In the summer of 1954, four hundred wealthy businessmen were invited to hear about a joint venture proposal. Hands were shaken, coffee was served and for the next few hours, behind closed doors, P & L statements likely the future of how this venture would play out.
History would show that this was one of the sweetest deals ever offered in business and those that embraced this idea would make thousands of times their original investment ... all that joined the venture would make millions.
This was not a naive group of wet-behind-the ears dreamers, awestruck by the thought of sudden riches, or easily swayed by emotion.
No, this was a hard-nosed bunch, used to to dealing with bankers and politicians.
Here were the captains of their industry, being offered the deal of a lifetime. Their reaction is what is fascinating. How many jumped at the deal?
How many of those original 400 had the foresight to run with this deal ... and beat out the competition?
As it turns out, exactly three.
The creator of this idea - ever the businessman - understood; "After all," he says, "all we were offering them was a name, a set of plans, and a dream!"
A name, a set of plans, and a dream... The deal was a simple one: $500 down and about $5 per day was all they had to pay for the rights to use a name and a set of plans ... to make the dream of a lifetime come true.
Who were this businessman and what was he selling?
You may not recognize his name but you certainly know his company. Today, it is one of the most recognized brand names in the world.
Side Note: Within three years this company went public with a $3.9 million stock offering and suddenly, everyone wanted in on the deal.
Those that didn't jump on board wound up standing in a long line, waiting their turn.
Who was this guy?
Opportunity: "...Opportunity comes often, it knocks as often as you have an ear trained to hear it, an eye trained to see it, a hand trained to grasp it, and a head trained to use it."
This quote is from "Twenty Tips for Success", founder Holiday Inn, America's Innkeeper.
In 1951, Kemmons Wilson was on vacation with his family and became disgusted by the motels of the era that charged $2 extra for children, "We have five kids, so our $6 room became a $16 room," he said. One year later, he opened his first Holiday Inn where children could stay for free and families were assured of consistently clean, safe, rooms. Very soon, Holiday Inn setup the first nationwide motel computer reservations network and then, everyone wanted in on the deal.
"From that point on it wasn't a question of trying to sell franchises - it was a question of allocating them."
The important point [call it the secret] from this meeting?
Really, there are two important lessons. First, when the risk is small - don't hesitate. In this case; $500 for the use of the Holiday Inn name plus five cents per room per day - about $5 a day on a 100 room motel - was a minute allowance compared to what investors made on this deal.
But the biggest reason for Holiday Inns' success was a risk taker founder, backed by hard working no nonsense franchisees that were willing to invest millions in the first nationwide computer suspicions network.
A centralized computer system was something that the rest of the lodging industry didn't have at the time. At that time the opposition was a bunch of small independently owned roadside motels too small and scared to make the major investment needed to win ... so they lost and the people that joined Mr. Wilson became very big winners.
So, the biggest [secret] from this meeting? When you are first to the market with a new technology backed by people that won't "give up", then don't be afraid to take a risk and go for it.
Thursday, January 29, 2009
Joint Venture Membership sites!
Joint Venture membership sites are sites where people go and join, either for free or paid subscription, so they can find JV partners all from one location. Asking "how can I cost-effectively sell to more customers quickly" might lead you to some powerful joint-venture strategies. With a joint venture, you only pay for results. So the best plan of action would be to restate your Joint Venture offer, indicating that you are prepared to be flexible and are open to alternative suggestions.The brains of some of the big players in this business, my weekend in Charlotte was also spent working out new joint venture concepts with many of the other arketers who, like me, had come to hear Mike, Gary, Craig, Joel, and Robert speak. He works with other respected people in the business to share knowledge and is probably really fed up with people emailing him to ask him for a joint venture.
Joint Ventures Will Eat Your Profits Most small business owners would rather struggle to get clients, and get mediocre profits at best, instead of sharing the profits with a joint venture partner that sends clients their way.Ideas on how to joint venture ideas are boundless. A joint venture is formed when you not only have an alliance but you come up with a strategy to find customers together. You can do this in several ways, but there are a few easy methods that you should combine: free publicity, viral marketing, joint venture deals and advertising on a large scale. #Through your business associates and suppliers Introductions from people in your network is a very effective way of meeting potential joint venture partners.The way it’s going to roll out is the joint venture is buying two rigs. The first thing the SALM would do is find companies with products or services that your customers would want to buy and then you negotiate a joint venture deal where you would give your endorsement to their products for a percentage of the profits. The last tip for immediate traffic is Joint Venture.
In a nutshell a good JV or joint venture consists of the following.These are just some ways to finance international trade ventures; you can also look into the possibility of grants, venture capital and joint ventures with local companies. The Joint Venture between the merchant and these marketers can be structured in many ways (in fact, each may be unique), but let's just play out a typical scenario for the purpose of an example. The following are ten online joint venture ideas. Exchanging links with other relevant websites is a great way to start building partnerships with other website owners and may open the door for future joint venture requests.A company might establish an RO with the aim of exceeding its legal restrictions, and thereby establish the functional equivalent of a joint venture or wholly foreign owned enterprise while avoiding much of the expense and inconvenience. Hence some introspection needs to be done regarding the digital cameras and cell phones in their joint venture together in the technological world. For any joint venture project to be successful, the partners must possess certain skills that are required to choose the right deal, the right partners, and to promote the project successfully.
Joint Ventures Will Eat Your Profits Most small business owners would rather struggle to get clients, and get mediocre profits at best, instead of sharing the profits with a joint venture partner that sends clients their way.Ideas on how to joint venture ideas are boundless. A joint venture is formed when you not only have an alliance but you come up with a strategy to find customers together. You can do this in several ways, but there are a few easy methods that you should combine: free publicity, viral marketing, joint venture deals and advertising on a large scale. #Through your business associates and suppliers Introductions from people in your network is a very effective way of meeting potential joint venture partners.The way it’s going to roll out is the joint venture is buying two rigs. The first thing the SALM would do is find companies with products or services that your customers would want to buy and then you negotiate a joint venture deal where you would give your endorsement to their products for a percentage of the profits. The last tip for immediate traffic is Joint Venture.
In a nutshell a good JV or joint venture consists of the following.These are just some ways to finance international trade ventures; you can also look into the possibility of grants, venture capital and joint ventures with local companies. The Joint Venture between the merchant and these marketers can be structured in many ways (in fact, each may be unique), but let's just play out a typical scenario for the purpose of an example. The following are ten online joint venture ideas. Exchanging links with other relevant websites is a great way to start building partnerships with other website owners and may open the door for future joint venture requests.A company might establish an RO with the aim of exceeding its legal restrictions, and thereby establish the functional equivalent of a joint venture or wholly foreign owned enterprise while avoiding much of the expense and inconvenience. Hence some introspection needs to be done regarding the digital cameras and cell phones in their joint venture together in the technological world. For any joint venture project to be successful, the partners must possess certain skills that are required to choose the right deal, the right partners, and to promote the project successfully.
Wednesday, January 10, 2007
Rate of Return
In finance, rate of return is a comparison of the money earned (or lost) on an investment to the amount of money invested.
Rate of Return or Return on Investment (ROI) is the ratio of money gained or lost on an investment relative to the amount of money invested. The amount of money gained or lost may be referred to as interest, profit/loss, gain/loss, or net income/loss. The money invested may be referred to as the asset, capital, principal, or the cost basis of the investment.
ROI is also known as rate of profit, rate of return or return. Return can also refer to the dollar amount of gain or loss. ROI is the return on a past or current investment, or the estimated return on a future investment. ROI is usually given as a percent rather than decimal value.
ROI does not indicate how long an investment is held. However, ROI is most often stated as an annual or annualized rate of return, and it is most often stated for a calendar or fiscal year. In this article, “ROI” indicates an annual or annualized rate of return, unless otherwise noted.
ROI is used to compare returns on investments where the money gained or lost -- or the money invested – are not easily compared using dollar values. For instance, a $1,000 investment that earns $50 in interest obviously generates more cash than a $100 investment that earns $20 in interest, but the $100 investment earns a higher return on investment.
Rate of Return or Return on Investment (ROI) is the ratio of money gained or lost on an investment relative to the amount of money invested. The amount of money gained or lost may be referred to as interest, profit/loss, gain/loss, or net income/loss. The money invested may be referred to as the asset, capital, principal, or the cost basis of the investment.
ROI is also known as rate of profit, rate of return or return. Return can also refer to the dollar amount of gain or loss. ROI is the return on a past or current investment, or the estimated return on a future investment. ROI is usually given as a percent rather than decimal value.
ROI does not indicate how long an investment is held. However, ROI is most often stated as an annual or annualized rate of return, and it is most often stated for a calendar or fiscal year. In this article, “ROI” indicates an annual or annualized rate of return, unless otherwise noted.
ROI is used to compare returns on investments where the money gained or lost -- or the money invested – are not easily compared using dollar values. For instance, a $1,000 investment that earns $50 in interest obviously generates more cash than a $100 investment that earns $20 in interest, but the $100 investment earns a higher return on investment.
Return on Capital
In economics, return on capital is a non-GAAP financial measure that quantifies how well a company generates cash flow relative to the capital it has invested in its business. It is defined as Net operating profit less adjusted taxes divided by invested capital and is usually expressed as a percentage.
When the return on capital is greater than the cost of capital (usually measured as the weighted average cost of capital), the company is creating value; when it is less than the cost of capital, value is destroyed.
When the return on capital is greater than the cost of capital (usually measured as the weighted average cost of capital), the company is creating value; when it is less than the cost of capital, value is destroyed.
Tuesday, January 9, 2007
Financial Planning
Financial Planning is a process of providing advice and assistance to clients to determine whether and how clients can meet their financial needs and life.s goal through proper management of financial resources. It is six step process as given below:
Establishing and defining the client . planner relationship
The Financial Planner should clearly explain or document the services to be provided and define the responsibilities. The planner should explain fully how he will be paid and by whom. The planner should also disclose any restrictions on his ability to give unbiased advice and disclose any conflicts of interests. The planner should agree on how long the professional relationship should last and how decisions will be made.
Gathering client data & goals
The Financial Planner should ask for information about the financial situation. The planner should mutually define the personal and financial goals, understand the time frame for results and discuss, if relevant, how one feel.s about risk. The Financial Planner should gather all the necessary documents before giving the advice.
Analyzing and evaluating the financial status of the clients
The Financial Planner should analyze the information to assess the current situation and determine what one must do to meet thegoals, depending on what services have been asked. For this one could include analyzing the assets, liabilities and cash flow, current insurance coverage, investments or tax strategies.
Developing and presenting Financial Planning recommendations and/or alternatives
The Financial Planner should offer Financial Planning recommendations that address the goals, based on the information provided. The planner should go over the recommendations with the client to help and understand them so that one makes informed decisions. The planner should also listen to the client.s concerns and revise the recommendations as appropriate.
Implementing the Financial Planning recommendations
The planner and the client should agree on how the recommendations will be carried out. The planner may carry out the recommendations or serve as your .coach., coordinating the whole process along with professionals such as solicitors or stockbrokers.
Monitoring the Financial Planning recommendations
The planner should agree on who will monitor the progress towards the client.s goals. If the planner is in charge of the process, he/she should report personally to review the situation and adjust the recommendations, if needed.
Establishing and defining the client . planner relationship
The Financial Planner should clearly explain or document the services to be provided and define the responsibilities. The planner should explain fully how he will be paid and by whom. The planner should also disclose any restrictions on his ability to give unbiased advice and disclose any conflicts of interests. The planner should agree on how long the professional relationship should last and how decisions will be made.
Gathering client data & goals
The Financial Planner should ask for information about the financial situation. The planner should mutually define the personal and financial goals, understand the time frame for results and discuss, if relevant, how one feel.s about risk. The Financial Planner should gather all the necessary documents before giving the advice.
Analyzing and evaluating the financial status of the clients
The Financial Planner should analyze the information to assess the current situation and determine what one must do to meet thegoals, depending on what services have been asked. For this one could include analyzing the assets, liabilities and cash flow, current insurance coverage, investments or tax strategies.
Developing and presenting Financial Planning recommendations and/or alternatives
The Financial Planner should offer Financial Planning recommendations that address the goals, based on the information provided. The planner should go over the recommendations with the client to help and understand them so that one makes informed decisions. The planner should also listen to the client.s concerns and revise the recommendations as appropriate.
Implementing the Financial Planning recommendations
The planner and the client should agree on how the recommendations will be carried out. The planner may carry out the recommendations or serve as your .coach., coordinating the whole process along with professionals such as solicitors or stockbrokers.
Monitoring the Financial Planning recommendations
The planner should agree on who will monitor the progress towards the client.s goals. If the planner is in charge of the process, he/she should report personally to review the situation and adjust the recommendations, if needed.
Earn Money with Google Adsense
Google’s AdSense is a fascinating revenue-sharing opportunity for small, medium and large web sites. Some webmasters are designing brand new sites specifically for serving AdSense text ads. (It’s against the AdSense rules to design a site purely for AdSense, so you’ll want to include a few affiliate Affiliate links or sell your own product, too.)
StepsLet’s say you have a goal of earning $100,000 a year from AdSense. Is that possible? Let’s see … $100,000 divided by 365 = $274 a day. So your goal is to produce either:274 pages which earn $1 a day or548 pages which earn 50 cents a day or1096 pages which earn 25 cents a dayThe following are hypothetical cases. To earn $1 a day per page, you need, per page…400 visitors, 5% click-through rate (CTR CTR) and average 5c payout.Or 200 visitors, 10% CTR and an average 5c payout.Or 100 visitors, 10% CTR, and an average 10c payout.Or 100 visitors, 5% CTR, and an average 20c payoutLet’s assume you choose a goal somewhere around the middle, say aiming for 50 visitors per page and want 274 pages earning $1 a day. You’d need 274 x 50 = 13,700 pageviews a day.Does that sound too tough? If so, you’d better look for more profitable keywords and ways to improve your click-through rates.Let’s try a different scenario, You choose more profitable keywords and make your $1 on average per page from, say, 10 visitors. 274 x 10 = 2740 pageviews a day, That’s looking easier to achieve, If your average visitor sees 3 pages, you now need 913 unique visitors a day.Is that too tough to achieve in your niche? If so, create two sites, each attracting half that number, 456 unique visitors, a day, Can’t achieve those click-through rates and payouts? Then you’ll either need more pages on your sites on more niche sites.Please note, because of the AdSense rules, these are all hypothetical cases. I’m not allowed to give real cases. Real CTR rates and payouts vary hugely.Choose the goal which best matches your site or sites.
Start building keyword-rich pages containing well researched, profitable keywords, and get lots of high quality links to your site.For example, if your site is about topics such as debt consolidation, web hosting or asbestos-related cancer, you’ll earn much more per click than if it’s about free things.On the other hand, if you concentrate only on top-paying keywords, you’ll face an awful lot of tough competition.What you want are keywords that are high in demand and low in supply, So do some careful keyword research before you build your pages.
StepsLet’s say you have a goal of earning $100,000 a year from AdSense. Is that possible? Let’s see … $100,000 divided by 365 = $274 a day. So your goal is to produce either:274 pages which earn $1 a day or548 pages which earn 50 cents a day or1096 pages which earn 25 cents a dayThe following are hypothetical cases. To earn $1 a day per page, you need, per page…400 visitors, 5% click-through rate (CTR CTR) and average 5c payout.Or 200 visitors, 10% CTR and an average 5c payout.Or 100 visitors, 10% CTR, and an average 10c payout.Or 100 visitors, 5% CTR, and an average 20c payoutLet’s assume you choose a goal somewhere around the middle, say aiming for 50 visitors per page and want 274 pages earning $1 a day. You’d need 274 x 50 = 13,700 pageviews a day.Does that sound too tough? If so, you’d better look for more profitable keywords and ways to improve your click-through rates.Let’s try a different scenario, You choose more profitable keywords and make your $1 on average per page from, say, 10 visitors. 274 x 10 = 2740 pageviews a day, That’s looking easier to achieve, If your average visitor sees 3 pages, you now need 913 unique visitors a day.Is that too tough to achieve in your niche? If so, create two sites, each attracting half that number, 456 unique visitors, a day, Can’t achieve those click-through rates and payouts? Then you’ll either need more pages on your sites on more niche sites.Please note, because of the AdSense rules, these are all hypothetical cases. I’m not allowed to give real cases. Real CTR rates and payouts vary hugely.Choose the goal which best matches your site or sites.
Start building keyword-rich pages containing well researched, profitable keywords, and get lots of high quality links to your site.For example, if your site is about topics such as debt consolidation, web hosting or asbestos-related cancer, you’ll earn much more per click than if it’s about free things.On the other hand, if you concentrate only on top-paying keywords, you’ll face an awful lot of tough competition.What you want are keywords that are high in demand and low in supply, So do some careful keyword research before you build your pages.
Conducting Market Research
Market research is an important activity for every business to engage in.
Steps
Determine your Target Market. This consists of the people who will buy your product. To find your market, answer the following questions:
What Class(Upper - Middle - Lower) do these people belong to?
What is the age range?Males or females (or both)?Are they single or married?
Do they have kids?
Could you sell your product to kids?
Once you figure out your target market, make an effort to reach out to this group and find out what they think about your product.
Steps
Determine your Target Market. This consists of the people who will buy your product. To find your market, answer the following questions:
What Class(Upper - Middle - Lower) do these people belong to?
What is the age range?Males or females (or both)?Are they single or married?
Do they have kids?
Could you sell your product to kids?
Once you figure out your target market, make an effort to reach out to this group and find out what they think about your product.
THE BUSINESS PLAN: Description of the Business
What goes in a business plan? This is an excellent question to ask. And, one that manynew and potential small business owners should ask, but oftentimes don't ask. The body ofthe business plan can be divided into four distinct sections: 1) the description of thebusiness, 2) the marketing plan, 3) the financial management plan and 4) themanagement plan. Addenda to the business plan should include the executive summary,supporting documents and financial projections.
Description of the businessIn this section, provide a detailed description of your business. An excellent question to askyourself is: "What business am I in?" In answering this question include your products,market and services as well as a thorough description of what makes your business unique.Remember, however, that as you develop your business plan, you may have to modify orrevise your initial questions.The business description section is divided into three primary sections. Section 1 actuallydescribes your business, Section 2 the product or service you will be offering and Section 3the location of your business, and why this location is desirable (some franchisors assist insite selection).
1. Business DescriptionWhen describing your business, generally you should explain:1. Legalities - business form: proprietorship, partnership, corporation. What licenses or permits you will need.2. Business type: merchandizing, manufacturing or service.3. What your product or service is.4. Is it a new independent business, a takeover, an expansion, a franchise?5. Why your business will be profitable. What are the growth opportunities? How will franchising impact on growth opportunities?6. When your business will be open (days, hours)?7. What you have learned about your kind of business from outside sources (trade suppliers, bankers, other franchise owners, franchisor, publications).A cover sheet goes before the description. It includes the name, address and telephonenumber of the business and the names of all principals. In the description of your business,describe the unique aspects and how or why they will appeal to consumers. Emphasize anyspecial features that you feel will appeal to customers and explain how and why thesefeatures are appealing.The description of your business should clearly identify goals and objectives and it shouldclarify why you are, or why you want to be, in business.
2. Product/ServiceTry to describe the benefits of your goods and services from your customers' perspective.Successful business owners know or at least have an idea of what their customers want orexpect from them. This type of anticipation can be helpful in building customer satisfactionand loyalty. And, it certainly is a good strategy for beating the competition or retaining yourcompetitiveness. Describe:1. What you are selling.2. How your product or service will benefit the customer.3. Which products/services are in demand; if there will be a steady flow of cash.4. What is different about the product or service your business is offering.
3. The LocationThe location of your business can play a decisive role in its success or failure. Your locationshould be built around your customers, it should be accessible and it should provide asense of security. Consider these questions when addressing this section of your businessplan:1. What are your location needs?2. What kind of space will you need?3. Why is the area desirable? the building desirable?4. Is it easily accessible? Is public transportation available? Is street lighting adequate?5. Are market shifts or demographic shifts occurring?It may be a good idea to make a checklist of questions you identify when developing yourbusiness plan. Categorize your questions and, as you answer each question, remove it from your list.
Description of the businessIn this section, provide a detailed description of your business. An excellent question to askyourself is: "What business am I in?" In answering this question include your products,market and services as well as a thorough description of what makes your business unique.Remember, however, that as you develop your business plan, you may have to modify orrevise your initial questions.The business description section is divided into three primary sections. Section 1 actuallydescribes your business, Section 2 the product or service you will be offering and Section 3the location of your business, and why this location is desirable (some franchisors assist insite selection).
1. Business DescriptionWhen describing your business, generally you should explain:1. Legalities - business form: proprietorship, partnership, corporation. What licenses or permits you will need.2. Business type: merchandizing, manufacturing or service.3. What your product or service is.4. Is it a new independent business, a takeover, an expansion, a franchise?5. Why your business will be profitable. What are the growth opportunities? How will franchising impact on growth opportunities?6. When your business will be open (days, hours)?7. What you have learned about your kind of business from outside sources (trade suppliers, bankers, other franchise owners, franchisor, publications).A cover sheet goes before the description. It includes the name, address and telephonenumber of the business and the names of all principals. In the description of your business,describe the unique aspects and how or why they will appeal to consumers. Emphasize anyspecial features that you feel will appeal to customers and explain how and why thesefeatures are appealing.The description of your business should clearly identify goals and objectives and it shouldclarify why you are, or why you want to be, in business.
2. Product/ServiceTry to describe the benefits of your goods and services from your customers' perspective.Successful business owners know or at least have an idea of what their customers want orexpect from them. This type of anticipation can be helpful in building customer satisfactionand loyalty. And, it certainly is a good strategy for beating the competition or retaining yourcompetitiveness. Describe:1. What you are selling.2. How your product or service will benefit the customer.3. Which products/services are in demand; if there will be a steady flow of cash.4. What is different about the product or service your business is offering.
3. The LocationThe location of your business can play a decisive role in its success or failure. Your locationshould be built around your customers, it should be accessible and it should provide asense of security. Consider these questions when addressing this section of your businessplan:1. What are your location needs?2. What kind of space will you need?3. Why is the area desirable? the building desirable?4. Is it easily accessible? Is public transportation available? Is street lighting adequate?5. Are market shifts or demographic shifts occurring?It may be a good idea to make a checklist of questions you identify when developing yourbusiness plan. Categorize your questions and, as you answer each question, remove it from your list.
Buying Your Own Business
Whether it's the new challenge, the dream of being your own boss, or the lure of a more lucrative market, people like yourself buy businesses every day. Below is a 10 step guide to doing this, free from the stress and anxiety that comes with stepping into the unknown.
Steps
Defining the business you want to buyWhen larger corporations do this they call it ‘acquisition profiling’. For you, it will probably manifest itself in a series of questions such as: What kind of business do I want to buy? How do I know which business is right for me? Where do I start?
Even if you already know what business is right for you it’s still a good idea to do some research. Read up on any future legislation that may affect the business sector. For example, deregulation plans for the gaming industry may be a wonderful opportunity. But new legislation on how care homes are run may prove restrictive. Know your facts and figures.
Each trade has its own series of trade magazines and associations and you should use this stage to read up. If, for example, you are thinking of buying a pub, then you should start subscribing to the Publican – a trade magazine for the industry – and contact the British Beer and Pub Association to find out why pubs fail. Get as much information about the sector and don’t be afraid to change your mind.
If you’re thinking of buying a hotel, ask yourself what makes one successful? What examples of success do you know? Could you replicate that? Go and stay in your favourite hotel and make notes as to why you like it so much. It may sound simplistic to do this but it will help you to define the business you want to buy.
In many respects, if you have not decided on the type of business you want to buy this can be a very frustrating stage. Being sure of the business type is very important because it will have to be something you enjoy and be able to do well.
However, never forget that sometimes the true benefits of business ownership are not related to what you do, but the fact that you are financially independent. Therefore, if you’re unsure about the type of business you want to buy but confident about being your own boss you might want to consider one of the many franchise opportunities available to you. There are over 650 systems on offer in the UK and thousands around the world. Go to www.FranchiseSales.com to see a comprehensive list.Please note, at this stage you’ll also be considering how much to spend on buying a business. Careful financial planning at this stage is crucial as you don’t want to overstretch yourself in the purchase only to find you don’t have adequate resources to make any changes or implement new plans. Make sure you build in some fat or slack into your budgets. Start doing the maths now.
Targeting the BusinessOnce you’ve defined the parameters of the business you to want buy – the market sector, size, location (are you prepared to move?), the price range etc, you’ll be in a position to start targeting the right business. There are two ways of targeting a business:
(1) Find a business that is already listed for sale.
(2) Approach a business not for sale and make an offer.
Our site has thousands of businesses – most of which are represented by leading business agents, brokers and accountancy firms. It’ll make your task of targeting a business much easier than searching through a newspaper.
However, if the business you want to buy is not actively being marketed for sale there is nothing to stop you from approaching the owner direct and making an offer. Every business has its price. If you go down this route then it is advisable to employ an intermediary who will represent you.There are many business brokers and accountancy firms who will target an opportunity on your behalf. However, this process can be expensive and the costs should be proportional to the size of the business you are targeting.There’s no point in spending £50,000 with a top-five accountancy firm if you’re targeting a post office. However, if you’re spending between £1m and £10m on buying a business then an experienced professional will be invaluable. BusinessesForSale.com has a directory of professionals who can be engaged for this type of activity.
Quick and Dirty DIY due dilligence
Okay – now things are getting interesting. You’ve narrowed down the opportunities and you’ve created a shortlist of possible businesses that interest you. Ideally, you will have five or six targets on your list. Before you engage lawyers and accountants and start the official due diligence process you will need to do your own – a DIY, quick and dirty version of due diligence.
What is due diligence? Well, it’s a fancy term – used by accountants and lawyers – to sum up the process of making sure the business is what it says it is.
It’s no different to buying a car. The AA – the equivalent of an accountant – will do a professional due diligence on your behalf for a fee. However, before you engage them you will do a bit of your own – kick the tyres, check the mileage, and give it a test drive. It’s the same with a business.Spending time on checking out the business could save you heartache down the line – whether you’re buying a fish and chip shop, a florist or an electrical engineering firm. Once you’ve got your shortlist you should get as much information as possible about each business on your list.This is your chance to dig around and make sure the business is as good as it seems. If you’re buying a listed business for sale then it should come with a sales memorandum – which will give an overview of what is being sold. However, don’t stop there.This is a crucial stage. You must find out the truth about the business being sold. Any flaws or irregularities could also help you to negotiate on the price or make your decision to walk away much easier.You will want to get access to financial records – audited and management accounts. For this you will be asked to sign a confidentiality agreement. Don’t be alarmed at this. This confidentiality agreement (it won’t be more than a couple of pages) is a promise by you not to reveal sensitive information to a third party and is designed to make the seller feel comfortable about sharing the knowledge of how his business is being run.Remember, the business will still be operational and no owner likes it to be known (to either his customers or competitors) that his business is for sale.Beyond financial records you will want access to information about existing contracts – either with suppliers or employees. You will want to research the local area and make sure there are no legal issues that might threaten your activity.If you are buying a services business you may want to test the quality of those services and pretend to be a customer. If you’re buying a hotel, for example, you should stay there and review the standards.This is your chance to get to the bottom of what is actually being sold before you employ expensive accountants and lawyers. It’s also a crucial stage if you are going to borrow money from a lender to buy a business. The surer you are about the business and the more evidence you can gather to back up your case, the easier it will be to start negotiations with a lender. From your shortlist of five or six you should be narrowing down to just one or two – the major target and a backup.Step 4 - Negotiating the priceOnce you are satisfied that the business you have targeted is what it seems to be – and that you have done as much as you possibly can to understand what it is you are going to buy – you can start to talk about buying the business. And inevitably this will mean a conversation or dialogue with the business owner or intermediary (agent, broker, accountant) about the price of the business.It’s important to note that at this early stage of discussions, the price remains subject to contract. This means you can make an indicative offer that can change at some future point. Between now and when the contract is drawn up you may discover some information about the business that will affect your perceived value of it and you may wish to negotiate further on the price.A similar situation arises in house buying. A surveyors report may reveal information that will change your opinion of the valuation. So feel free to talk about what you are willing to pay at this stage with the security that you won’t have to pay it once you’ve done further investigation. Of course, you may find out (upon further research) that the business is actually undervalued – and that you have a real gem on your hands (but don’t ever count on it). In this case, you may just want to pay the asking price.Also, at this stage and throughout the process, don’t allow yourself to be rushed. Don’t allow yourself to be pushed into a quick sale. Take your time. Once you make an indicative offer a business owner or intermediary may want to rush things through. That’s only natural.However, resist them. Remember, as a buyer, you hold most of the cards. Take as much time as you need to get to the bottom of what it is you are buying. Don’t let them force a timetable on you that you feel uncomfortable about. A timetable must be structured in your favour. You’re paying. You’re the buyer.Valuing the businessA price is the ultimate reflection of the value of the business. There are many valuation methods used to assess a business. Most first-time buyers will be buying a property-based business (such as a pub, child nursery or coffee shop), which means that a great deal of the valuation will be based on the property itself. A surveyors report will give you comfort here.However, when it comes to valuing a non-property-based business or valuing the rest of a business (the turnover of the pub, child nursery or coffee shop) you will want to look at the methods, such as (i) Multiple of earnings (ii) Discounted cash flow and (iii) Asset valuation. You will need to take into account intellectual property and goodwill.Because you’re a first-time buyer, using a multiple of earnings is a good starting point. As a general rule you can take a multiple of future profits to land on a price. A majority of businesses that are sold are done so on a multiple of between three and eight times the profit. So if a business is making profits of £100,000 then it could be valued at between £300,000 and £800,000.If you were buying a hotel, restaurant or care home you would then have to factor in the value of the bricks and mortar. It’s a rough rule and anything between three and eight times profit is about right for most businesses.There are companies that specialise in valuing certain types of businesses and you may wish to engage the services of an accountant with experience in buying and selling businesses when making an assessment. However, in the final analysis, a business is ultimately worth what you’re willing to pay for it.Paying for the businessThere are many ways you can structure how you pay for a business. The simplest and most convenient way is to pay in cash on completion. You pay the whole lump sum and the business is yours. Banks will lend up to 60% of the value of the business and you will need to find the rest yourself.Another way to pay for the business is to defer the consideration. Consideration is the legal term meaning payment. This way involves you holding back some of the payment until a certain event or milestone is hit. For example, if the value of the business you are buying is affected by the renewal of an important contract – with a key customer – then you may wish to defer full payment until that contract is renewed.You may wish to agree terms with the vendor. In effect, he or she loans you some of the money you need to buy the business he or she is selling by taking a big deposit for the business and then accepting monthly or quarterly payments from you, the buyer, over a specific period of time (three years, five years or even longer) for the rest.This is a very common way of buying a business in the United States – usually called ‘loan notes’ or ‘vendor financing’ – and is becoming more popular in the UK. The seller will wish to have some security built into an agreement that will give him an equitable stake in the business, should you fail to meet payments or if the venture fails.Heads of agreementThe purpose of heads of agreement is so that there are no misunderstandings between the buyer and seller when it comes to completing a deal. Think of it as a roadmap that outlines how the sale will take place. It’s not the contract of sale – which comes later.Essentially it’s a document of terms – matters that you’ve both agreed on. For example, it will include a period of exclusivity that will prevent the vendor from talking to another prospective buyer. It will also protect the seller by preventing you from revealing information about the business to third parties.Importantly, the document gives you the right to recover costs if the seller suddenly decides to pull out of the deal.The heads of agreement are only partially legally binding, e.g. the exclusivity period or confidentiality terms discussed above. But the price of the business or the completion date, or whether you actually want to complete the deal, are not legally binding. You can still walk away, even if you’ve signed heads of agreement.See them as laying down the foundation of the deal, setting the parameters for it. They are designed to give comfort to both the buyer and seller.At this stage you will be employing professionals, such as lawyers or accountants. Make sure they have actual experience of buying and selling a business. Your family solicitor or current accountant may not be the right professional.With heads of agreement a timetable will be drawn up. Detailed negotiations with finance providers will be taking place and information about when and how the money will be made available will be written into the heads of agreement.Due diligenceThis is the official due diligence undertaken by professionals to make sure that everything is as it should be. It may include commercial due diligence to assess the business itself, legal due diligence to look at the contracts of the business, and financial due diligence to assess the tax position.Depending on the nature of the business you’re buying you may not need a complex assessment. For example, the due diligence involved in buying a post office may only be one or two days of your accountants' and lawyers' time. If you were buying a multi-million pound software company you would probably need a team of lawyers and accountants working over a period of many days and perhaps weeks. However, in each case, the principle remains the same – to make sure that the buyer is 100% sure of the business he or she is buying.Sale and purchase agreementThis legal document will contain the terms and conditions of the acquisition and the rights and obligations of the parties involved.Apart from the price, and when and how the purchase will be financed, it will also contain more detailed clauses. For example, you may put in a restrictive covenant preventing the seller from setting up a new business that will directly compete with you.
Steps
Defining the business you want to buyWhen larger corporations do this they call it ‘acquisition profiling’. For you, it will probably manifest itself in a series of questions such as: What kind of business do I want to buy? How do I know which business is right for me? Where do I start?
Even if you already know what business is right for you it’s still a good idea to do some research. Read up on any future legislation that may affect the business sector. For example, deregulation plans for the gaming industry may be a wonderful opportunity. But new legislation on how care homes are run may prove restrictive. Know your facts and figures.
Each trade has its own series of trade magazines and associations and you should use this stage to read up. If, for example, you are thinking of buying a pub, then you should start subscribing to the Publican – a trade magazine for the industry – and contact the British Beer and Pub Association to find out why pubs fail. Get as much information about the sector and don’t be afraid to change your mind.
If you’re thinking of buying a hotel, ask yourself what makes one successful? What examples of success do you know? Could you replicate that? Go and stay in your favourite hotel and make notes as to why you like it so much. It may sound simplistic to do this but it will help you to define the business you want to buy.
In many respects, if you have not decided on the type of business you want to buy this can be a very frustrating stage. Being sure of the business type is very important because it will have to be something you enjoy and be able to do well.
However, never forget that sometimes the true benefits of business ownership are not related to what you do, but the fact that you are financially independent. Therefore, if you’re unsure about the type of business you want to buy but confident about being your own boss you might want to consider one of the many franchise opportunities available to you. There are over 650 systems on offer in the UK and thousands around the world. Go to www.FranchiseSales.com to see a comprehensive list.Please note, at this stage you’ll also be considering how much to spend on buying a business. Careful financial planning at this stage is crucial as you don’t want to overstretch yourself in the purchase only to find you don’t have adequate resources to make any changes or implement new plans. Make sure you build in some fat or slack into your budgets. Start doing the maths now.
Targeting the BusinessOnce you’ve defined the parameters of the business you to want buy – the market sector, size, location (are you prepared to move?), the price range etc, you’ll be in a position to start targeting the right business. There are two ways of targeting a business:
(1) Find a business that is already listed for sale.
(2) Approach a business not for sale and make an offer.
Our site has thousands of businesses – most of which are represented by leading business agents, brokers and accountancy firms. It’ll make your task of targeting a business much easier than searching through a newspaper.
However, if the business you want to buy is not actively being marketed for sale there is nothing to stop you from approaching the owner direct and making an offer. Every business has its price. If you go down this route then it is advisable to employ an intermediary who will represent you.There are many business brokers and accountancy firms who will target an opportunity on your behalf. However, this process can be expensive and the costs should be proportional to the size of the business you are targeting.There’s no point in spending £50,000 with a top-five accountancy firm if you’re targeting a post office. However, if you’re spending between £1m and £10m on buying a business then an experienced professional will be invaluable. BusinessesForSale.com has a directory of professionals who can be engaged for this type of activity.
Quick and Dirty DIY due dilligence
Okay – now things are getting interesting. You’ve narrowed down the opportunities and you’ve created a shortlist of possible businesses that interest you. Ideally, you will have five or six targets on your list. Before you engage lawyers and accountants and start the official due diligence process you will need to do your own – a DIY, quick and dirty version of due diligence.
What is due diligence? Well, it’s a fancy term – used by accountants and lawyers – to sum up the process of making sure the business is what it says it is.
It’s no different to buying a car. The AA – the equivalent of an accountant – will do a professional due diligence on your behalf for a fee. However, before you engage them you will do a bit of your own – kick the tyres, check the mileage, and give it a test drive. It’s the same with a business.Spending time on checking out the business could save you heartache down the line – whether you’re buying a fish and chip shop, a florist or an electrical engineering firm. Once you’ve got your shortlist you should get as much information as possible about each business on your list.This is your chance to dig around and make sure the business is as good as it seems. If you’re buying a listed business for sale then it should come with a sales memorandum – which will give an overview of what is being sold. However, don’t stop there.This is a crucial stage. You must find out the truth about the business being sold. Any flaws or irregularities could also help you to negotiate on the price or make your decision to walk away much easier.You will want to get access to financial records – audited and management accounts. For this you will be asked to sign a confidentiality agreement. Don’t be alarmed at this. This confidentiality agreement (it won’t be more than a couple of pages) is a promise by you not to reveal sensitive information to a third party and is designed to make the seller feel comfortable about sharing the knowledge of how his business is being run.Remember, the business will still be operational and no owner likes it to be known (to either his customers or competitors) that his business is for sale.Beyond financial records you will want access to information about existing contracts – either with suppliers or employees. You will want to research the local area and make sure there are no legal issues that might threaten your activity.If you are buying a services business you may want to test the quality of those services and pretend to be a customer. If you’re buying a hotel, for example, you should stay there and review the standards.This is your chance to get to the bottom of what is actually being sold before you employ expensive accountants and lawyers. It’s also a crucial stage if you are going to borrow money from a lender to buy a business. The surer you are about the business and the more evidence you can gather to back up your case, the easier it will be to start negotiations with a lender. From your shortlist of five or six you should be narrowing down to just one or two – the major target and a backup.Step 4 - Negotiating the priceOnce you are satisfied that the business you have targeted is what it seems to be – and that you have done as much as you possibly can to understand what it is you are going to buy – you can start to talk about buying the business. And inevitably this will mean a conversation or dialogue with the business owner or intermediary (agent, broker, accountant) about the price of the business.It’s important to note that at this early stage of discussions, the price remains subject to contract. This means you can make an indicative offer that can change at some future point. Between now and when the contract is drawn up you may discover some information about the business that will affect your perceived value of it and you may wish to negotiate further on the price.A similar situation arises in house buying. A surveyors report may reveal information that will change your opinion of the valuation. So feel free to talk about what you are willing to pay at this stage with the security that you won’t have to pay it once you’ve done further investigation. Of course, you may find out (upon further research) that the business is actually undervalued – and that you have a real gem on your hands (but don’t ever count on it). In this case, you may just want to pay the asking price.Also, at this stage and throughout the process, don’t allow yourself to be rushed. Don’t allow yourself to be pushed into a quick sale. Take your time. Once you make an indicative offer a business owner or intermediary may want to rush things through. That’s only natural.However, resist them. Remember, as a buyer, you hold most of the cards. Take as much time as you need to get to the bottom of what it is you are buying. Don’t let them force a timetable on you that you feel uncomfortable about. A timetable must be structured in your favour. You’re paying. You’re the buyer.Valuing the businessA price is the ultimate reflection of the value of the business. There are many valuation methods used to assess a business. Most first-time buyers will be buying a property-based business (such as a pub, child nursery or coffee shop), which means that a great deal of the valuation will be based on the property itself. A surveyors report will give you comfort here.However, when it comes to valuing a non-property-based business or valuing the rest of a business (the turnover of the pub, child nursery or coffee shop) you will want to look at the methods, such as (i) Multiple of earnings (ii) Discounted cash flow and (iii) Asset valuation. You will need to take into account intellectual property and goodwill.Because you’re a first-time buyer, using a multiple of earnings is a good starting point. As a general rule you can take a multiple of future profits to land on a price. A majority of businesses that are sold are done so on a multiple of between three and eight times the profit. So if a business is making profits of £100,000 then it could be valued at between £300,000 and £800,000.If you were buying a hotel, restaurant or care home you would then have to factor in the value of the bricks and mortar. It’s a rough rule and anything between three and eight times profit is about right for most businesses.There are companies that specialise in valuing certain types of businesses and you may wish to engage the services of an accountant with experience in buying and selling businesses when making an assessment. However, in the final analysis, a business is ultimately worth what you’re willing to pay for it.Paying for the businessThere are many ways you can structure how you pay for a business. The simplest and most convenient way is to pay in cash on completion. You pay the whole lump sum and the business is yours. Banks will lend up to 60% of the value of the business and you will need to find the rest yourself.Another way to pay for the business is to defer the consideration. Consideration is the legal term meaning payment. This way involves you holding back some of the payment until a certain event or milestone is hit. For example, if the value of the business you are buying is affected by the renewal of an important contract – with a key customer – then you may wish to defer full payment until that contract is renewed.You may wish to agree terms with the vendor. In effect, he or she loans you some of the money you need to buy the business he or she is selling by taking a big deposit for the business and then accepting monthly or quarterly payments from you, the buyer, over a specific period of time (three years, five years or even longer) for the rest.This is a very common way of buying a business in the United States – usually called ‘loan notes’ or ‘vendor financing’ – and is becoming more popular in the UK. The seller will wish to have some security built into an agreement that will give him an equitable stake in the business, should you fail to meet payments or if the venture fails.Heads of agreementThe purpose of heads of agreement is so that there are no misunderstandings between the buyer and seller when it comes to completing a deal. Think of it as a roadmap that outlines how the sale will take place. It’s not the contract of sale – which comes later.Essentially it’s a document of terms – matters that you’ve both agreed on. For example, it will include a period of exclusivity that will prevent the vendor from talking to another prospective buyer. It will also protect the seller by preventing you from revealing information about the business to third parties.Importantly, the document gives you the right to recover costs if the seller suddenly decides to pull out of the deal.The heads of agreement are only partially legally binding, e.g. the exclusivity period or confidentiality terms discussed above. But the price of the business or the completion date, or whether you actually want to complete the deal, are not legally binding. You can still walk away, even if you’ve signed heads of agreement.See them as laying down the foundation of the deal, setting the parameters for it. They are designed to give comfort to both the buyer and seller.At this stage you will be employing professionals, such as lawyers or accountants. Make sure they have actual experience of buying and selling a business. Your family solicitor or current accountant may not be the right professional.With heads of agreement a timetable will be drawn up. Detailed negotiations with finance providers will be taking place and information about when and how the money will be made available will be written into the heads of agreement.Due diligenceThis is the official due diligence undertaken by professionals to make sure that everything is as it should be. It may include commercial due diligence to assess the business itself, legal due diligence to look at the contracts of the business, and financial due diligence to assess the tax position.Depending on the nature of the business you’re buying you may not need a complex assessment. For example, the due diligence involved in buying a post office may only be one or two days of your accountants' and lawyers' time. If you were buying a multi-million pound software company you would probably need a team of lawyers and accountants working over a period of many days and perhaps weeks. However, in each case, the principle remains the same – to make sure that the buyer is 100% sure of the business he or she is buying.Sale and purchase agreementThis legal document will contain the terms and conditions of the acquisition and the rights and obligations of the parties involved.Apart from the price, and when and how the purchase will be financed, it will also contain more detailed clauses. For example, you may put in a restrictive covenant preventing the seller from setting up a new business that will directly compete with you.
AdvertiingYour Home Business Online
When you start a home based business, it is essential to gain an edge over other competitors offering same products or services in your market. In order to attract customers to your site you will have to promote your site through advertisements. Even if the quality of the product or service you offer is the best, it will not gain attention from the customers. Without advertisement, there will be no sales and no revenue.
Steps
Pay attention to the market. Currently, there is a trend towards digitalization. You can create a domain with an attractive dot com and file your site to free web directories. This can add great value to the products and services you are offering.
Try shared advertising on the internet. Here you need to find people who are also in need of product exposure at least expenditure, and merge your advertisement along with their product. This method gives definite benefits as long as you differentiate your product well from the others. It can also be less expensive. Any surfer that comes to visit the other product or service will definitely have a look at yours. Shared advertisement is very common on the internet. The more advertisers you share with, the greater the exposure of your product.
Use banners with good designs can prove effective. Well-designed banners can attract more attention from the customers and provide credibility to the product.
Advertise through ezines, classified ads, and blogs. This can also attract the attention of the customers to a great extent.Link up with partners who sell a different product or even the same product. You pull advertising dollars and you will rotate each others sites on your prospective sites. For example: John will rotate Willie's and Bob's website on his site and they will do the same for Willie, this will increase each members exposure to a broader audience. This technique could also be used for classified ads, solo ads, and any other promotion technique you could ever dream about.
Barter/Trade. If you have a website with a high page rank, you could negotiate with another webmaster/ezine owner. You could trade links for an advertisement. The possibilities are endless with this technique.Add your url to search engines and directories.
Steps
Pay attention to the market. Currently, there is a trend towards digitalization. You can create a domain with an attractive dot com and file your site to free web directories. This can add great value to the products and services you are offering.
Try shared advertising on the internet. Here you need to find people who are also in need of product exposure at least expenditure, and merge your advertisement along with their product. This method gives definite benefits as long as you differentiate your product well from the others. It can also be less expensive. Any surfer that comes to visit the other product or service will definitely have a look at yours. Shared advertisement is very common on the internet. The more advertisers you share with, the greater the exposure of your product.
Use banners with good designs can prove effective. Well-designed banners can attract more attention from the customers and provide credibility to the product.
Advertise through ezines, classified ads, and blogs. This can also attract the attention of the customers to a great extent.Link up with partners who sell a different product or even the same product. You pull advertising dollars and you will rotate each others sites on your prospective sites. For example: John will rotate Willie's and Bob's website on his site and they will do the same for Willie, this will increase each members exposure to a broader audience. This technique could also be used for classified ads, solo ads, and any other promotion technique you could ever dream about.
Barter/Trade. If you have a website with a high page rank, you could negotiate with another webmaster/ezine owner. You could trade links for an advertisement. The possibilities are endless with this technique.Add your url to search engines and directories.
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