Before signing a lease

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What to Look For

If you are in business, or are about to go into business, you could be involved in taking on a lease. However, a hasty sign-up could endanger your future financial security.

Negotiating the right lease can be a significant step in your business. Signing up for rent of $1000 per week is a commitment in itself, but over a six-year term it’s even more significant, totalling $312,000. If you have personally guaranteed the lease it’s a huge exposure. If your business failed, the lease commitment could send you personally broke or you could even lose you your home.

Be sure you will be able to afford the total commitment before you sign and try to avoid letting your spouse or partner sign a personal guarantee as well. If a guarantee is required and you can’t negotiate your way around it then limit it to say three, or six months’ rent.

Understanding what your lease covers is critical. Look for and work through the following:

  • The term of the lease – is it for one, three, six or nine years?
  • Does it have a Right of Renewal and if so when, and for how long?
  • When are the rent reviews due and is there a formula around this – is it CPI (Consumer Price Index), or a market adjustment?
  • What is the procedure for exercising your renewal of the lease or for negotiating the rent increase?
  • Is the lease assignable – can you sell your business and pass the lease with it?
  • Is it a gross or net lease – who pays the outgoings?
  • Does the lease state whom has responsibility for exterior maintenance?
  • Who pays for the insurance? Is it an indemnity or replacement arrangement?
  • Whose responsibility is it for common areas and ground maintenance?
  • Does the lease have an arbitration clause to resolve disputes?

Your investment in leasehold improvements

On a termination of the lease, the landlord may retain your fi t-out, or they might invoke a make-good clause meaning the cost may be on you to remove, redecorate and return the space to its condition when you took over. This can be very onerous and can create a significant expense when you thought you were in the clear.

Tax implications of lease inducement/incentives

Often there are significant offerings made to entice a sign-up – make sure you have your chartered accountant check for any tax implications to ensure there are no surprises.

Lease suitability and your landlord

Have you considered all aspects of a particular site in terms of zoning, council planning, parking, accessibility, your competitors and neighbours? Developing a good relationship with your landlord could make resolving any issues easier.

Do your homework

There are many issues which could impact on your business, your life and your family. Don’t make the mistake of not taking sound professional advice. Consult your chartered accountant and lawyer before you commit to any lease.

Call Blackler Smith & Co. on 555 9090 for an obligation free chat regarding leases, getting into business and tax structures.

Health and Safety at Work Act 2015

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The new legislation means there is now more legal and moral accountability on everyone regarding health and safety in the workplace, with the ultimate goal being to ensure New Zealand workplaces are safer.

The law took effect 4 April 2016 so the Court would expect businesses to have incorporated any enhancements to health and safety by now.

The penalties can be considerable – up to $3 million. But, for low-risk businesses who already take a considered approach to health and safety not much will change. However, it is worth reviewing your practises to see if there are any areas where you may be at risk.

We suggest that businesses include health and safety in their business agendas. Business owners should do a walkthrough of their company for a practical assessment of what health and safety looks like in reality in their business.

A good place to start is www.worksafe.govt.nz/hswa

Health and Safety – Did you know:

  • Everyone has a responsibility and can be held accountable for workplace health and safety including employees and directors.
  • Non-compliance of health and safety by employees can be a disciplinary issue.
  • The government has set a target of 25% reduction in serious harm by 2020.
  • You should always check any contractors’ health and safety policy before allowing them onsite as you could be liable for their
    offences or unsafe practises.
  • A work car is considered a place of work.
  • You cannot insure against court costs/fines but you can insure against having to pay reparation to a victim or their family. The court can order a company an ‘adverse publicity order’ (basically a name and shame advertisement in a newspaper).
  • We have heard stories of some businesses breath testing their employees after Friday night drinks to ensure they are not over
    the limit when they leave the office!
  • A director of a company needs to understand the operations of their business and continuously check their business has the appropriate resources and processes for health and safety. If you are a director in name only, now would be a good time to change your management structure. See us for any assistance.

To download the article click here.

Put your money where your clients are

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At Blackler Smith & Co we believe that after providing business services and advice, the next best valuable thing we can do to support our clients is to use their services ourselves, or make introductions where it benefits both parties.

We try hard to connect people. When we know someone needs something that another client supplies, we put one client in touch with the other so they can use one another’s services. If we trust someone and give a recommendation, it usually goes a long way to transferring that trust so others can do some good business together.

We live the referral process ourselves. We believe in our clients. In the past few months we have given our clients priority for our own business, either through Blackler Smith & Co as the buyer, or through our personal patronage. To make it real, here are some examples:
Carpet retailer, Picture framer, Electrician, Beauty Therapist, Legal services, Architectural services, Catering, Dental services, Storage provider, After school care, Travel, Hotel, Painting, Packaging, Restaurant, Takeaways, Roofer, Plumber, Engineering, Panel repair, Insurance.

Our clients demonstrate belief in us and we reciprocate wherever possible.

Please call Ben Blackler or Blair Smith on 04 555 9090 to learn more about us.

To download the article click here.

sam-broad-picture-framer

Sam Broad www.sambroad.co.nz, client and supplier to Blackler Smith & Co.

Almack Electrical

Alan McGhie Almack Electrical Limited, client and supplier to Blackler Smith & Co.

Buy Well – Part Two

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The SWOT Analysis BEFORE you buy

In our last article we wrote about how to Buy Well when it comes to buying a businesses. Now that you’ve found what looks like the ideal business to buy, you’re about to put an offer in. About now, undertaking a SWOT analysis as part of your due diligence before you go unconditional could save you thousands of dollars and give you a wider appreciation of what you are about to leap into.

What’s a SWOT analysis?

It’s a sound business tool that’s used to highlight the key issues and features of a business, and the environment it operates in. A SWOT analysis gives you a focus for areas you need to concentrate on. It’s part of your strategic analysis.

A SWOT analysis gets you to ask 4 questions. What are the:

  • Key Strengths of this business?
  • Key Weaknesses of this business?
  • Main Opportunities for this business?
  • Main Threats to this business?

Strengths and Weaknesses relate to the business itself. Opportunities and Threats can also refer to issues outside the business.

Sit alone, put your detective hat on and start your thinking under each question. After you’ve done your solo part, ask questions of others in the industry, consider the SWOT of competitors, ask your advisers, your friends and the people currently working for the business. Even ask Google! The more information you can gather, the more knowledge you have to make an informed decision about one of the largest purchases you may ever make. Here are some ideas to get you started:

Strengths:

  • What are the key products or services sold?
  • What does this business do well?
  • What key skills and capabilities are held within the business?
  • What are the things this business has going for it?
  • What is its USP – it’s Unique Selling Proposition?
  • What is the business’s reputation?

Weaknesses:

  • What are the areas the business may struggle in?
  • What aspects of the business don’t appear right, or don’t make sense?
  • What needs attention?
  • What can be improved on?

Opportunites:

  • Where can you go with this business if you make some changes? How can you put your own personality into it?
  • What new products and services can you add or develop?
  • What can you do to improve performance?
  • What efficiencies can you gain with the current systems/processes?
  • What can you do that is not being done now?

Threats:

  • What are the issues that could threaten the business’s financial situation?
  • What are the significant changes in this industry that could occur?
  • What is changing in the wider marketplace?
  • What are the competitors doing, who are they and where are they?

A careful SWOT analysis will alert you to important issues to consider during your due diligence phase of checking the business with eyes wide open before you fully commit to buying it. Remember that a business which fails to plan, plans to fail.

For help with a SWOT analysis, due diligence and all things business, give us a call for an obligation-free chat. Call us on 555 9090 or email info@bsco.co.nz

What’s the one best thing I should do in my business today?

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What’s the one best thing I should do in my business today? That’s easy for us to answer – develop or review your strategy. As part of this get familiar with terms like ‘positioning’ and ‘functionality’.

Positioning (how you want your product or service to be perceived) is very powerful. Consider:
• Should I sell X or Y?
• How should I price my products or services?
• Should I employ person Z?

Refer to your positioning and the answers will quickly follow.

Functionality is about whose job it is to do something.

Refine the ‘who does what’ and:
a) You’ll get more done and cover all the bases,
b) You’ll learn to delegate more easily and free up your own time,
c) Employees will have clarity and engagement, and get more done for you.

Strategy is one of our favourite focus areas to help clients with because it pays for itself almost instantly and gets you on the road to where you want to be. Strategy sessions will often work best away from your premises with your business adviser and all decision makers in the room.

To download the article click here.

 

Before signing a lease – What to look for

/in , /by

If you are in business, or are about to go into business, you could be involved in taking on a lease. However, a hasty sign-up could endanger your future financial security.

Negotiating the right lease can be a significant step in your business. Signing up for rent of $1000 per week is a commitment in itself, but over a six year term it’s even more significant, totalling $312,000. If you have personally guaranteed the lease it’s a huge exposure. If your  business failed, the lease commitment could send you personally broke or you could even lose your home.

Be sure you will be able to afford the total commitment before you sign and try to avoid letting your spouse or partner sign a personal guarantee as well. If a guarantee is required and you can’t negotiate your way around it then limit it to say three, or six months’ rent.

Understanding what your lease covers is critical. Look for and work through the following:
• The term of the lease – is it for one, three, six or nine years?
• Does it have a Right of Renewal and if so when, and for how long?
• When are the rent reviews due and is there a formula around this – is it CPI (Consumer Price Index), or a market adjustment?
• What is the procedure for exercising your renewal of the lease or for negotiating the rent increase?
• Is the lease assignable – can you sell your business and pass the lease with it?
• Is it a gross or net lease – who pays the outgoings?
• Does the lease state whom has responsibility for exterior maintenance?
• Who pays for the insurance? Is it an indemnity or replacement arrangement?
• Whose responsibility is it for common areas and ground maintenance?
• Does the lease have an arbitration clause to resolve disputes?

Your investment in leasehold improvements
On a termination of the lease, the landlord may retain your fit-out, or they might invoke a make-good clause meaning the cost may be on you to remove, redecorate and return the space to its condition when you took over. This can be very onerous and can create a significant expense when you thought you were in the clear.

Tax implications of lease inducements/incentives
Often there are significant offerings made to entice a sign-up – make sure you have your chartered accountant check for any tax implications to ensure there are no surprises.

Lease suitability and your landlord
Have you considered all aspects of a particular site in terms of zoning, council planning, parking, accessibility, your competitors and neighbours? Developing a good relationship with your landlord could make resolving any issues easier.

Do your homework
There are many issues which could impact on your business, your life and your family. Don’t make the mistake of not taking sound professional advice. Consult your chartered accountant and lawyer before you commit to any lease.

Contact Ben or Blair of Blackler Smith & Co. on 04 555 9090 for an obligation free chat regarding leases, getting into business and tax structures.

To download the article click here.