04/06/2009 by info.

I was told a story last week about a Company Director who was hosting a dinner party/business meeting in a plush and upmarket apartment in Central London. He was asked whether he owned the freehold of the apartment (worth millions)…. he said he did. His business contact then reminded him that for £3 he could find out whether he was telling the truth, he didn’t back down. The truth is that he doesn’t own it, but he lost all credibility because this person knew that he was a liar and perhaps couldn’t be trusted.

Jump forward to The Apprentice and Yasmina Siadatan’s interview in the Semi Final where she claimed that her restaurant trading under the name of MYP UK Limited was turning approx £8,000 per week and had a gross (sic) profit of 4.5% this would mean that the net profit would have been in the region of £19,000 per annum. (Actual turnover for the company is apparently approx £290,000 per annum with a net profit of around £8,000)

She was, for a Finance Director, naïve enough not to realise that Alan Sugar, you or I could obtain the annual accounts. The programme suggested that she was not telling the truth but it actually showed that she was a very poor accountant. As the restaurant had only been trading for 9 months pro rata she maybe WAS telling the truth, but the lack of technical knowledge meant that she was unable to explain herself.

These two people were both naïve, one simply wanted other people to think that he were doing better than he really was and the other didn’t want to admit her own weaknesses. Even though she was a Finance Director Yasmina Siadatan knew nothing about finance.

But when you have something to lose such as when negotiating with buyers of your business, honesty is not the best policy, but is the only way forward. At best you can lose face when found out, at worst you can be sued for damages should someone rely on your representations in buying your business.

If you know something isnt true dont lie about it, if you are not sure about the answer, dont be afraid to admit that you need to ask advice before answering.

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04/06/2009 by info.

The recession has hit many sectors, industries and businesses. Some businesses have deliberately contracted cutting their operations and costs in order to survive with a related reduction in turnover; others have had this forced on them by the market.

Many business owners are holding off selling their business until they return to previous levels of profitability, and perhaps they are right in doing that. When you are selling a business, profit and the size of the business is everything. A small business where the owner is simply making a wage could be worth nothing, or at most two times its profit. The larger the business becomes, the multiples someone is willing to pay increases.

So if you own a business and find yourself in this situation of wanting to sell but not believing that you business is worth enough what could you do?

You could accept the lower price, or trade your way out of it of course; another alternative would be if you wanted to sell your business for a good price is to buy a business.

You can buy competitor, and incorporate their turnover into your business, but because you are using your existing infrastructure a good proportion of the costs will disappear increasing your profitability.

Or buy a business or two in slightly different locations and create a chain, re-branding those businesses.

In other words you speculate to accumulate, a £40,000 investment now, could result in a much larger return a matter of a few months later. One time when 1 +1 = 3

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