Once you have your start up business idea, have tested the market and are ready to embark on your business journey, there are several things you need to make sure you get right at the start. Below is a summary of 7 of the elements that when implemented correctly will ensure you keep more of your business’s profits in your hands.
1. Do you need to set up a separate structure to run your business?
Understanding the difference between the different business structures, such as companies, trusts, partnerships and sole traders, will help you decide which is most suitable for your business and your personal situation. Getting this right can have a huge impact your taxation, both ongoing and when you come to sell your business, asset protection and if you are in business with someone else, how easy it is to unwind the structure, without too much pain. You need to consider your structure from your industry standards and regulations. Another consideration is that some Government Grants are available are only available to Companies.
2. Setting up your Accounting/ Book keeping system.
Selecting the right system to prepare your accounts, that will streamline and automate the process for you, can save you literally hundreds of hours (and headaches). The likes of Xero and MYOB Online make this process so much easier and efficient, and while I am a great believer of putting your time into what you do best, I also understand that when you are starting out you need to be Jill of all trades, so while your start up business maybe worlds away from the exciting book keeping world 😊, its important to make sure you implement a system that works for you. And it’s worth investing a little time in understanding the numbers and what they mean for your business.
Well this is a biggie, and I will only skim over here, but you need understand the different types of taxes that may apply to your business, how they work, how you register for them and how you report on them. You also want to make sure that you are in a position where you are not paying any more tax than you need to.
4. Budgeting and Cashflow.
Two very scary words right there! But they don’t need to be, there are simple ways to put these together to help you measure where you are at. With the great accounting software we know have, it’s never been easier to put together meaningful reports that measure where you are at now, rather than leaving it until the end of the tax year. This will enable you to be nimble with your decision making. Also understanding the difference between cash flow and profit is critical for any business in a growth phase, you may be making great profits, but if you are continually reinvesting you may be hampered by lack of cashf low.
5. Funding your business
How will you fund your business? What are the different options available? Will you need EFTPOS facilities, overseas trade facilities – the costs of these can vary dramatically so it’s important to look at what will look at what will work best for you. It is also worth looking at Traditional bank loans vs emerging funding options. What Grants, might be available to help you grow your business?
6 Employing your first team member
This can be both an exciting and daunting time, and depending on your industry, you will have options on how this might look, whether it is an employee or a contractor. You will need to understand the different taxation, superannuation and Workcover obligations around this.
7. Payments and Invoicing
Ok so we all want your business to flourish right? So, you need make sure your invoices and payment methods are set up, to meet your needs and, to make sure you get paid on time every time. Invoicing terms, payment agreements and trade terms will
While this is no means an exhaustive or detailed list, I hope you have found it helpful, and it has given you insight into some of the things you should consider when setting up your business.
Please note this is general information only and you should seek specific advice in relation to your personal situation.
- The Wealth Genie
It’s exciting times starting a business, coming up with the concept of what your business is all about, then you may hit brick wall in trying to work out - where to from here. A goggle search on “starting a small business” will get you 915 million hits in .88 of a second, gosh what a wealth of information, but it is so overwhelming. We live in a world of information overload and are constantly bombarded with “stuff” on do it this it way, do it that way, buy this, read that etc.
So, to provide some clarity I have put together a list of the top questions I will walk/ talk through with clients that are starting their new business venture, before we even get to the nitty gritty of business structure set ups, tax and all the other exciting advice!
1. What is your business idea? Let’s get really clear on exactly what your business will do. What are you selling, services, products, a combination of both?
2. Are you passionate and excited about your idea? Running a business, you are passionate about will put fire in your belly and knowing why you want to go into business will set you apart from your competition. Simon Sinek has a great TED talk – on “People don’t buy what you do people buy why you do it”.
3. Have you tested your market? Pre-selling and validating your ideas with friends and colleagues will give you a good gauge as to the demand for your business. A friend willing to part with cold hard cash for something you have to offer can be a validator of your business idea. When I first started my accounting business, my first clients were family and friends, then they refer and then it is a snowball effect.
4. Who is your ideal customer? client? Who are you selling to – what problem are of theirs will you be solving? What needs of your customer does your product or service satisfy? Then, who is the ideal customer for what you are selling? If you can explain to someone how you can solve a pain point for them, they are much more likely to buy from you. Your ability to clearly define and determine the best customer for what you are selling, will save you wasting a lot of time and money than with a scatter gun approach and set you up for business success.
5. What will set you apart from your competition? How will you stand out from the crowd? This is a whole other topic in itself, but things like outstanding service (everyone says they deliver it – but do you walk the talk), fixing customer pain points, being passionate about what you do, be a little different, focus on a narrow niche, offer a money back guarantee – these are just a few things you can do to make your business different to the one down the road, and potential customers more likely to buy from you.
- The Wealth Genie
There is a lot of media hype now over the amount you need in super to retire – and I am a bit over it. And talk of increasing the retirement age to 70 is a little depressing. Currently, most people can access their super when they are 60, and age pension around 66 increasing to 67.
The reality is that superannuation or retirement savings is only one aspect to your financial independence, other things such as owing your own home, your human capital and other assets outside of super can all work together to create a lifestyle for you that doesn’t have you turning up at a desk at 8.30am Monday through Friday.
Take your family home for example with the explosion of AirBnB you can rent out some or all of your home for a period of time and earn some extra dollars, and some clever folks are even earning money from helping others with their AirBnB’s building side hustles, property managing several properties for others.
Go a step further, and that caravan that is sitting down the side of your house, can also be hired out. There are websites such as www.camptoo.com and www.camplify.com.au where you can list your caravan, motorhome, campervan etc for hire We recently picked up a motorhome from a lovely man in North Fitzroy, and cruised around for a week, in his fully decked out motorhome. I asked him how he found hiring it out – his answer “brilliant – we were going to put the van in storage for six months but discovered camptoo and instead have been able to generate some decent money”. Brian’s motorhome rents for approximately 20-30% less than your mainstream van hire companies – it’s a win win!
So, you have human capital which is your ability to work and earn an income, and you have financial capital which is what you have accumulated by using your number one asset, your ability to earn an income,
The goal has always been to reach the point where our financial capital covers all of our needs, and we don’t need the human capital anymore. That’s what we call financial independence, “I don’t need to work to get paid anymore.” But it’s still your choice about whether or not to harvest your human capital and turn it into additional dollars—and you can.
You can continue to “work in retirement.” That’s why I’m a huge fan the label of “financial independence” and not “retirement” because in reality what often happens is most people when they first retire, have some time off and then they realise they are kind of bored and they go back into some sort of work – and now work looks completely different for them. It may only be on a part time basis or in totally different role to what they were doing previously. I have a client who is a retired engineer who is having a ball working in a wine bar, mixing his two loves wine and chatting, no, he is not earning the same dollars but it’s an extra $20,000 per year he doesn’t need to draw from his super, and he is super happy!
When you consider that you can earn around $20,000 without paying any tax, and if you are over 60 any income you are drawing from super is tax free, with a little bit of planning now, you may be closer to financial independence that you think! So I encourage you to think outside the square and look at things a little differently 😊
As this year quickly races past our eyes we may have lost sight of those little or big goals we set for ourselves at the start of the year. Often we begin the New Year fresh, motivated and ready to make the next year the best one yet and although this is great, sometimes we lose sight or get off track of our goals we
had in set.
Sometimes a mid year “detox” is the perfect way to recharge, recuperate and get back on track to
smash out your end of year goals.
Now here at The Wealth Genie we’re predominately focused on financial success and freedom so I’m not just talking about any old detox. No juice detox or lemon water craze. We’re talking “a spending detox”.
I have created five tips to get your back on track of your financial goals and right into a spending detox.
Now because it’s a detox it’s not forever! (That wouldn’t be sustainable) Choose a week (or a month if your game) and get back down to the basics. Not only can a spending detox help you get back onto this years goals it can give you a new appreciation for your money and recognize some bad habits you may have formed.
The spending detox
1. Get back to the goal
First of all it’s important to remember and refresh what your financial goals were and why you were striving for them. Write them down and get motivated again!
2. Cut out all unnecessary shopping
For the period of your detox no sneaky online spends or picking up a cute top after work on Friday. Just for this one-week (or month) only spend money on things you desperately need. The shoes don’t count!
3. Get rid of your debt
Obviously a lot easier said then done but carrying credit card debt is so harmful to financial health and tends to be a huge deterrence in reaching goals. Try making double or triple the repayment this week, bringing you closer to having the debt paid off.
4. Identify where you got off track
Looking back and reflecting on exactly what you were excessively spending your money on and where you went wrong is vital in not doing it again. Identify where you could have not spent as much money and come up with a plan of how to not make the same mistakes in the future!
5. Swap this for that
Going out for dinner, weekends away and treating ourselves to those lovely massages can really make a dint in the spending budget. While all of those things are lovely and should be enjoyed on the spending detox they just wont’ do. Swap going out for dinner with a special home cooked meal, put a candle and some music on and you’re in a make shift five star restaurants!
Think of a spending detox like any other detox! While it’s not exactly that enjoyable in the process, the end result will have you feeling lighter, refreshed and motivated!
- The Wealth Genie
With tax return just around the corner (crazy, I know. Where did the year go?!) We thought it would be fitting to give our best tips to maximize your tax return this year or next!
If you’re someone who always watches all your friends take in large tax returns and you seem to get little to nothing, then this article is for you!
Although quickly approaching (June 30th), there’s still time!
1. Maximize depreciation deductions
Small businesses with an total annual turnover of less than $10 million can still receive an immediate tax deduction for nearly all individual assets purchased by 30 June 2018 that cost less than $20,000 that are used in your business.
If you are registered for GST, the amount is less the GST, but if you are not the total is taken to include the GST.
2. Claim deductions for a home office
If you’re constantly required to handle emails from home or have an agreement you’re completely entitled to claim a tax deduction for a percentage of this. Eg. The running of your cost and equipment.
3. Seek professional advice when starting a business
Professional expenses associated with starting a new business, such as legal and accounting fees, are deductible in the financial year those expenses are incurred rather than deductible over a five-year period as was the case previously.
If you established a business during the year, you should make sure you talk to us about claiming professional advice fees as an expense.
4. Consider whether your legal structure is right for your business
Small businesses are able to change their legal structure without incurring any income tax liability when active assets are transferred by one entity to another.
This rollover applies to active assets that are CGT assets, trading stock, revenue assets and depreciating assets used, or held ready for use, in the course of carrying on a business.
We can review your business structure to ensure it is appropriate for you and your business.
5. Review your private company loans
The income tax laws around loans made from private companies to directors and related parties are quite complex and if there are loans made from your private company you may need to review these prior to 30th June to make sure you are not at risk that these loans are considered unfranked dividends to shareholders or associates.
Depending on the circumstances, these strategies may include repaying a loan, declaring a dividend or entering a complying loan agreement.
In addition an unpaid distribution owed by a trust to a related private company beneficiary that arises on or after 1 July 2016 will be treated as a loan by the company, if the trustee and the company are controlled by the same family group. In these circumstances, the associated trust may be taken to have derived a deemed dividend for the amount of the unpaid trust distribution in 2017-18.
6. Write-off bad debts
If you have invoiced a client or customer and you are not going to receive payment for it you are able to claim a tax deduction for it in the year you decide to write off the debt. The invoice must previously been brought to account as income or sales.
7. Paying employee bonuses
If you pay your team bonuses and you want to bring expenses into the 2017-18 year, ensure they are quantified and documented in a properly authorized resolution (e.g. Board minute) prior to year-end to enable a deduction to be incurred for these bonuses where they are not paid or credited until the subsequent year.
8. Pay any outstanding superannuation entitlements
The Australian Government has announced a 12-month amnesty from 24 May 2018 for employers to pay any outstanding Superannuation Guarantee (SG) contributions for periods prior to 1 April 2018.
Employers who voluntarily disclose and pay previously undeclared SG shortfalls during the Amnesty and before an SG audit will not be liable for the administration penalties and will be able to claim a tax deduction for payments made during the 12-month period. The announcement is subject to approval by the Parliament. To able to claim the tax deduction in the 2017/18 Financial year these amounts must be paid by 30th June 2018.
Some specific tips for farmers:
7. Farm management deposits (FMDs)
One of the best tax-planning measures available to primary producers is effectively utilising the farm management deposits scheme, or FMDs. They are an effective business and cash flow planning tool.
Primary producers can deposit up to $800,000 in a FMD account, they can have early access to their FMD account during times of drought, and they may be able to offset the interest costs on primary production business debt.
Tax averaging enables primary producers to even out their income and tax payable over a maximum of five years to allow for good and bad years. This ensures that farmers don't pay more tax over time than taxpayers on comparable but steady incomes.
Primary producers who opted out of income tax averaging for 2006-07, or an earlier financial year, are able to choose to restart income tax averaging in 2017-18.
Hopefully these tips can assist you in getting the most from your tax return this year! Do not hesitate to contact The Wealth Genie for any financial advise and services!
- The Wealth Genie
Additional sources: https://thenewdaily.com.au/money/your-budget/2015/06/10/seven-tips-maximise-tax-return/?g
The media has been exploding with attention on the Royal Commission into the Banking and Financial Industries (Link here for more information). With all of this information bombarding the public, it's a little wonder people are skeptical about the big banks and their super funds.
Although somethings are simply out of our control, there are a few little things we can do to regain some power.
Here are 5 things you can do today to take control of your super:
1. Have a look at the Investment Option your super is currently invested in for you within your fund. You should make sure that it is in line with your Risk Profile and your time horizon until you can access your super money. Generally speaking the longer, you have until you can access your super (which for most under the age of 56 is 60 years old) the more aggressive you can be in your investment selections. What has grabbed the media’s attention is the amount of super money that has gone into what they call the default option, and while these vary between funds, it is generally what they call a Balanced Option which means that it is balanced between investing in Cash/ Fixed Interest and Growth Assets such as shares. This can have a huge impact on the total superannuation amount for a person who has 10 + years until retirement.
Say a balanced fund is returning 6% per annum as opposed to a High Growth fund (invested mainly in growth assets such as shares) which is returning 9% per annum. For a 30 year old earning $80,000 per annum and a starting balance of $20,000 in super the difference this makes is staggering:
After 30 years – Balanced Option, Super Balance is $946,626
High Growth Option, Super Balance is $1,618,772
That’s a whopping $672,146 difference!!
2. Check your fees on your account. As of the end of September 2017 all funds with the exception of Self Managed Superannuation Funds need to disclose all their costs, and you can find the costs for your own superfund in their Product Disclosure statements which are found on each funds website. The fees will not always be on your superannuation statement. There are also websites where you can check the fees and compare your superfund such as Canstar and SuperRatings.
3. Make sure your employer is paying your superannuation at least quarterly. We all assume that our employer will do the right thing but it isn’t always the case, so check your money is going into super when it should be and for the correct amount.
4. Check the Insurance on your fund. Many funds offer default insurance, which you pay for out of the fund. So check what you are paying for is what you need, or enough to meet your needs if a crisis arises.
5. Consider consolidating. If you have more than one fund it might be worth consolidating into the one fund to save on fees, but make sure that you have considered any insurance that might be a fund that you wish to close.As you will lose any insurance benefits if these funds are closed.
As always this is general advice only, and if you would like advice specific to your situation please seek advice from a professional adviser.
- The Wealth Genie
Financial anxiety is something that unfortunately most of us deal with. Research by the Center for Social Impact conducted for National Australia Bank found that two million Australians are experiencing severe or high financial stress, while a further 10 million are living with some level of financial worry.
So, if you feel alone in your financial anxieties, don’t! You definitely are not. Anxiety is unfortunately so extremely common in our society in all aspects of life, especially with our money.
Anxiety is a normal, physiological and emotional state that results when we behave apprehensively. While in itself anxiety isn’t harmful, the stress it creates can be.
Money and financial stress doesn’t HAVE to be an issue in your life. By implementing a few simple steps and thought processes financial anxiety can be a thing of the past!
As mentioned in previous blog posts, positive thinking is at the root of all success. Approaching your financial worries with a positive mind frame will only attract more positivity into your life. Of course this won’t magically make money appear in your account or pay your bills but it definitely will help you calm your fears which in turn can lead to solutions to your financial problems. If you’re finding it hard to focus on the good in your current financial situation brainstorm some positive changes or progress you’ve made financially over the past year. Highlight these and celebrate them!
Remember you can only control the controllable. Don’t put so much pressure on yourself to control everything and be on top of every single thing. There are things we can control and we can’t. For example, if you’re not in a job that allows you to save your desired amount right now, you can’t control that. Try looking for a job that does allow that and if you can’t find one right now, so be it. You may have things pop up that you need to pay for which get in the way but that’s just life. Try not to stress it because at the end of the day it’s out of your control.
Often when we get the most stressed and anxious about our finances it’s when our budget is out of whack. This can cause us to feel as if it’s spiralling out of control when it’s not in reality. A regular budget check up and revamp might just be in order!
Review your bills and expenses, reduce them, pay off and repeat!
Never be ashamed of your financial situation. No matter what it is. With shame brings anxiety. As mentioned above there’s only certain things we can control. You can control past financial mismanagement or incorrect budgeting but you can make a conscious effort to better your future financial actions!
Additionally, stop comparing! Your financial situation doesn’t have to be the same as your friends, sister, mother or co-worker. We’re all individual; we all have different needs and financial requirements, so there’s no point comparing yourself to another persons situation.
Having professional advice can help calm your nerves and anxieties and assist you in achieving your financial goals and desires. Whatever it is, these people have extensive knowledge and experience in things you may not.
Not only will talking to a professional help curb your financial anxieties by assisting you in planning etc, talking about your concerns is one of the best things you can do.
Finally, staying up at night or constantly biting your finger nails worrying about your financial situation won’t make it any better, in fact it will probably make it worse! You may have heard that 85% of what we worry about never happens, and it’s true! A lot of the financial worries we have never even come true! So take a deep breath. Take the appropriate actions of what we can control and put time and energy into those.
If you’re feeling stressed out about money, you’re not alone! The ABC published an article that goes into how many people are stressing about money and the damage it’s causing. Link below.
- The Wealth Genie
With the 2018 -19 Australian Government budget recently being released I thought it was only fitting to write a blog post around the topic budgeting! Low and middle-income earners have emerged as the biggest winners from this governments planned tax cuts, with a dual income family potentially saving $1,000 on their tax bill.
Now while this probably won’t make any crazy difference to your saving goals I have formulated five top tips that will help you stick to your budget!
Saying that you will stick to a budget and actually doing it are two completely different things. While it’s a lot easier said then done, sticking to a budget is an enormously rewarding and satisfying task to achieve.
No matter how big or small your financial dreams are a budget is a vital step in getting there.
Firstly, what is a budget? A budget is an estimation of revenue and expenses over a specified future period of time; it is compiled and re-evaluated on a periodic basis. Budgets can be made for a person, a family, a group of people, a business, a government, a country, a multinational organisation or just about anything else that makes and spends money.
Having a budget allows you to create a plan that reflects your goals, priorities and financial dreams.
When talking about budgeting most people think of completely cutting out the indulgences we love, like those morning coffees or massages, but in fact it’s the complete opposite. As long as you do budget for these little indulgences that we love, then go for gold! If you can comfortably budget them into your life then there’s no reason not to have them!
As mentioned before formulating a budget plan is the easy part, not straying away from that plan is the hard part!
Here are five tips sticking to your budget tips that will help you stay right on track!
1. Write it down and keep track of your expenses
Writing down on a piece of paper, your smart phone or computer exactly what your budget is will set clear boundaries of how much you can spend. Simple!
Recording what exactly your spending your money on will help you identify the things you seem to be spending too much on, where your money is going and where it could be better spent. Keeping receipts, recording when you pay a bill or even taking photos of invoices are great ways to keep an eye on your expenses.
2. Be accountable
Having somebody in your life that can keep you accountable for your budget is a great way not to fall off track. Whether that’s a friend, a partner or even a parent, having someone to check in with each week to see how your budget and spending is going will not only motivate you but also keep you on the right track.
3. A spend less then nothing day
Sometimes we don’t realise just how easily a quick duck to the shops to grab something for dinner or buying lunch everyday can add up! Designating a “spend less then nothing day” means that you set aside day that you don’t spend anything, that is not completely necessary for your survival of course.
Be creative in the kitchen; use what you have left over. Have a coffee at home or ride your bike to work. These little changes can make a big impact overall to your spending!
4. Treat yourself
As mentioned before, budgeting doesn’t mean that you have to give up your morning coffee or massage. In fact, if we don’t do these little things to treat ourselves the likelihood of slipping off the bandwagon completely is so much higher.
Budget in something for yourself that you love and will make you feel good and recharged!
5. Be realistic
Making sure your budget is attainable and achievable is key! There’s no point budgeting so intensely that there’s no way you won’t fail. Don’t make yourself suffer or live uncomfortably just because you’re on a budget. This will end in failure… Sure, cut back or reduce reasonably but don’t take away everything, especially the things you love.
These are just five simple tips that can make budgeting more attainable and stress free! Remember, budgeting is a good thing! Don’t turn it into a horrible thing to do. Be realistic, treat yourself and enjoy the rewards that you will receive!
With social media being all the rage, constantly expanding and forever growing, it's interesting to question what impact the role of social media has on your business.
Now, I'm no social media expert by any means but with people making careers and earning their income these days purely by an online platform, surely there are some benefits in spending some time and energy and possibly even money into a social media platform/presence for your business.
I took it upon myself to dig a little deeper into this thought and the numbers spoke for themselves. Here are two that really stood out to me.
71% of consumers who have had a good social media service experience with a brand are likely to recommend it to others. (Source: Ambassador)
The claims are true. The statistics are real. We are in an online world where it is more important to represent your business and your brand on social media.
Having a social media presences is an expensive, fast and effective way to get your business out their to the world. Here are five undeniable benefits that the use of social media can bring to your business.
Firstly and most important increased business awareness/exposure! This is obviously a detrimental factor into any businesses success, the more exposure = the more customers/clients/buyers. Fact: 60% of Instagram users say they discover new products via that platform.
2. Personalise your brand/business
When your brand/business forms a social media presence it suddenly becomes way more then just a service or product. Social media allows people to feel a human connection between them and your brand. Connection is key! Through social media you can create your “look” through branding and come across the way you want to be seen.
3. Increase website traffic
Social media is a fantastic tool to use increase website traffic and create leads to your business. Social media posts and ads provide the perfect opportunity for this. Sharing QUALITY and valuable content to your customers on your social media is a great way to share, connect, get attention, increase visibility and grow!
Whether we like it or not, people are ALWAYS going to have an opinion (hopefully good not bad). And now day’s people tend to jump straight onto the Internet to showcase their complaints…whether your business is there to response or not. This is when social media becomes a blessing (and sometimes a curse). Being able to respond to complaints and highlight positive via social media can clean up a messy situation quickly! Somebody left you a review that wasn’t true? Confront the comment in a professional and respectful way. Vice versa, somebody left you words of praise? Thank them for their kindness!
Social ads are booming! They’re an inexpensive way to promote your business/content. You can target specific audiences and end up saving a lot of money!
For some of us that grew up in a world without social media it may be tough to get your head around (but there's people out there now that do it as jobs and can help you with that). Unfortunately if social media isn't your thing, it might have to be….
For your business to succeed it is no longer a question of if you should jump on the social media bandwagon, but a need to, if you ever want your business to reach its full potential.
Again, I’m no social media expert. Everything above is just what I’ve gathered from watching the industry, having people work within social media around me, and personal research I’ve conducted on my own.
The true impact that social media can have on your business can only truly be understood when you start applying the methods.
So if your business isn’t currently social media active then it might be time to hop to!
Here are so more useful links that dive deeper into the benefits of social media on your business!
Knowing how much your business is REALLY worth presents unlimited benefits to both you and your buyer. If you are preparing to transition ownership of your business or just beginning to consider your options for stepping away from the business, it is important to be prepared and have accurate expectations about the sale price.
There are a range of factors that have an impact on the price or value of your business and listed below are some of generally the most important:
1) Type Of Business – different types of businesses (e.g. manufacturing, service companies, distributors) are hard to compare and can often generate a very different sale price. However, generally if your business has a proprietary product, special expertise, defined contracts or provides any value-addition for clients you will see higher sale prices than those business who do not.
2) Revenue Size – This one is a bit obvious! The higher the revenue the higher the selling price can be! The two go hand in hand. Recurring revenue is great. The more returning contracts or customers you have each year indicates how “safe” and “reliable” your business is, therefore adding to your businesses value.
3) Customer Base – Usually, the wider and more loyal the customer base, the higher the selling price
4) Marketing Position – A company that occupies the uppermost position in the market, or has a unique niche will sell for a premium over other companies.
5) Industry Outlook – If the outlook for the industry is positive and growth is predicted, the sale price will rise. The stage of the industry life cycle is also important. If it is experiencing a period of consolidation and larger companies are acquiring smaller ones, the price for the smaller ones will rise.
6) Depth of management and sales teams – Generally, if the business owner bears all managerial responsibility, the selling price will decrease.
7) Company History – The business’s track record is important in the sale. If you can demonstrate a history of consistent growth and profit, buyers will be willing to pay more. This also works in terms of the story of the company. A solid company history increases its tangible value.
These points listed above are all general factors that impact business value BUT there is more then meets the surface when it comes to valuing a business.
Below are three extra extremely useful points to take into consideration when selling/valuing your business!
1)Intellectual property – this can be anything from recipes to trade secrets and trademarks. These are the things the set your business apart from the rest, that give your business VALUE. This “IP” could also exists in how you run your business from your customer base or contact network
2)Business potential – Business potential is a huge game changer when it comes to business value. Perhaps you haven’t had the time, energy or motivation to achieve the maximum success of your business but the potential is there! This needs to be highlighted! The benefits of buying a pre-existing business in comparison to starting from scratch are huge and your buyers need to know that!
3)Happy customers – If you have an already developed business, it’s reputation and customers satisfaction is vital in it’s success and therefore value. Happy and satisfied customers impact your business more then anything else because they are your business! Put yourself in your customer’s shoes when running a business, solve issues quickly, chase good reviews and listen to the feedback!
To summarize, there are a several factors that will affect the value of your business and some of the most important ones aren’t seen on surface level! The best thing you can do is be prepared and do all you can do before you do place your business on the market, to obtain the best possible outcome for all your hard work.
Remember that when it comes to valuing or selling your business!
If you are considering selling your business, or just want to consider your options we can advise you about the process, discuss alternatives and assist with the sale of your business
Michele Purvis is an advisor with over 30 years experience working in the accounting and financial services industry helping clients to define and create their wealth.