JULY MARKET REPORT
Most of the recent economic news is positive from the majority of commentators which possibly explains the high level of lookers on our websites which has reached astronomical numbers without necessarily clicking through to ask for more information.
Despite this, the activity this month has been at the best since the recession began with a number of good quality sales achieved.
The low level of click through would lead us to conclude that there is a high level of pent-up demand out there which is wanting to invest but has held off because they are not sure whether the bottom has been reached or not.
Interest rates are probably as low as they are going to go and assets such as shares are still trading at very low price earnings multiples and the SME business sales market is at an all time low so the timing is good to look at purchasing a business. This does not mean that you can always expect a bargain as owners of the businesses which have weathered the economic storm well, are reluctant to take a significant price reduction.
The buyers that are putting in offers at very low levels have little chance of success and risk offending the seller and hence the co-operation which goes with the transition of a business.
The clever buyer will want to get in now as things pick up so too will the price of businesses which will have a double effect on creating wealth for the purchaser. As the economy improves so will earnings. Most businesses recorded a poorer 2009 result then 2008 and all the pricing models for business valuations are predicated on the 2009 numbers. As income rises so will the value of the businesses. On top of this some improvement in multiples is sure to occur as the economy picks up so the business values will further improve.
In summary the 2008/9 year saw many sellers missing the boat knocking back good offers which in hindsight they would and should have taken. It was a year of wait and see for many buyers who were wanting to invest but kept listening to the news and possibly missed the bottom of the value market.
Listings are now in short supply because what has been available is slowly being taken up.
For more information on selling or buying a business, please contact us.
Peter Gwynne, Group Managing Director
EMAIL MARKETING TIPS
Since email marketing has become an integral part of any small business marketing strategy, you do want to follow some simple advice to ensure your email marketing is well received, provides values and increases your revenues!
PLAN EARLY & SEND EARLY
When it comes to email campaigns, you may not realise this, but the sooner you get on your client's and / or customers' minds, the better off you are. You better believe your competition is planning and sending out early campaigns. If you plan your campaigns in advance, you will be better prepared to change course if you need be.
BE CONSISTENT IN YOUR FREQUENCY
As you know the rule of thumb is 7 times exposed before a prospect becomes a customer. That guideline is certainly still viable and valid. If you only take the time to send 2 or 3 messages in your email marketing campaign, then you are leaving money on the table, no doubt about it. Keep your frequency going, use similar, if not the same template with different content.
FOR GOODNESS SAKES, USE HTML
The only time this would not apply, is if the mamority of your email list has opted out of HTML emails, or rather chosen plain text for their delivery method. Buy why, you ask? HTML is far prettier than plain text or even rich text and people like pretty! You also have more control over how your email marketing content is delivered. NOTE: always provide a link to the "hosted" HTML version of your email marketing piece, so users that want to see your HTML without compromising their email client can experience the full HTML email effect.
SEND HOLIDAY & SPECIAL OCCASION EMAILS
People all have egos, if you stroke them at least 7 times a year, you stand a far greater chance of them receiving your messages, reading them in their entirely and also interacting with your organisation. People like to know that others care about them, so make sure these emails are geared toward the client and NOT your offers. Of course, include a call to action, just like with every email, but keep your promotional copy to the bare minimum on these emails.
If you have any email marketing tips to share, please send us your thoughts.
TIPS FOR OWNING YOUR BUSINESS
Selling A Business With A Month-To-Month Lease
Depending on the type of business, a month-to-month situation can be severely detrimental to the value of the business. For example, if you are the owner of a Post Office for sale, it is unlikely a Buyer would risk buying the store without a solid long term lease. The customers renting the mailboxes are tied to that specific address. If the store is forced to relocate, many customers and thus much revenue would potentially be lost.
On the other hand, if you are the owner of a wholesale distribution business and you have no walk-in traffic, it makes no difference where the business is located. The Buyer may desire to relocate the business in which case a month-to-month situation is highly desirable. If your business is retail and your clients are local, you may be able to relocate the business within the same area and retain most if not all of your customers -- as long as they know where to find you.
There is no "one size fits all' answer or solution in business transactions. That is part of the challenge. Every business is unique as is every Buyer and every Seller. A good business broker must be a creative problem solver and must focus on making sure the Buyer and the Seller both get what they need from the transaction.
First-Time Business Buyers: What You Need To Know
Making the transition from worker bee to small business owner involves a great deal of time, effort, money, and personal commitment. It is not a decision to be made hastily nor taken lightly. There are certain questions you need to ask and certain elements to consider, with every step along the way a potential pitfall. How successful you become—both personally and financially—will depend in great part on how prepared you are at the beginning of the journey. Here are some of the most vital questions to consider.
What Type of Business Should I Own?
Your knowledge, business experience, temperament, personal interests, and comfort level in a particular field all contribute deciding on which industry you should consider. If you don’t like hanging around other people’s children, don’t start a daycare centre. If you hate sitting in front of the computer all day long, perhaps a career as an IT consultant is not for you. If you have the same problems with the sun as does comedian Woody Allen—“I don’t tan, I stroke”—a landscaping business may not be your best option. Matching your abilities and interests to the industry you want to join is the first positive step to take.
Where Do I Get the Money?
It is the rare business these days that can be started with just pocket change. That said, you don’t have to be a multi-millionaire in order to become a first-time business buyer. Options abound for the enterprising soul, including buying a business from an owner who is willing to provide some or all of the financing. You can also consider a home equity loan, bringing in one or more partners—friends or relatives who might fulfill an active role in the business or else act as passive investor. A business banker from one of the big four banks is a good place to start when looking for a business loan.
Do I Buy a Franchise or an Existing Business?
After deciding on the field or industry and examining your financial capabilities (or limitations), the type of business worthy of your consideration will most likely fall into one of two basic categories. A franchise is a small business that is part of a larger corporation. Many of the big brand names out there—McDonald’s, Baskin and Robins, Espresso Essential, New Zealand Natural and so on—are actually individual franchises owned and operated by people just like you. In addition to having an instantly recognisable name, you will enjoy the backing of a multi-million or -billion dollar enterprise, along with regional or national marketing campaigns and many other benefits. But franchises rarely come cheap, and it is not unusual for a major industry name to cost you upwards of six figures just to open the doors for business. None of those safety nets are available to the person who buys a non franchised business, and polls have shown that franchise operations generally enjoy more success than their stand-alone counterparts. However, by buying a business directly from its owner, you may be able to negotiate a better price, talk to him or her into sticking around to show you how the business should be run, and even have the seller provide some or all of the financing on much better terms than you would find at the bank. Starting a business from scratch is a third path, but the prospects of failure—especially for a first-time business owner—are generally too high to make this a worthwhile option.
What Else Should I Know?
If you are focused on buying a franchise, make sure you examine every bit of material the parent company is compelled to provide. This is called the “due diligence” phase, a term that originated in the 1930s that referred to stockbrokers and how they were legally required to explain everything about a transaction to their clients. From the standpoint of a first-time business buyer, this would include statements on the financial health of the corporation, the level of success enjoyed by the average franchisee, what your exact costs will be and what they’re applied against, how much training you should expect to receive, and so on. If you’re buying an existing business, the owner will show you profit-and-loss statements going back five or more years, list every asset and liability the company has and owes, and lots more. You will also want to scope out the competition and obtain an independent analysis of the value of everything that is part of the sale, from the true worth of the building to what it would cost to replace that 20-year-old pizza oven. For this step in the process, you should rely on the know-how of experts—real estate appraisers, business brokers, accountants, attorneys, and bankers. Spending a few thousand dollars at this stage of the game can save you ten or hundreds of thousands on the back end.
Source: BizBen, modified to suit the Australian conditions
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