As a child, Albert Bossward says he was always “taking anything apart and putting it back together again”. Albert recalls one occasion…
Steve Rowland is one of the most down to earth and decent people you’re likely to meet and he operates in the niche field of freight…
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 Ben or Blair of Blackler Smith & Co. on 555 9090 for an obligation free chat regarding leases, getting into business and tax structures.
The Bolton Hotel
Our clients are always up to interesting activities, and we are proud to be associated with them. We’d like to share one with you:
You may wonder why The Bolton Hotel has so many wonderful pieces of art by the well-known New Zealand artist, Rita Angus.
The owner of The Bolton Hotel is Warwick Angus and he happens to be Rita’s nephew. Rita passed away in 1970 and through his family connection Warwick managed to secure the copyright to a large number of her art works, many of which have not been seen in public before.
Art may have been in Rita’s blood, but for Warwick it was building. He worked for the family firm for 40 years and it was during this time that he came across the Bolton site. It was a car park at the time but he could see its potential as a good site for a hotel, as it offered protected daylight on all four sides as well as a lovely aspect to the Wellington western hills and the city. Under Warwick’s direction The Bolton Hotel was built, and it opened on the 1st of February 2005.
The transition from the construction industry to hotelier was a big step. Warwick has many stories of the things he learnt along the way. One of the most memorable was in the early days of the hotel when Warwick thought it might be a nice gesture to return a lady’s earrings found in one of the hotel bedrooms. A short time later Warwick received a telephone call from the lady of the house to say, “thank you, but these are not my earrings”.
The Bolton Hotel team has matured since those early days and Warwick is extremely proud of the hotel, its independence with no allegiance to a hotel chain, and its many successes as a top ranked Wellington hotel. Warwick puts the success of The Bolton Hotel down to the skill, dedication and hard work of management and staff. He also gives credit to Blackler Smith & Co for their tremendous assistance particularly in the formative years of his businesses.
Running a business should be EASY if you know where you are positioned in the marketplace. But the specifics can make things more complicated.
Do catchy titles in advertising and business buzzwords leave you feeling cold? Do you loathe all the technical jargon out there, like’ business plans’, ‘cash flows’, ‘working capital’ and ‘succession planning’?
Whilst the above terms have relevance we believe they are a by-product of a much simpler high-level topic that is much easier to understand.
The highest performing businesses have a Business Strategy and look at every aspect of their business on an ongoing basis. Most of your competitors won’t have a well thought out plan – here’s how you gain a competitive advantage from the outset.
There are lots of different parts of a business strategy. However, under the ‘Keep It Simple’ approach, arguably the two most important questions to understand are:
- Positioning – what is your desired position in the marketplace?
- Functionality – who does what in your business?
To put things into a sporting context, the All Blacks brand is clearly positioned as one of the premier brands/teams in world rugby. They overachieve, are revered and they fill stadiums around the world as a result.
The All Blacks’ functionality is well understood, as in ‘who does what?’ The coach is the boss, no question about that, but they don’t do everything. They call in the event manager, the dietitian, the mental skills coach, the defence coach, the scrum coach and mentors. They surround themselves with experts in particular fields and delegates areas of responsibility to them.
By understanding the functionality within their wider team, they truly help to build their high-performing culture and create great players and ambassadors for the brand.
Understanding how functionality and positioning tie together:
There is a familiar catchphrase at Blackler Smith & Co’s marketing meetings: “is this consistent with our positioning?” Everything we do needs to be consistent with our branding and desired market positioning. We don’t, for example, advertise that we simply ‘do the books’. We offer a profoundly higher skill set to our clients than that. Everyone in our firm has specialities and areas of responsibility and we outsource those skills that we do not have (in our case, graphic design). We maintain our internal efficiencies and positioning by sticking to what we know best – chartered accounting and business advice.
A perfectionist might not be the right person to get ideas moving fast, but may be the perfect person to check the final product. Use the existing skills in your workplace to your advantage and always, always consider if what you are doing fits the image you are trying to present to the marketplace.
There’s a lot more in-depth work that goes into a strategy session, but over a couple of 2 hour sessions you should be well on your way. To enquire about a simple, practical business strategy session please call Ben Blackler or Blair Smith on 555 9090 or email email@example.com.
Having your own business is a dream shared by many people. After all, what’s better than taking on a new challenge and building an enterprise that rewards you not only financially, but also provides your life with greater purpose and, hopefully, freedom?
A popular avenue to obtaining your own business is to buy an existing one. An existing business offers some advantages over setting one up from scratch, including starting with:
- An existing brand and existing customers
- An established organisational structure with trained staff, systems, supply chains and relationships
- Premises and equipment
- A history of past performance including turnover, margins, expenses and overall profits.
The last item here, a history of past performance could be the best predictor of your future with the business. It’s one that we see buyers too easily dismissing by adopting too optimistic an attitude of “we’ll do it better”, and “we’ll put more hours into it”.
Businesses can always be improved but turning around an unprofitable or truly declining business takes something very special. It requires skills beyond those held by many people. It’s usually better to buy well in the first place.
Things to both understand and look for in the accounts provided by the seller include:
- Key themes, ‘signs’ and trends, including those of the industry itself
- Key people and seasonality impacts
- Unsubstantiated turnover claims
- An excessive asking price; amounts attributed to plant fixtures and goodwill
- Adjustments to expenses to improve the appearance of the result.
That’s where professional advice comes in. Our business reviews a lot of financial information of businesses for sale under a ‘due diligence’ process as well as many practical issues of buying a business. One of business-life’s no-brainers must be to find yourself an experienced and motivated chartered accountant (they’re the qualified ones) to explain what information you need, to review this for you and to help you decide whether to keep going, run away or help to negotiate a better outcome for you.
A final part of the pre-purchase process is structuring your purchase for GST, risk protection and tax benefits according to your particular circumstance.
People are often (understandably) confused about the best order to follow seeing advisers about buying a business. This is a generalisation but we suggest this order:
- Chartered Accountant (they see the financial results for hundreds of businesses and might even know a business that’s for sale)
- Bank (to get finance shored up and other insights)
- Lawyer (to work through the detail a sale and purchase agreement requires before presenting it to a seller). Your lawyer will also work with your chartered accountant to ensure the tax and GST detail is optimal for you.
To speak to us about the business you’re considering buying, please call Ben Blackler or Blair Smith on 555 9090 or email firstname.lastname@example.org
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:
- 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?
- 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?
- 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?
- 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 the experts Ben Blackler and Blair Smith a call for an obligation free chat. Call us on 555 9090 or email email@example.com