Variations include:

You deliver– This is where you sell the service and complete the service in-house.

White labelled– This is where you sell the service, but the order goes to a third party for completion, all under your branding without the customer knowing otherwise.

4. Subscription– works for both physical and virtual goods and services: I personally love this model and have several subscription based projects of my own in the pipeline. In the subscription model you sell services/products (physical and/or digital) via your website, taking payment electronically, and delivering according to subscription levels and schedules. This model, if well setup, can be very lucrative, especially if you have minimum subscription periods that your customers must adhere to. In addition, adding a subscription model to an existing direct sales model can help smooth out the frequently seen monthly revenue ups and downs, making it easier to manage your cashflow and forecast ahead. 5. Online marketplaces– this model is often used by start ups, those wishing to quickly move stock and those who wish to create and run an online membership based market business. Variations include:

Existing– example Ebay; Gumtree: This business model is built around the use of existing platforms like Ebay to sell. I am personally not a fan of this model as it is not the easiest to get right, given the incredibly high competition and the strong focus from the customers on securing the best for the cheapest. Having said this, I have used this model with great success and built a start up from scratch using Ebay for the start, with a transition away from Ebay to a direct sales business model once I hit certain internal targets.

In-house– you develop your own market place: This is for anyone wanting to create their own version of ‘Ebay’. This is a very rarely used model that is costly and difficult to execute, so if you have this on your mind I strongly recommend you get in touch with me for a chat.

5. Combos– This is where you deploy more than one business model to run at the same time, or, you transition from one model to another based on various internal criteria, and business or market needs/factors. An example could be to develop a primarily subscription based business, but at the same time offering some items for direct sale as well. One of the beauties of the digital (online) world is that the possibilities are broad in terms of how you setup your online business. In addition, a digital model is far more flexible than the traditional bricks and mortar version, allowing you to evolve quicker, cheaper and more effectively than your offline counterparts. Interested in knowing more? Give me a call, drop me an email, I am always happy to help. 

Benchmark Business Sales and Valuations

Benchmark Business Sales and Valuations speciality division: Medical and Dental

Benchmark Business Sales and Valuations, Australia’s only national Business Brokerage sells to medical and dental practices clients across Australia. Benchmark Business Sales Specialists work in each State and offer the broadest possible range of experience in the market today, we are dedicated to structuring win/win transactions for the long-term success and benefit of all parties involved. The Sale of a medical and dental practice requires not only a great knowledge of the industry, but also access to interested Buyers who want to connect with Sellers. Benchmark’s Team of Specialist Brokers in the medical and dental field know how to market your practice achieve premium results. With many years of experience to call on we know where Buyers come from and we have developed successful Marketing and Sales Strategies to ensure outstanding results for our clients.

The medical and dental division is a group of experienced professionals including Benchmarks award-winning Specialist Nikki Katz, and Brian Sander, who has been with Benchmark Business Sales for more than 5 years and opened the Adelaide Office in 2014.

Ziggy Frankenfeld is a Chartered Accountant with extensive experience in executive leadership in Melbourne. Ziggy focuses on medical Businesses in Victoria. The medical and dental Business Brokers in Queensland are Belinda Packer and Jasmine Robson. With years of experience in the Business sector and owning Small Businesses Belinda Packer and Jasmine Robson achieve great results for their clients.

The dental and medical Division at Benchmark Business Sales and Valuations offers some of Australia’s most experienced Brokers to assist clients in the Sale or Purchase of a Business.

Contact us today on 1300 366 521 and speak to our Specialists.

Click here to find out more: https://benchmarkbusiness.com.au/medical-dental-practice-sales

Benchmark Business Sales and Valuations

Over the last 24 years we have seen a trend emerge in demand for small businesses. Demand rises and falls in a predictable way, and through mapping the monthly rates of buyer enquiry over the 19 years we have noticed clear trends emerge.

Traditionally the busiest months are January, February, April, September, October and early December. The quietest month is always August, and March, May, June, July and November are also quieter. October is a strange month for buyer enquiry because it’s usually quiet in the first weeks (long weekend and school holidays) but then (for unknown reasons) the second two weeks are usually very good (except in Victoria).

Aberrations such as elections will influence demand, but overall the increase and decrease in buyer demand has proven to follow the same pattern year after year.

Here is a graph which illustrates how buyer demand rises and falls during each year: 

Some cities will vary slightly in January. For example, demand is slow to build in January in Adelaide and Melbourne, but in Queensland demand starts from about the third day of January and rises. Another example of regional variation is the lull that occurs in Melbourne in the last week of October and the first week of November. We believe that this is caused by the Spring Racing carnivals and Melbourne Cup.

What does this mean for business owners?

All this information points to the reality that each year there are “good” and “bad” times to be selling. Demand influences price, and therefore it is best to have a business on the market when demand is starting to peak.

Preparing to sell at a “Peak” time (such as February) can mean that not only will the business sell for a higher price, but is will (usually) sell more quickly. Conversely, trying to sell in June, July or August will be likely to see the business sell more slowly, and in trying to expedite the sale business owners often drop the price – and achieve an inferior outcome.

So it is a good idea to look at the buyer demand volumes and plan to sell when demand is at the highest levels.

What does this mean for business brokers?

Experienced business brokers plan ahead and actively work to gather new listings to have them ready for the annual buying “frenzy” that occurs in January/February. OK, … it’s not quite a frenzy, but over 25 years we have seen it proven over and over again, that this is the peak time of the year for sales, and those brokers with the best listings will make the most sales.

The demand for small Businesses rises and falls throughout the year. Benchmark Business Sales analyses data of the last 20 years and can notice trends.

 Benchmark Business Sales and Valuations

As a business owner, you're always asking yourself, "What does it take to build an enduring, great company and to continuously improve and grow?"

The answer is that in business "You're either growing or you're dying," so you can choose;

GROW

STAGNATE

DIE

It's your choice. But really, there is no choice. Who would seriously choose to stagnate? .. and obviously nobody chooses to die. So, there is no choice – but to grow.

Focus On Growth Culture

Growth culture isn't just a component of a company's strategy, it is the company's strategy. Growth is a framework that needs to drive all operational tasks, projects and initiatives of a company. The DNA of the company needs to be all about growth. Opportunities for growth are everywhere and should always be explored. Companies that don't grow generally don't attract the most talented team members (because great people seek growth) and are therefore at a disadvantage from the very beginning.

Growth-focused companies have direction and that attracts the best people, and A-team players want to play with other A-team players, creating a cycle. Growth focussed companies invest heavily in the development and growth of their people, and watch as everyone grows together. This positive feedback loop of obtaining great people allows for more growth, which allows for more personal and professional challenges, which in turn allows for more growth that leads to more great people becoming team members (and repeat, again and again). This momentum is everything – and it only occurs if a team is constantly growing and pushing their own boundaries and capabilities.

Have Large, Audacious Goals

Operating a small-to-medium business is hectic. “Bushfires” and distractions are always popping up, let alone the endless opportunities for improvements. Having large, audacious goals and working backward allows a team to understand where they are going and how to get there. It provides everyone with the same direction, and allows the team to all work together for the common aim.

Having a growth mindset and pushing for big goals creates an environment of continuous improvement and growth.

Growth usually feels scary and intimidating, it requires additional investment, making choices based on probability-weighted outcomes, constantly weighing and considering opportunity costs, and stepping into the unknown. However, by not having these challenges or growth opportunities, you face the bigger risk of not attracting and/or keeping great people, which could lead to your company's demise. Not to mention, there is likely another competitor in your industry that is focused on growth and eventually and inevitably they will "eat your lunch." So we’ve all go to focus on growth – or die!

Benchmark Business Sales and Valuations

Business owners must have three separate business plans:       

• A Business Plan
• A Marketing Plan and      
• An Exit Plan.  

Do you have all three?

A Business Plan allows the owners and shareholders to plan for the daily operation of the business and to put targets, budgets and operating systems in place. It’s like the “instruction manual” for the running of the business.

Every business should have one.

Good business managers regularly refer to the Business Plan and use it as a constant reference point when making business decisions. It should be reviewed at least annually and updated and adjusted regularly.

A good business plan includes:          

• A mission statement          
• Plans for growth and expansion
• Budgets
• Asset replacement plans
• Operational plans         
• Key Performance Indicators to be measured and
• Action Plans which summarise the actions to be implemented with dates and responsibilities 

A Marketing Plan refers to the business plan and the mission statement to outline the targets and outcomes to be achieved through marketing and details the plan for achieving those aims. It includes a budget, and a mechanism for measuring spending and results achieved. The Marketing Plan also includes KPIs that are to be measured and monitored. 

An Exit Plan. All that‘s required to produce an Exit Plan, is to:

1. Decide when you want to exit, and how much you’ll want to sell for
2. Plan on how much profit the business will need to show to sell for the price that you want to achieve
3. Set a program with targets and KPI’s (Key Performance Indicators) required to realise the price sought.
4. Decide who is the most suitable buyer of your business
5. Plan to prepare the business for sale
6. Seek advice from credible advisors to keep you accountable and “on-track” and
7. Measure your performance and adjust where necessary to hit targets

Then, make it happen by engaging an effective business broker who will:

1. Help set an appropriate pricing plan
2. Help set the sale plan (including how the sale is to be executed)
3. Prepare the data and information that buyers will need
4. Understand the most suitable marketing techniques and produce a bespoke marketing plan
5.  Pro-actively follow up on buyers and engage them
6. Remove emotion from discussions and help to negotiate the best outcome
7. Follow the process through due diligence and co-ordinate activity to finalise the transaction.

The first plan to prepare should be the Exit Plan. Remember to start with the end in mind, and work back from there. 

There are three Business Plans every Business Owner must have: Business Plan, Marketing Plan and an Exit Plan. You need these to run a successful Business.

The end of the year is the best time to set up your Business plans: Why not taking advantage of the Christmas break and finish your Plans? 

Benchmark Business Sales and Valuations