14/06/2010 by info.

Willy Wonka & the Chocolate Factory is a film that is loosely based on the 1964 Roald Dahl novel Charlie and the Chocolate Factory.

The world, learns that the chocolate maker Willy Wonka has hidden five Golden Tickets amongst his Wonka Bars. The finders of these special tickets will be given a full tour of his tightly-guarded sweet factory, as well as a lifetime supply of chocolate.

In fact when Charlie win the prize, Wonka discloses that his actual prize is the factory itself, as the Golden Ticket search was conceived to help Wonka search for an honest and worthy successor to be the heir to his business.

Now I would not suggest if you wanted to sell your business that you should conduct a prize draw for a golden ticket, some have tried it without success!

But this story highlights two aspects in selling your business:

Firstly, that often your customer is a likely buyer. A customer may prefer to take control of their supply chain and grow their business vertically so that they can have more control over that supply. A shop customer also already knows how good your business is, and they do not make bad choices, they may already be sold on your business and could habitually recommend it to other people. Although many business owners are worried about approaching these potential buyers due to confidentiality.

Secondly that Wonka goes through a process of removing unsuitable successors from the process, this is exactly what happens when you sell your business. A number of prospects are either identified or indentify themseleves as buyers, now this process of identifying the one buyer takes time, you can do it yourself or your can instruct an agent to do it for you.

A seller of a business may have their own criteria, Wonda wanted honesty. Buyers can require that a buyer is competent or already have experience.

So when you think about selling your business you need to think about who is likely to buy it and what is your criteria for this buyer? Are you only interested in the money, or would you want more?

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01/06/2010 by info.

What buyers, making a decision to buy a business, do in their mind, is to carry out a SWOT analysis (an analysis of a businesses Strengths, Weaknesses, Opportunities, Threats), and you should be aware that strengths to you might not be so for a buyer. They do not do this on paper however it is done in their mind.

A shop owner for example could quite easily increase his turnover and profits by opening longer hours and working 6.00am to 11.00pm but this can be seen as a weakness to a buyer, especially if they want a life/work balance.

The seller may regard the additional profits as an opportunity, but it may undermine the demand for that business if buyers are not interested in working those long hours.

A very profitable business may indicate a strength to you however if you have made your business too complicated not many people will consider it an opportunity.

You would think that if a business makes greater profits then its value must increase, however it depends on how that profit is achieved.

When you want to sell your business it is important that you understand whether certain decisions and features will increase or decrease its value.

Carry out a SWOT analysis from a buyer’s point of view otherwise you may end up with a profitable business that is not worth the money it should be.

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06/04/2010 by info.

Why are certain people successful in business and others are not?

The different is their risk taking and decision making abilities; it is this that separates an entrepreneur from common people. Successful business people ignore the fear and trust their ability to make the right decision. It is important therefore that when faced with fear in your business, that you make a decision quickly.

Procrastinators lose in business not because they delay making decision but because they end up not making a decision at all.

The primary reason for not making any decision is that they are fearful of the outcome and they would rather continue on the current path - even if the current path were losing them money.

I see this all the time when people are looking at buying and selling a business; I am called in to value a business and am told by the owner that they want to think about it. In other words they are scared of making that decision to sell.

The same thing happens with buyers, even though they are presented with a great opportunity they will delay that decision to go ahead.

Of course no decision at all is a decision because the answer ultimately is NO. If you are in that situation remember you will not be successful in business if you say NO all the time.

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04/12/2009 by info.

One of the most frustrating aspects of any sale is perceived and unnecessary delay after solicitors have been instructed.

I am sure that many of you who have not sold a business but have been though the process in the sale of a residential property can recognise this feeling.

But if there is any fault whose it is?

There may be a number of reasons for a delay and the simplest one is that either a buyer or a seller is deliberately slowing down the sale process for personal reasons. Perhaps buyers are not ready to buy because they are waiting for a sale of their own to complete or the seller wishes to take advantage of seasonal profitability.

There may be issues that arise that neither party was aware about or one side wishes to try to hide and hoped that due diligence would not uncover the truth.

Sometimes the parties are at fault by instructing the wrong solicitor for the job. A solicitor without significant experience in business transfers can often stress and want answers to unimportant issues in the sale.

If a lease is being transferred the fault can lay with the landlord or landlords solicitor who have no incentive to hurry the process along. Often for them it is the better the devil you know.

Most of the time it is the fault of the buyer, seller or both for not managing their solicitor allowing them to sit on and not deal with paperwork when they receive it; the solicitor as a result with deal with matters when they have the time, so if you want a speedy conclusion you should be more proactive.

So is it ever the agent’s fault?

Well there are a good number of private sales where the seller and buyer conduct a good proportion of sales negotiations directly so an agent never gets involved in the process at all.

If an agent is involved they should provide comprehensive head terms for each sides solicitors and apply for references on behalf of the buyer, however when solicitors are instructed the agents job, that of finding a buyer, is technically over.

An agent may act as a go-between to communicate to both sides who is at fault in slowing the process down. But finding a buyer is what an agent is paid to do, not to try to hurry along professionals whom they have no power over.

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21/08/2009 by info.

It is thought that less than half of all start ups have any formal business plan, so it begs the question if they have no business plan, how do they know how much money they will need to run that business?

The fact is that they don’t! People starting business often overestimate their income and turnover and underestimate the amount of capital that is required to continue trading. This under capitalisation leads to business failures due to the owner not being able to invest money into that business.

How many times have you noticed new restaurants or retail shops open, only to close within a year, you can be almost certain that the owner fell into the category of not having a formal plan and being unjustly optimistic about their working capital needs.

The same scenario often happens with business purchases, often a business is sold on the basis that there is potential if only the owner could afford to invest, the buyer thinking they have a bargain underestimates the businesses working capital needs with the result that the new owner rather than the seller is the one who fails.

Maybe a business buyer should be staying clear of businesses sold “with potential in the right hands”, yes the owner could be incompetent without any business acumen and he might be a blithering fool. However the market (his potential customers) has already had experience of dealing with that business and has decided that they will NEVER return. So it might need a lot of money to turn this business around and persuade the market that things are now different.

So why not take this money you will need to invest turning around a business with potential and simply buy a more expensive business one that is generating profits and needs minimal investment.

If you don’t have the funds to do so, conceivably this is an indicator that you are under capitalised and will get into financial difficulties buying that business with potential.

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06/08/2009 by info.

Many business owners try to sell their business using smoke and mirrors. Hiding the fact that their business during the recession is not doing as well as it has done in the past. They claim a certain turnover but cannot provide any documentary evidence to back up these claims.

Business owner may present historical financial accounts to show that the business is capable of obtaining a certain level of trading; these historic figures are no guarantee of future performance.

But how accurate are these accounts?

One thing to remember is that an accountant will simply prepare accounts based on the information provided to them so there is no guarantee that they are accurate. Perhaps the best way of assessing how accurate they are is to ask to look at the books, if the books are kept well the chances are that the accounts will be “honest”.

I trained as an Accountant in the late 1980’s and prepared plenty of accounts, most of the small business accounts I prepared were from incomplete records. Often these accounts cannot have been 100% accurate as the information and explanations from the client may not have been accurate.

Also on one occasion when selling a business, an owner presented to me accounts showing an immediate jump in turnover of some 20% from the previous year, the business was sold on this basis. The new owner made a comment to me later when he wanted to sell the business that there was no way that these accounts were accurate, and that he had been “stitched up like a kipper”.

Cash takings are involved with many businesses and also the financial accounts will include “one-offs” or discretionary expenses that are not strictly necessary for the production of income. Often the profit stated in these accounts can be understated and if taken at face value can lead to many great businesses being turned down.

And from the sellers point of view the fact that they have tried to reduce their tax liability by introducing private expenditure into their business account, or by understating their turnover may have backfired.

Accounts unless they have been audited, (and that only applied to medium and larger sized businesses); often need to be looked at with a pinch of salt. They are an important part of the due diligence process but not the be all and end all of any buying decision.

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