Firm Journal

3 December 2020

Conducting due diligence when buying an existing business

You’ve found the perfect business for you to buy. It fits all your requirements and you’re in a position where you can comfortably buy the business. What’s next?

Before you sign the contract to finalise the buy, it is important to conduct due diligence. For this, you should review the financial records, business operations and legal documents. These will prepare you to manage the business and identify any risks or problems in process that you might need to tackle head on. You will also be able to better understand what will be expected of you as owner of the business and which responsibilities have been allocated to that position. 

You should review items such as: 

• Licenses and permits: Have all the necessary permits and licences been acquired, and if not, look into why this might be the case – were they denied a permit due to any issues with the business?
• Contracts and leases: Have you spoken to the landlord and whether they’ll be transferring the lease agreement/negotiating a new lease? Is the business in contract with another that is problematic?
• Agreements: Are there any agreements the business is in that you don’t feel comfortable with?
• Status of plant, equipment, and fixtures: What is the current status of the equipment and machinery? When will you need to replace it? Has it been approved by the relevant authorities?
• Assets: Identify any assets that are under the business. Does it have any intellectual property? 
• Inventory: How much inventory is there? Is it included in the sale? How is the inventory managed and will you still be able to source it from the same place? What is the status of the current inventory i.e. can it be used?
• Liabilities: What liabilities do you need to be aware of? Are there any outstanding debts? Any fines, warranties, refunds that need to be paid for? 

Additionally, you need to conduct financial due diligence. Examine the past 3 to 5 years of the following financial documents:

• Tax returns
• Business activity statements (BAS)
• Records of accounts receivable and payable
• Balance sheets
• Profit and loss records
• Cash flow statements
• Sales records

You should examine these to make sure that record-keeping has been conducted and maintained appropriately. This will also inform you of any changes that need to be made once you start running the business yourself. 

25 November 2020

Why company culture is important

Company culture has become an important part of how businesses are perceived. Businesses with a positive culture are more likely to attract clients and customers. Statistics also show that over 50% of executives believe that having a good culture can influence productivity, creativity, profitability, firm value and growth rates. 

However, while it can be easier to describe and quantify a company’s products and services, defining culture is a lot more difficult. It requires capturing the company environment, values and relationships. 

Identifying what your company culture is, or what you want it to be, will determine your work processes, hire new people into your team, and how you and your employees interact with clients. 

The first thing to do is to identify key traits that describe your culture. Bring together a diverse group of people from across your company and brainstorm words and qualities which describe the culture. Collate the words which you hear the most so that you end up with a list which is representative of the culture that employees most relate to. 

The next thing you need to do is distil this list down to the core values you can see in it. You can conduct surveys (if you have a large company) or talk to your employees (if the company is small) and ask them whether the values you have chosen resonate with them, and if not, which ones do. At this point, you should aim to have around 5 values, but this is a flexible number. 

Last of all, once the core values have been established, share them throughout the company. Employees should relate to these values and they should also feel motivated to embody them. Communicate with your employees about why these values may or may not be working/suitable. 

Remember that this is a process. You may not get it right the first time, which is why it is important to be receptive to feedback from all members of the company. 

19 November 2020

What to know before you apply for a business loan

A business loan can give you the support you need to fund growth or temporarily relieve cash flow pressures. These are some things to know before applying for the loan:

• Understand the purpose of your loan: You should be sure about why you want a loan and what you will be doing with the loan. 
• What loan amount do you need: Realistically calculate how much money you need and how you’ll be allocating it to your needs
• What can you afford to pay: Consider the length of the loan, payment options and other details before you apply. Think about what you can afford to pay so that you can discuss which of these features can and cannot be adjusted to suit your needs. 
• Secured or unsecured loans: A secured loan means that you provide an asset for the loan, your interest will be lower than for an unsecured loan and the lender may be able to sell your asset if you are unable to pay the loan. An unsecured loan means that you don’t provide an asset so that the interest rate is higher. It may be difficult to get approved for an unsecured loan. 
• Fixed or variable interest: If you are confident that you can meet the repayment requirements even if the rate increases but a fixed rate makes it easier to manage your cash flow as all your repayments are the same. 
• Fees and charges: The true cost of any loan is only apparent when you take into account all the additional payments that are incurred. These could include early repayment fees, exit fees, valuation fees (to secure your loan), etc.
• Paperwork: Planning your paperwork ahead of time will make it easier for the lender to approve your loan, this will also make the entire process faster.
• Consider speaking to an expert: You may want to discuss with an advisor about whether a loan might be the best option for you and what alternatives are available if any. 

12 November 2020

Why you should have a written partnership agreement

Having a strong relationship with your partners is extremely important, but sometimes it isn’t enough. Having a document which covers all aspects of running the business, both those which are liable to disputes and those which are not is essential. 

If you haven’t done so already, the following are some reasons why you should create a written agreement now:

• You and your business partners have a clear understanding of the rules and regulations which will apply to the business and to your business relationship.
• If there is no agreement in place, then all the partners share equal profits and cover losses equally. This will be regardless of how much time and effort each partner contributes to the business. Creating an agreement will allow partners to tweak these aspects and create a unique division which represents the partner contributions more accurately.
• If there is no agreement in place, then the terms of the partnership will be covered by the legislation of your state or territory. These have a one-size-fits-all approach which might not suit your business. Creating an agreement specific to your partnerships will mean it is tailored to the specific circumstances and relationships within your business. 
• Minor disagreements can lead to bigger problems if there is no set method to resolve them. A written agreement will allow you to create clear and unambiguous procedures to deal with those sorts of matters and allocate roles to each partner so that there are no confusions about decisions-making. 
• Creating an agreement will allow you to focus on the business end of things as opposed to spending time on dealing with specifics of the partnerships. 

A written partnership will help streamline the nitpicky processes so that you can focus on the growth of the business. 

5 November 2020

How innovation can help business

Innovation doesn’t have to be a revolutionary and world-changing breakthrough. It can also be small changes you make to continually improve your business. Innovation can help in multiple aspects of business.

• Improve sales and customer relationships: Putting the time and effort into improving your products and services is essential if you want to retain customers. Customers will recognise the changes you make and your commitment to doing the best you can for them. This will inevitably translate into improved sales.
• Reduce waste and costs: Implementing changes which utilise new ways to eliminate waste and increase efficiency are extremely important. This will help you either increase your profits, or invest the money you save back into other necessary improvements for the business.
• Improve employee performance: Creating a work environment that promotes innovation is more likely to keep employees stimulated and interested in their work. When employees are given the opportunity to suggest and implement changes, they are more likely to take pride in their work. This will also result in greater productivity.
• Boost your market position: Innovation is also important in keeping up with changes in the market. Creating a company culture which is flexible and facilitates regular changes will mean that you can transform according to the needs of the market. This will differentiate you from competitors and boost your position in the industry.

29 October 2020

Maximise holiday sales during the pandemic

This holiday season is not going to be like any other. Preparing for how your business will tackle the change ahead of time will help maximise sales.

• Maintain a human and compassionate approach in all customer communications: This will make your customers feel more comfortable and be pleasantly different to the technology-based interactions they are likely to have had due to the pandemic.
• Use real-time data to understand buying trends and change the products that you focus on selling depending on this data: Using the data your business has access to in an effective way can be extremely helpful to plan advertising campaigns that are catered to your consumers and what they desire.
• Promote sales as early as possible: This gives customers an opportunity to spread out their buying and minimises in-store traffic closer to the holidays. This is especially important due to restrictions placed on the number of people that can enter stores.

Considering the financial difficulties every business has experienced this year, it is important to take advantage of the holiday season where possible. These tips will assist your business in making use of the surge of buyers that is likely to occur.

22 October 2020

Small businesses and mental health

Owning and running a small business often means that you are responsible for most or all of the tasks that need to be completed. Often, owners will find their time being entirely occupied with their business. This can take a toll on their mental health and cause work related stress. Which not only inhibits one’s ability to complete the duties of their role, but also puts them at greater risk of developing mental health conditions.

Keeping work hours in check

Although it is tempting to focus on your business at all times, this can prevent individuals from participating in other activities which are important for physical and mental health. Business owners may feel motivated and enthusiastic to put extra time into their work, however, long work hours have been associated with poorer mental health, fatigue, burnout, worry, and irritability.

Creating a work life balance by setting time limits on work hours might be a necessary precaution at the start. Taking breaks during the work day and setting time aside during the week will be extremely beneficial.

Accessing support

Running a small business can often be isolating as there is rarely someone to share concerns of the business with. This will mean that owners are dealing with all of the issues on their own.

Discussing issues that arise with family or close friends can help reduce the feeling of being isolated. Alternatively, there are groups of small business owners who, and business mentors who may be able to understand and relate to what owners are experiencing, and potentially provide relevant advice.

Maintaining a healthy lifestyle

A healthy lifestyle can help individuals manage stress and work towards improved mental health. This will also improve the ability to focus and concentrate when working.

Developing good sleeping habits is a great way to kickstart this process. It can also be helpful to try different relaxation techniques such as meditation and exercise is an important start. Remember that this is a trial process, so trying different techniques to find the most effective one is essential.

15 October 2020

Best practices in business management

Engage employees in the company vision

It is important to share the business vision with employees so that they feel more motivated and enthusiastic. This will not only develop an interest in the work being completed, but also increase productivity. Further, engaged workers are more likely to bring in ideas and contribute to the growth of the company.

Reward Effort

Continually recognising and rewarding effort will encourage employees to continue putting in the effort. It lets employees know that they are appreciated and builds company loyalty.

Being Vulnerable

Upholding a stoic demeanour rather than being vulnerable prevents teams from developing strong professional relationships that are effective. Instead, vulnerability assists in team building and allows employees to feel comfortable with making suggestions that could be extremely promising.

Encourage differing opinions

Businesses should steer clear from creating an atmosphere where people avoid making suggestions because they are in conflict with other ideas. An environment where conflict is welcomed can lead to productive discussions and the generation of good ideas.

Company culture

Determining the core values that your business holds and sharing them with employees can help with creating a strong team. The dynamic between team members is important in ensuring productivity and efficiency. Identifying a company culture will assist the hiring process as well as team dynamics later on.

6 October 2020

What is Organisational Culture?

Understanding what organisational structure is can help with making decisions about your business in all areas. Organisational culture is multifaceted, it consists of the shared values, beliefs and norms in the workplace, and determines employee interactions as well as customer interactions.

There are four types of organisational cultures.

• Clan Culture: Focussed on collaboration between teams to form a family-like relationship.
• Adhocracy Culture: Focussed on creativity and innovation and open to continual change.
• Market Culture: Focussed on achieving goals through competitive drive amongst employees.
• Hierarchy Culture: Focussed on formal procedures and guidelines and maintaining power structures.

The organisational culture reflects in all aspects of the business. It can help with determining which potential employees may be more suitable than others and the way that those in leadership positions communicate with employees.

The way a business communicates and interacts with their customers is also influenced by organisational culture. Businesses may desire friendly and informal relationships, or formal and reserved relationships. Communication methods may also change, such as preferring email interaction as opposed to utilising chat functions.

Of course, the culture of an organisation can have overlap of the different types. More important than focussing on one type of culture, is recognising what works best for your business and trying to foster values and norms that embody that.

1 October 2020

How to upscale your business

Set realistic and actionable goals

Businesses should set realistic and actionable small goals which they can work towards, rather broad goals which provide no direction. Setting broad and unrealistic goals is demotivating and makes any progress made seem insignificant. Every person in the business should be given a target to meet over a reasonable timeline which contributes towards achieving a larger goal.

Establishing standardised and automated processes

Small businesses can make the mistake of ‘doing things as they come’ but this means that as business grows, adjusting to high scale tasks is difficult. To avoid this, business should standardise all processes of work. Any individual placed into a role should be able to follow standardised procedure and yield a product which is of similar quality to the previous one. Investing money into automation tools is worthwhile for this procedure. This can include automating management of social media, email, and customer relationships. Both of these will contribute to creating structures which support growth.

Identify competitive strengths and weaknesses

Recognising the strengths and weaknesses of one’s business is essential. Strengths will allow businesses to hone in on unique qualities they possess which give them a competitive advantage. Weaknesses will reveal which areas require growth so that changes can be made before upscaling takes place.

Network

Businesses should continue to develop relationships with service providers, sales channel partners, suppliers and customers. Keeping an open mind about partnerships or potential collaborations could open up different avenues of business growth.