31 January 2017

Caveat Emptor - let the buyer beware when buying businesses. By Steve Marsten.

2017 has only just started and yet January is almost over! We hope you all enjoyed Australia Day. There is positivity in Gladstone and investors are out and about looking at potential business opportunities. This week I want to bring some matters to your attention if you are looking at buying a business. Always remember that often sellers have been working their business for a number of years and have enjoyed the benefits of building their business up. Consequently, many have an emotional attachment to the business. It’s been their baby that they have often grown and nurtured over a period of time.
The problem is that they see value in their business that is not reflected in the financial figures that they have offered to the seller as part of due diligence. Now that’s not to say there isn’t any intrinsic value however one must be convinced that the business actually has some intrinsic value before signing on the dotted line.
Buyers need to be comfortable that what they are paying for is plant, equipment and fittings; positioning or premises; customer listings or confirmation that a market for the services and products exists AND a commercial managers salary is sustainable. You don’t want to simply be buying a job and you DO want a return on your investment over and above your commercial salary.
Recently, we received a set of figures from a seller's accountant. The Abridged Financials indicated that the business would operate at a LOSS once a Manager's Salary was factored in.  This was queried in light of the price being sought by the seller.  Clearly this became problematic and we advised our client NOT to go ahead.
However buyers can get just as emotionally attached to the purchase before the transaction is completed. Unfortunately, emotions do play apart with any transaction and as professionals, we do our best to keep the emotion away from the decision. We don’t like seeing people part with their hard earned cash on purchases that don’t stack up. Caveat Emptor is Latin for let the buyer beware!

At the end of the day a business is only worth what a willing seller and a willing buyer agree on. Patience is often the key to a good investment. At Sothertons, we work through the need to assess any intrinsic value in a business such as goodwill and provide our clients with practical business values so either a seller or buyer can make an informed decision. Call us on 4972 1300 to hear more about maximising the business  value or ensuring you are paying the right amount for your new business.

24 January 2017

New Year New Business. By Tina Zawila.

By Tina Zawila
It may have been the holiday season, but behind the scenes there was a lot happening in Gladstone’s business economy in December and January.  At Sothertons we have been working with entrepreneurs who are starting their dream business, sellers who are moving on to new challenges or pastures, and buyers who are looking for an opportunity to be the master of their own destiny. 
Whether you are the buyer, or the seller, there’s usually a lot to learn regarding the purchase/sale process, and how to make sure you get the best possible outcome.  
Here are two things you should know:
One of the critical pieces of information in a business sale is the trading history of the business.  Usually this is presented in an “Abridged Profit and Loss Statement”, which essentially is a modified financial report showing several years of income and expenses, after adjustments have been made for items that were unique to the owner (such as the owner’s salary and motor vehicle etc).  This report usually helps to support the seller’s asking price, demonstrating to a potential purchaser that the business will provide a return on their investment.  This report should be prepared and signed by a qualified accountant.
The second important concept is the “due diligence” process.  This is where the potential purchaser has time (usually after the contract is signed) to do their own evaluation of the business to verify that the information they were provided during negotiations is accurate and to satisfy themselves that they are prepared to proceed to settlement. 
As your accountant and business advisor we are here to help in this process.  We can prepare the financial report if you are the seller, or we can review the report that has been supplied to you if you are the buyer.  We can assist you as the buyer to ask the right questions during due diligence, and as the seller we can help you provide the information to the buyer.
A business is usually a big investment of your time and money – don’t try to buy or sell on your own.  Call our experienced and professional team at Sothertons Gladstone on 4972 1300.

17 January 2017

Guiding our youth. By Steve Marsten.

Recently I was dealing with a couple who are quite well off. Both have well paying jobs and they always holiday with their two young children overseas. One child is 13 and the other is 10. They had come in to discuss ways to improve their savings and debt reduction strategies.

Interestingly, their real issue was whether they were misguiding their children in respect to thoughts about money. How could they ensure that their children will be happy and well-adjusted adults? After all, that’s what we all aim for with all our children.

Now as financial planners and advisors, we don't offer advice on child raring. However, in the same way you give time and effort to reviewing, considering and planning your financial goals, you need to be strategic about how you pass on certain traits to your children. There are five areas to consider deliberately passing along to your children. These are:
  1. Values
  2. Principles
  3. People (whom they associate with and perhaps eventually marry)
  4. Finances
  5. And spirituality
Children need to understand that life is about much more than just money. That said the most difficult job is getting your children to appreciate money and its value. Not to mention, appreciating the need to work hard for it especially early on. 

This may be difficult given the recent media feedback about the millennial attitudes that are coming through of entitlement, expectation and immediate gratification. Also younger people have never had so much information and access before them. Guiding them to have an enquiring mind with a good dose of scepticism and the belief that not everything on google is correct, reliable or even relevant.

Seeing income and wealth as only one part of a successful life is more likely to transmit their value over the time. 

Wealth includes non-monetary assets such as knowledge and values, beliefs, confidence and self-esteem. Throw in a good dose of humility and your children should become flexible to circumstance and well adjusted.

I don't suggest we are perfect with our children however keeping their feet on the ground and their spirits high with the goals aimed higher would be a great achievement. At Sothertons we share our experience and knowledge to make sure that a financial plan encompasses your goals monetary and otherwise. Call us on 4972 1300.

10 January 2017

The KEY - Keep Educating Yourself. By Tina Zawila.

By the time you read this article, Steve and I will be in Brisbane undertaking our Australian Institute of Company Directors Course.  At Sothertons we are strong believers in life-long learning.  As professionals, we are constantly required to undertake professional development, reading and upskilling to be able to offer the best possible service and advice to our clients.  However, the truth is, we would do it, even if it wasn’t a requirement of our profession.  Life-long learning is simply a part of who we are.
The world is a rapidly changing place and the skills and knowledge you have now, may not serve you in the future.  In fact, some of the skills and jobs that will be required within the next couple of years probably haven’t even been heard of yet!
As a business owner, to stay relevant and successful, you must keep yourself, and your team, ahead of the game in your industry, regardless of what industry that is.  If you own a cafĂ©, you should be looking at what trends are evolving in food and nutrition, if you are a mechanic, you need to be on top of the latest computer technology driving our cars, and if you are a professional service provider (doctor, lawyer, engineer) there will always be advances in technology and legislative requirements.
If you are an employee, a commitment to life-long learning and professional development adds value to you and the organization that employs you.  Don’t rely on your current employer to offer you formal training and development, look for your own opportunities.  Find something that you are passionate about and seek more information and knowledge on that topic.   It will give you a competitive edge over your peers and may just land you that promotion or new opportunity.
Remember, that life-long learning does not necessarily mean formal courses, it can simply be reading a book or watching a YouTube educational video.  In this digital age, we all have access to more information than ever before, so what are you waiting for?
What are your learning goals in 2017?  The professional team at Sothertons are avid learners, call us today on 4972 1300, we would be happy to share our resources with you.