Plain English Guide To Creating A Simple ‘Business Operations manual’

How to create simple operations manual?

An operations manual is the key to reducing the dependence on the owner of the business for performing the repetitive tasks involved in the day to day running of the business. It shows procedures and policies so that employees know what to expect and new employees can join in and know what they are to do right from day one.

The goal of an operations manual is to instruct new people coming in the business on how various tasks associated with the business should be executed. It should also contain the policies and procedures relating to suppliers, employees and customers. The operations manual helps bring consistency in the business because the documented steps are repeated again and again and everyone gets clear visibility into what is expected. An operations manual which has been in use for a few years and has gone through a few revisions greatly assists in the sale of a business because the new buyer is assured that the important tasks associated with the business are clearly documented and the learning curve will be significantly quicker with the aid of this manual.

While each operations manual would be tailored to the specific needs of a business there should be a few common elements present in every manual.

1. Brief overview of company: The manual should briefly talk about how the company evolved, about the roots of the company and its history. This gives a face and a story to the company and helps employees to connect better with the company.
2. Opening and closing procedures: The opening and closing procedures should be detailed thoroughly. For instance if there is an inventory check at the time of closing or if there is a reporting time at which all employees should report, the responsibility to open the store etc.
3. Cash handling: For most small businesses leakages are a big issue and this makes the cash handling policies very critical and important. Most businesses require all transactions to be documented and it would be at your peril to do otherwise.
4. Customer service: The customer is at the heart of any business and the more detailed the procedures about interacting with the customers, the higher customer satisfaction and repeat business will be. The depth at which you want to go depends on your style of management but it is always good to include things like return policies, after sales service and handling of irate customers.
5. Sales promotions and discounts: It always helps to have the marketing strategy of the business clearly documented. This would involve detailing all the sales promotions that will be carried out in every season and the usual guidelines for marking down goods and the methods to approach target customers.
6. Supplier management: There needs to be a section on managing suppliers and vendors. Who are the approved suppliers of the business, what are the credit terms when dealing with these suppliers? How to approach a new supplier? These are some of the issues that would be addressed in this section.
7. Legal and contractual issues: There would be some contractual things that a business would be bound by and employees need to know how to work within the bounds of these issues. Sometimes a business may be dealing with patented technology or using certain trademarks. The operations manual should aim at making the employees well versed with the do’s and don’ts around such things so that no legal or contractual issues arise.

The operations manual should be easy to follow and should be a living document, which is revised frequently so it reflects the current reality of the business and is followed by the people working in the business.

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Plain English Guide to Industrial, Commercial and Retail Leasing In Australia

Specific Issues for the Landlord to Consider

As a landlord, there are a number of issues you need to consider. Firstly, and most importantly, you need to ensure that the lease documentation meets your needs. You must also understand how the lease is to operate and what your rights are. A good solicitor will be able to adapt any special needs or requirements you may have into the lease documentation and explain it to you in plain English so that you are clear about what it all means.

Whilst drawing up the lease, you and/or your solicitor will need to consult parties such as your financier (if there is a mortgage over the property), your architect or builder if building works may be required and your property manager or agent. This will ensure that the commercial terms incorporated into the documentation are appropriate.

Commercial, Industrial and Retail Leasing

Leasing premises is a major investment decision, whether you are a landlord or tenant.

What many people don’t understand, however, is how complex a commercial lease can be and how it can be fraught with potential problems. Whilst many people have signed residential leases in adult life and found the process to be fairly simple and easy to understand, a commercial lease has many and far-reaching implications, not the least of which is the prospect of losing a business should something go wrong!

This Plain English Guide highlights some of the issues facing both tenants and landlords in a commercial leasing situation and what should be considered when negotiating a lease agreement.

Secondly, you should endeavour to find a tenant that you are comfortable with and who you are confident will be able to pay the rent and leave the premises in a satisfactory condition.

Other considerations you will need to take into account include:

• Obtaining appropriate security on the lease, for example, you may wish to obtain personal guarantees from the directors or shareholders of the company leasing the premises in the event that the company fails to meet its obligations under the lease. Another alternative is to request a bank guarantee or cash deposit, usually to the value of three months rent.

• Who is responsible for the fit-out of the premises and who will own the fit-out at the end of the lease, as well as who is responsible for refurbishing the premises at the end of the lease.

• Obtaining the consent of your mortgagee for the lease. Most commercial leases exceed three years (including options to renew) and in NSW this means that they need to be registered with the Land Titles Office. Registration cannot take place without the consent of the mortgagee.

• What is required of you, as a landlord, in terms of maintenance and access of common areas, lobbies, lifts, toilets etc. Whether any strata levies apply and what the rules of the building are etc.

Specific Issues for the Tenant to Consider

When you consider that one of your most important business assets is your lease, as a tenant it becomes critical that you understand the implications of a lease and your rights and obligations.

In fact, your premises are the most tangible component of your business and your goodwill is affected by your location, so why risk losing it all over a lease dispute?

Expert legal advice will ensure that your needs and your rights are taken into account during a lease negotiation. Not only will it enhance your business opportunities, but in the event that you choose to sell your business, a sound and secure lease is vitally important and could make or break the deal.

When you have found the right premises, in the right location for your business, some of the specific issues you need to consider when negotiating the lease include:

• Whether you can gain the relevant licenses (eg liquor license) and the relevant approvals from Council to run your business within the premises

• What warranties you are able to secure from the landlord regarding damage to the building etc and whether you are covered in case of the need for relocation or demolition of the building

• How, and when, the rent will be reviewed and what your responsibilities are in terms of outgoings

• What is the term of the lease and when are you able to exercise any options for renewal – you will also need to carefully diarise reminders to ensure that you meet the relevant requirements for exercising these options

General Items for Negotiation in a Commercial Lease

Most commercial leases will take into account the following “items” that should be negotiated between the landlord and tenant (lessor and lessee) and incorporated into the documentation:

• Rental payments – how much and when to pay

• Commencement date of rent period, depending upon completion of fit-out and obtaining relevant approvals for business etc

• Outgoings payable by the landlord or the tenant

• Term of the lease

• Options available for renewal and how/when to exercise the option

• Maintenance – landlord is generally responsible for structural repairs and tenant for day to day maintenance of premises

• Use – what the premises can be used for and the type of business permitted etc

• Assignment/Sub-letting – whether the landlord gives consent and what approval procedure is in place

• Insurances required

• Obligations of each party at the end of the lease

Retail Leasing – Special Considerations

Over the last couple of years, the Retail Leases Act in New South Wales has undergone some major changes, which impact on the negotiation and drafting of leases for retail businesses.

In fact, retail leases are treated quite differently to other commercial leases and are covered by a set of unique rules. Whether you are a landlord or tenant entering into a retail lease you will need advice from a legal expert to ensure that your rights and obligations are adequately taken care of.

The Act can be complex and requires expert interpretation – ignorance can lead to significant penalties.

Some of the most important changes to the Act affecting retail leases include:

• The definition of, and what constitutes, a “retail” business – a far greater number of businesses now fall into the category of retail business and are therefore covered by the Act.

• There are greater obligations for lessors and agents to disclose and provide information to lessees quickly when entering into negotiation of a lease and also during the term of the lease.

• There are new provisions under the Act for fit-outs and how costs are dealt with between lessor and lessee.

• There are new restrictions regarding the advertising of available retail space to new tenants, unless the lessor has specifically offered a renewal or extension to the existing lessee which has been refused.

• The old security bond system has been replaced and now requires payment of a bond to the Department of State and Regional Development for investment and management.

• A new section of the Act has been written to deal with misleading or deceptive conduct by either party to a retail lease.

• Independent retail valuers will be used to determine rent reviews in the event that both parties cannot agree on the actual rent.

• More detail is required from lessors in the disclosure statement relating to “disturbances” which might interfere with the lessee’s operations if they are to avoid liability (whereas before, a lessor only had to provide written warning of a likely disturbance to avoid responsibility).

Retail landlords and tenants should be aware of the changes to the Act and how they might be affected as their current leases expire and are due for re-negotiation. Enlisting expert legal advice can save money, time and potential heartache over the re-negotiation process.

How To Get A Legal Loan From Your Company With A Division 7A Company Loan Agreement

The Income Tax Assessment Act 1936 contains measures to prevent the dispersal of profits by companies among their shareholders/associates. These measures fall under Divison 7A of the Act, which require the majority of company-shareholder loans to be standardised under loan agreements. This limits the ability of companies to gift money or shelter profits from tax, and restricts the practice of forgiving loans which were never intended to be repaid. Intercompany loans are exempt from Divison 7A.

Division 7A requires borrower’s to accept payments as completely assessable unfranked dividends, thus requiring full disclosure in the borrower’s tax return. Deemed dividends reduce the retained earnings of the company, and waste franked credits, leading to an effective doubling of taxation. Noncompliance in declaring dividends can be considered tax evasion.

To prevent such penalties it is advisable to implement a loan agreement. An agreement will exempt the company from Divison 7A provisions. The conditions for exemption include:

• Implementation of a written standardised loan agreement, in place before the company tax return is due or lodged (whichever is first);
• A minimum repayment having been made on the loan, before the aforementioned date;
• A loan term not in excess of 7 years for unsecured loans, and not in excess of 25 years for mortgage-secured loans;
• A minimum rate of interest being charged.

If you are unsure whether your loan is included under Division 7A, ask the following:

• Has a payment been made to an associated entity (other than a company)?
• Has payment been made due to the influence of the shareholder/recipient?

If ‘yes’ to both questions, your loan is probably subject to Division 7A. Seek professional advice if you are still unsure.

For More Information and A Division 7A Company Loan Agreement Template Sample Click Here

TOP 10 TIPS FOR A WINNING BUSINESS EXIT STRATEGY

A WINNING BUSINESS EXIT STRATEGY: THE TOP 10 TIPS

Exit planning is a broad and complex topic.  No two situations are identical.  The right exit plan depends on the business itself and the needs and wants of the owner manager.However, no matter who you are or what circumstances you are in, there are ten tips that could make all the difference to your situation.

Tip #1 – Do not procrastinate – Start now
You should always run your business with one eye on the exit.  After all, you may not control your exit timing. You may not even be around to manage the process. It may even take a year or more to properly prepare your business for sale.
Here are some example situations:
Your death.
A critical illness or disability – yours or a loved one’s.
A sudden shift in market conditions.
A sudden loss of key employees, customers or suppliers.
An offer you cannot refuse.

Tip #2 – Make a plan and write it down
Exiting your business is a process, not an event.  You need a plan to be in control of the process, otherwise it will control you.
There are many benefits to having a plan, including:
You need a plan to know what success looks like.
You need a plan to make a roadmap others can follow with or without you.
Having a plan will give you some peace of mind.
But most importantly – making a plan will have an immediate, positive impact on you and your business.
Put the plan on paper.  Keep it short and to the point.  Share it around – with your professional advisors, loved ones and key confidants.  Review it once a year.  Be ready to share it with a prospective buyer – make it part of what you have to sell.
Compile a ‘Ready for sale’ binder and place in it your exit plan and include any due diligence material that a buyer would want to see.
Make sure that your trusted friends know of its existence and location.

Tip #3 – Get competent, professional advisors
You may only do this once or twice.  Good professional advisors will be involved in doing this hundreds of times.
Get people who know what they are doing, have done it many times before, and are cost-effective.
Be wary of consultants who want big fees.  The best work will be done by those focused on relationships, not projects.

Tip #4 – Assemble an advisory team
The team should include:
Your business accountant.
Your business lawyer.
A business valuer.
A tax professional.
Your personal financial advisor.
Your key personal advisors, including your spouse or loved one, key employees, friends and mentors.

Tip #5 – Know your triggers – When to get out
Can you answer these questions?
Why will I want to exit my business? – Which will be the #1 question from any potential buyer.
What do I want to get out of it, and why?
What do I need to get out of it, and why?
Do I know and appreciate the differences between wants and needs?
When to exit your business is a personal decision.  Only you will know for sure.  But knowing and managing the answers to these questions will help you know when the time is right.
Timing will depend on why you are exiting the business.
Timing will depend on what you want and what you need to get out of the business.
It is very important to remember that the right conditions are the key – not some date circled on a calendar or other self-imposed deadline.
Stay flexible – those conditions will not be totally under your control.
In the meantime, as you work on your business, keep in mind that the best businesses to sell are those that are not timing dependant, but which are sustainable, predictable, durable and not personality based.  If possible, get your business to have those characteristics.  If you do, timing will become a much less important issue.

Tip #6 – Do a realistic assessment of what it is you have to sell
You have to know what it is you have to sell, and what value it really has.
Ask yourself the following questions.  Make sure you can answer them.  Manage your business around these issues while you are working on your succession plan:
“How are businesses like mine valued?”
“What is the present value of my business?”
“What economic trends impact the value of my business?”
“What industry tends impact the value of my business?”
“What is going on in my company that is impacting the value of my business?” – critically assess the ‘fitness’ of your business.
This is where your professional advisors come in, especially your business accountant, business lawyer and business valuer.  They can teach and guide you through these issues.
The number one impediment to selling a business is almost always the seller’s price expectation.  Sellers who have trouble selling their businesses almost always have an unrealistic assessment of the value of their business to a prospective buyer.  If you get a deal on price, the success rate on successfully closing a deal is greater than 90%.
There are a number of key reasons why owner managers end up over-valuing their own businesses:
They do not understand how their businesses are valued – especially from a risk/return perspective.
They do not appreciate that their business is of more value to them than to anyone else.  After all, they understand the risks better than anyone else and are confident in being able to manage them.
They have trouble assessing risk from a buyer’s perspective, and how that impacts price. Use an objective ‘business risk assessment tool’ to look at your business from an external perspective.
They expect buyers to accept low returns on their investment equivalent to public company price earnings multiples, second mortgages, and other lower risk or more liquid investments.
The key to getting the best possible price for your business is to manage the buyer’s risk perception – in your mind and in the mind of the buyer.  The greater the perceived risk, the lower the price and the greater the return on investment the buyer will look for to mitigate that risk.  Identify the business risks and start reducing and managing this risk at least six months before you want to take your business to market.

Tip #7 – Wherever you are today, start working immediately to enhance the value of your business
Here are more key questions to ask yourself, to start answering, and to start planning your business around:
“What could I do that would enhance the value of my business?”
“What do I need to do that?”
“What risks do those things represent?”
“What impact will they have on the value of my business?”
“What impact will they have on the buyer’s perception of risk?”
The things that most impact value and price in the sale of a business are:
Profitability – sales, margins, overheads – as percentages and in real dollars.
Cash flow – to service debt, repay debt, to fund expansion or improvement, to provide reserve, to distribute to owners.
Sustainability – profits, cash flow and key relationships.
Predictability –consistent, reliable, tied to measurable outside indicators.
Durability – robust, adaptable, well positioned.
Believable growth opportunity – the more the buyer sees an opportunity for post-closing profit growth, the less they need to use price to manage their risk and the more they will pay.
Financeability – has the company been managed to leave room for additional third party financing – operating loans, term loans, equipment leases – or potential cost savings and reductions?
Earnouts – is the seller willing to tie part of the purchase price to post-closing company performance?
Minimal Personal Goodwill  – is the company at a stage where anyone can own it and make money?
Synergy – will the buyer reduce competition, or improve margins, or reap cost savings or sales increases?
These are things you can identify and work on improving as part of running your business day-to-day.  Not only will they improve your sale price when you exit the business, they will greatly improve your profits and business during the time you have left.
Consider this analogy: many people fix up their house when they go to sell it, and then wonder why they had not taken the trouble to do so during all the years they have lived there!

Tip #8 – Pick who you are going to sell your business to
Start with the end in mind.  Your choices of potential buyers usually include:
A partner.
A competitor.
A customer.
A supplier.
An employee.
An investor.
A true successor owner-manager.
Pick your top two or three.  Have more than one scenario in mind and mapped out.
Know why they would want to buy you out, and what they will value most.  Make sure their deal will get you what you what you need as well as a good shot at what you want.
Then run your business accordingly.

Tip #9 – Get your house in order
There are some basic things you need to do that will not only impact you when you go to sell but will help you a lot in the meantime:
Plan your tax strategy and implement it.  After all, the only way to compare different offers and deal structures is in looking what they do for you after tax.  Get ready for that.
Identify redundant assets and plan when and how you will get them out of your company.  Redundant assets include anything that the buyer will not need to run your business, including excess cash, investments, car leases, apartments, airplanes, boats etc.
Understand how EBITDA – earnings before interest, taxes, depreciation and amortization – impacts valuation and price negotiations.  Learn how to track it, and set up your accounting and reporting systems to do that. Have a fully declared, clean profit & loss account.
Get the right relationships with the right people in order, and maintain them – customers, suppliers, employees, and lenders.
Get your company properly financed, with some excess borrowing capacity on the table.
Get your legal contracts in place with the right people – customers, suppliers, employees, lenders.
Have a “clean” situation on all legal and government matters, especially any kind of taxes or government reports or remittances.
Get some third party studies done if they will help you manage all of this – environmental, structural, marketing, equipment appraisals, business valuations.
Can you really afford to sell? You will have to pay out all business liabilities – will there be a surplus?

Tip #10 – Prepare yourself for moving on
Be sure you can let go when the time comes.
That you will act when the conditions are right.
That you have something else to do that you are genuinely looking forward to.
Beware you don’t develop last minute seller’s remorse – i.e. regretting the sale at the last minute and consciously or unconsciously jeopardizing the deal. It’s really quite common.

All of the above tips are included in the new How to Sell Your Own Business Manual (includes risk analysis & business valuation software) that is available by digital download from:   http://rpemery.com/business_valuation_appraisal_tool_kit.html

Exclusive Agency Agreement – What You Need To Know

EXCLUSIVE AGENCY AGREEMENT

Use an agency agreement to grant exclusive agent rights.

Some businesses lend themselves to close relationships between parties. Salesmen who are assigned a certain territory, literary or talent agents who represent an actor or author, as well as other close business affiliations all demand a very specific business relationships: the exclusive agent-principal relationship. Whenever you intend to permit someone to act on your behalf exclusively, or you are the person who plans on acting on another’s behalf, you need an Exclusive Agency Agreement. Here is what you need to do to make sure your agreement is suitable:

WHAT IS AN AGENT-PRINCIPAL RELATIONSHIP?
Whenever one person agrees to allow another person to act on their behalf, they have entered into an Agent-Principal relationship. The agent is the person who acts on behalf of the person who hires them, called the principal. Agents can agree to deals as if they were the principal, making legally binding agreements that will be binding against the principal.

WHAT IS AN EXCLUSIVE AGENT?
An exclusive agent is one with special, exclusive rights that no other agent can have. A principal can hire an Agent to represent their business interests in a certain territory, industry or region. They can also hire an agent to represent specific properties, or for specific times, or any number of other constraints. The key difference between an Agency Agreement and an Exclusive Agency Agreement is that the exclusive agent is the only agent entitled to act on behalf of the principal, in as much as is specified by the agreement.

DOES BEING AN EXCLUSIVE AGENT MEAN YOU ARE THE PRINCIPALS ONLY AGENT?
Maybe. Depending on the kind of agreement you enter into, a principal can have numerous agents, all of whom are granted Exclusive Agency Agreements. For example, a manufacturer may enter into an Exclusive Agency Agreement with numerous sales professionals, all of whom have exclusive rights. These agreements will typically limit the agent’s exclusive rights to a specific territory or product.

HOW DO I ENTER INTO AN EXCLUSIVE AGENT AGREEMENT?
Depending on whether you are to be the principal or the agent, you first need to determine what your needs and desires are. Some agreements will be very broad, while others will be much more specific. No matter what, it is up to you to ensure the terms of the agreement accurately reflect what you want.

WHAT NEEDS TO BE STATED IN THE EXCLUSIVE AGENCY AGREEMENT?
This varies by situation, but there are several things that must be included in any agency agreement. Each party must know what rights the agent has, what obligations the principal has to the agent, the manner of termination of the agreement and many more. If the agreement covers sales or commissioned sales, these factors need to be included as well.

Like any good contract, the Exclusive Agency Agreement needs to be specific, complete and easy to understand. Since the agreement will serve as the basis for a close business relationship, it is in the best interests of both parties to be sure they are comfortable with all the terms of the agreement before they enter into it. A strong, properly formed Exclusive Agency Agreement can be the foundation to a solid relationship, while a poorly formed one can lead to numerous problems down the road.

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Plain English Guide to Shareholders and Partnership Agreements

Establishing a business is a challenging process. When two or more parties come together with a shared vision, it is common to focus on setting up the business in a logistical sense first and then selling and marketing the product or service. In many cases, the business owners neglect a vital step in the process of securing the future success of their business – a shareholders or partnership agreement. This Plain English Guide answers some of the more commonly asked questions regarding shareholders agreements and outlines the benefits. If you are thinking of setting up a business, or you are currently involved in a business that does not have an agreement in place, speak to your solicitor today about how you can protect your future.

What is a Shareholders/Partners Agreement?

A shareholders agreement is a written agreement between the shareholders or partners of a business. It is best prepared at the start of a business, when all parties are enthusiastic and there have been no disputes or disagreements over the running of the business. The agreement covers the funding, structure, management and direction of the business, as well as outlining the responsibilities and obligations of owners. It is critical that the individual circumstances of a business and the parties involved are taken into consideration. The agreement is also designed to deal with the issues that, based on experience, have a distinct possibility of arising in the life of a business. It can also help to determine in advance how those issues will be dealt with should they arise – rather than having the parties react “after the event” and potentially allowing self interest to affect what each party sees as the appropriate response.

Why do you need a shareholders agreement?

A shareholders agreement can avoid or minimise disputes over the running of a business and its funding. In much the same way as a prenuptial agreement can minimise the cost of a marriage breakup, a shareholders agreement can also reduce the cost and uncertainty of a business break up. Every business is different and every shareholder or partner is different – a good shareholders agreement can help to minimise the potential for conflict, the unpredictability and cost of dealing with conflict and maximise opportunity for growth. Once a business relationship has broken down it becomes very difficult to objectively look at key issues. It is much easier to decide on the fundamental issues early and to minimise the problems that can occur later.

What is covered by a shareholders agreement?

A legally binding shareholders agreement will specify a number of requirements for the successful running of a business. It will outline a range of issues, such as: The structure of the senior executive team – who will be director, whether there will be a managing director, how often the directors will meet etc. Voting rights of shareholders and directors Majority/percentage votes required for major decisions to be implemented The type of decisions that require a vote between shareholders – eg. purchase of major assets, loans over a certain amount, buying and selling shares etc What happens on a “deadlock” (even votes for and against a decision) and how it should be resolved Banking, accounting and auditing arrangements Dividend policies for the distribution or retention of profits Capital contributions and what assets are provided by each participant Shareholder obligations to provide “loans” to the business The type of business that will be undertaken and the planned future direction of the business Parties salaries and reviews including fringe benefits What happens when a party wants to “exit” the agreement, or passes away What events will “trigger” the termination of the agreement How shares will be valued in the event of a buy-out or sale to another party Restrictive covenants if a shareholder leaves

What happens if a shareholder or partner leaves the business?

The shareholders agreement should take this scenario into account and incorporate provisions for the buy-out or sale of a party’s shares. It will also identify the individual circumstances in which a shareholder can terminate an agreement, or what will happen in the event that one of the shareholders passes away. In many businesses, for example, there is no provision for the death of one of the shareholders or partners and the remaining spouse takes on the interest in the company. This is often not the best outcome for a business and can be avoided with a welldeveloped shareholders agreement and adequate succession planning. It is important to remember that even though a shareholders agreement is in place, if constructed and reviewed properly, it does not restrict the business or partnership’s progress.

What if my business doesn’t have a shareholders agreement?

If you are currently operating a business or partnership without an agreement in place, we recommend that you discuss your situation with an experienced commercial solicitor. In most cases, an agreement can be drafted based on the existing structure and operational style of the business. It also helps to identify possible issues and problems before they arise, and before business relationships become strained in the event of a conflict. Think about the future of your business. Don’t leave it to chance – you never know what is around the corner.

A Shareholders Agreements includes a provision that each shareholder agrees that in the event of death, their executor will be bound to sell the shares back to the company.

If you hold shares in a company – it is in your best interests to insist upon a Shareholders Agreement – if you don’t you are putting your investment at risk.

 

Business Valuation – Just How Much is Your Business Worth?

“HOW MUCH IS YOUR BUSINESS WORTH?”

Valuing Your Business –

So, how much is your business truly worth? Do you know 9 out of 10 business owners have little idea what the true value of their business is? Yet nothing is more important that getting this right.  Valuing a business can be very complex. In fact, a business can have more than just one value. It depends entirely on the seller or buyer’s perspective.   For example, a business can have a different value to an owner-operator buyer than it does to an investor buyer, or to a competitor wishing to expand, or to a supplier or customer wanting to vertically integrate. Unfortunately, it can also have quite a different value aain to a liquidator!   The better professional business valuers take the key drivers into account when they value a business.   (You can value your own business quickly and easily with the Small Business Appraisal Tool found in The Business Appraisal and Marketing Kit)

-The Key Drivers of Business Value.

The better professional business valuers consider the following factors when valuing a business:

- Margin.

The greater the positive difference between all business costs and sales, the more valuable is a business.

- Growth.

A growing business has a higher value than a business that is static or in decline.

- Asset utilization.

A business that uses the least amount of assets and uses them efficiently is more valuable.

- Financial engineering.

A business that actively seeks to optimize its weighted average cost of capital (WACC – the mix of equity and debt funding the business carries) and minimize its working capital is more valuable.

- Relative business risk. A business that is comparatively less risky when assessed against the business risk factors are more valuable.

Business Risk Factors - The following is a comprehensive list of risk factors used for valuing larger businesses:

° The length of time the company has been in business

° The length of time under the current ownership

° The number of employees

° The quality/appropriateness of the business location

° Condition and quality of plant and equipment

° The tenure and security of occupancy

° What working capital is needed to fund growth

° Threat of debtor defaults

° Business sales growth (past and future)

° Future industry growthpotential

° Desirability of the business (is there a demand for this type of business)

° Are there management control systems in place

° The documentation of systems;  jobs, procedures, policies

° Quality of the customer base and customer retention

° Level of competitor rivalry

° Advertising requirements

° Geographical scope

° Supplier power

° Buying power

° Threat of new entrants into the market

° Threat of substitutes on the market

° Degree of market focus

° Threat of litigation

° Customer loyalty

° Government regulation

° Owners’ working hours

° Owner dependency

Note – This is just a small part of the information that Business Appraisal and Marketing Kit will teach you about valuations.

However, for smaller businesses fewer risk factors are taken into account to arrive at an estimated business appraisal. The Small Business Appraisal Software supplied with the Business Appraisal and Marketing Kit uses the following 10 risk factors to calculate a business appraisal:

°The time the business has been in existence

° The quality and consistency of earnings

° Industry growth/expected growth

° Business sales growth over the last 3 years and expected in future growth

° The degree and intensity of competition

° Suitability of the business location

° Supplier concentration (relying on just a small number of suppliers is very risky)

° Buyer concentration (relying on just a small number of buyers is very risky)

° The difficulty of entry for new competitors

° Employee quality and stability
Why Do You Need a Business Valuation?

A business valuation will determine the value of your business and who your potential buyers may be and why they are interested in acquiring your business. The following are some things a business valuation is used for:   – Buying or selling at fair investment or market value   – Divorce   – Security for a loan at fair market value   – Selling or gifting to a minority party interest in the business (e.g. an employee you want to reward)

What Types of Valuations are Available?

A good valuation can cost you a lot of money.  An average business valuation can be anything around $3,500. But there is a cost-effective alternative you can successfully, at long last, do yourself. The Small Business Appraisal Tool that comes with the Business Appraisal and Marketing Kit does it all for you using simple, easy to follow steps.  There are many valuation techniques and The Kit has simple easy to follow explanations for the:

- Discounted Free Cash Flow Method

- Free Cash Flow Method

- Future Maintainable Earnings Method

- Net Asset Backing Method

- Market Valuation Methods

- Comparable Sales Method

- Industry Averages or Rules of Thumb

- P/E Ratios

- Owners Discretionary Cash Flow Valuation Method

- Business Affordability Method
Do It Yourself Valuations - Using the Small Business Appraisal Software program that is included in The Business Appraisal and Marketing Kit you get an accurate, full business appraisal based on the Owners Discretionary Cash Flow Valuation Method. The appraisal program makes it simple for a small business owner to value their business without the expense of other

methods. You take control.

The following is what an accountant says about the incredibly easy to use appraisal software tool included with the purchase of the Business Appraisal and Marketing Kit.

“Valuing a business can be a very subjective process. The business owner invariably thinks their business is worth a small fortune and, of course, the prospective purchaser wants to pay nothing for it. The book and software guide you through the process and helps to determine the appropriate valuation method and earning multiple applicable to your business.   I found the book and software extremely valuable as not only a guide for the small business owner, but a tool that accountants can use to advise their clients. Accountants in public practice are not taught how to value a business. It is something they either pick up from a more senior member of their firm or they attend a workshop specific to the subject.   I highly recommend this as a tool that all small business and public practice accountants should own and refer regularly to.”

Appraising your business is made so very simple using the unique Small Business Appraisal Software.  You can purchase your very own along with the full version of ‘How to Sell your Own Business’ at Business Appraisal and Marketing Kit.

Once your business is appraised and valued then you will need a business for sale legals and contracts kit. You can get a Complete Sale Of Business Legals Contracts Kit here. It will save you thousands of dollars.

YOU CAN SELL YOUR OWN BUSINESS!

There are many reasons for selling a business – Retirement, health, family lifestyle, or you may have built a successful business and the time is right to sell and move on. Whatever the reason, it’s going to be one of the most important business decisions you’re likely to make. The process of selling a business can be involved and complex if you don’t know the correct steps. However, armed with the right information you can successfully sell your own business. And, doing it yourself is more popular than ever with sellers reaping the rewards.

Business owners who sell their own business find it is an exciting and worthwhile task. No one has the knowledge of your business that you do – its unique benefits and day-to-day operations – so who better to sell it? What’s more, business owners place a lot of the importance on reducing and controlling information leakage, maintaining confidentiality and, of course, you avoid the high commission fees paid to a business broker.
What you need to know to sell your business -

The decision is made and you are keen to put your business on the market. What is the next step? What do you need to know about selling a business successfully? Here are some general tips to help you gain a better understanding of the process of selling your own business:

Making the decision to sell -

There is no reason why you cannot sell your own business. It is a straightforward process. While an accurate business appraisal (to establish the correct selling price) is one of the most important aspects of selling your business, some of the other things to consider but not limited to include:

- Preparing your business for sale

- Get your documents in order

- Advertising/marketing plan

- Prepare for buyer inquiry

- Understand potential buyers

- Due diligence
Preparing your business for Sale -

Selling a business takes planning and preparation to maximize your business’s top sales potential. Give yourself plenty of time to put everything in order – your accounts, systems and your people.

The Business Appraisal and Marketing Kit is a wealth of information and has simple, easy to follow steps to take you through each and every stage of the sale process.
Get your Documents in order -

Documentation covers a myriad of things such as financial accounts. It is important to have the following documents at hand and ready for the buyer presale:

- Confidentiality agreement

- Information memorandum

- Summarized information memorandum

- Buyer Enquiry Form

- Letter of intent

Confidentiality Agreements -

It is important to get a Confidentiality Agreement signed before giving out any confidential

information to a potential buyer. This document binds them to the terms of the agreement. Genuine buyers are fully prepared to go along with and sign the correct confidentiality agreement.

Straight talk:

Make sure you have a Confidentiality Agreement and it is signed before you give any information. We cannot stress this enough.

A copy of a Confidentiality Agreement can be found in

The Business Appraisal and Marketing Kit
Information Memorandum –

The point of the Information Memorandum is to give a potential buyer, details of your business and it becomes a great marketing tool.

The Information Memorandum should make the business sound appealing, and present all the significant information in a straightforward manner so a buyer can determine if they are interested in pursuing a purchase. If they are interested, they will however need further information.

The following are some of the headings from the template for writing your own Information Memorandum:

- Introduction and Summary

- Description of the Business

- Asking Price and Selling Terms

- The Industry

- Your Competition

- Your Products/Services/Customers

- Personnel

- Major Assets

- Business Plans

- Financial Statements

- Appendices
Summarized Information Memorandum -

Once you have completed the Information Memorandum, you should also do a summarized version.

You determine the level of information that you will send. Be certain you have the Confidentiality Agreement signed and returned before sending out such detailed information.

For the full version of the Information Memorandum template and templates for all the forms you need to sell your own business see The Business Appraisal and Marketing Kit. Its simple steps make it easy for any small business owner to follow.