HOW DO I TAKE OVER MY FAMILY BUSINESS?

On the other hand, when it comes to taking over a family business; when you take control of a business that has been owned by members of your family. The following questions are the list of important questions needs to look at before taking over a family business:

WHAT IS THE FAMILY BUSINESS?

You should consider family and business issues separately as it will be conflicting in managing the business relationships and family relationships if you are working with your family.

HOW DO I PREPARE FOR RUNNING THE BUSINESS?

Preparation for taking over a family business cannot start too soon. Some important steps in preparing are declaring your intentions, apprenticing, studying business, getting outside experience and building network will help you building up the confidence and the support for running the business.

HOW DO I HELP PREPARE RETIRING FAMILY MEMBERS?

When you own your own business, there is no retirement age but as part of the baby boom generation, a large proportion of family business leaders in Canada expect to retire over the next decade. The majority of these don’t have formal plans for what they will do when they retire. So you should involve information and advisers and identify the needs and the wants for their retirement and include it in preparing a plan.

WHAT ARE THE LEGAL ISSUES?

Taking over the family business is really about two separate issues that is taking over management authority for the business and taking over legal ownership of the business which includes taxation issues, legal form issues, insurance issues and alternative compensation issues.

WHAT TAKEOVER PROBLEMS WILL I FACE?

There are great many factors that contribute to the poor success rates for second generation entrepreneurs because of the hasty expansion, losing key employees, succumbing to family politics, failing to develop a strategy and problems in managing the transition such as empowering employees, providing ongoing communication and rewarding support.

HOW DO I BUY FRANCHISE?

In this blog we will look at the questions need to be considered before buying a franchise . Firstly we will discuss about buying a franchise so we look at the following questions:

HOW DOES FRANCHISING WORK?

In the above question we will cover the types of franchises like licensing, dealership franchising, conversion franchising, multilevel marketing and business format franchising.

IS FRANCHISING RIGHT TO ME?

Buying a franchise from an established, growing, and ethical franchisor can have a many benefits as well as drawbacks. Merits of franchising include marketing research, brand strategy, existing customer, training, advertising power and complete package. However the drawbacks involve the franchise fee, franchisor control, royalties, advertising and lack of goodwill equity. Although it also franchisor also look the personal skills which suits for being a franchiser.

HOW DO I CHOOSE A FRANCHISE?

These is full process you should go through before buying a franchise but the main three things you should keep in mind are minimum investment, initial franchise fee and required capital; also, assessing the franchisor, assessing the opportunity and buying an existing franchise.

HOW CAN I FINANCE A FRANCHISE?

You should keep in mind the financial requirements and sources of finance like personal sources, government programs, banks and investors.

WHAT ARE THE CONTRACT ISSUES?

Lawyers working on behalf of the franchisor prepare the franchise agreement to ensure that every sentence of every paragraph benefits and protects the franchisor. Your interest in the contract is to make sure that you understand the implications for each of its provisions, and decide whether or not you are willing to accept those conditions.

TRENDS AND CHALLENGES IN ENTREPRENEURSHIP.

 In the following blog we will answer the question of how will I prepare for the future as we will tell the emerging trends and issues in entrepreneurs which will be an advantage an disadvantage in some or the other way around. Our focus will be the currently shaping the understanding and the practice of entrepreneurs:

WHAT ARE THE RECENT CHALLENGES FOR SMALL BUSINESS?

In the current times, entrepreneurs are having great challenge with e-business technologies for small firms which include websites, e commerce and operations software. It is also challenging in using of social media like Facebook, twitter, YouTube and blogs etc. however the economy and the environment of small business is also changing according to the challenges in the market for the firms.

WHAT ARE SOME CURRENT TRENDS IN RESEARCH?

It is relatively focusing on scientific inquiry like policy makers, practitioners, educators and other researchers. They classify the entrepreneurship in three ways as novice entrepreneurs, serial entrepreneurs and portfolio entrepreneurs. It also shows the studies of minority and female entrepreneurs producing more result and equal benefit to all business owners.

WHAT IS SOCIAL ENTREPRENEURSHIP?

A social enterprise, unlike a traditional business must have a purpose other than making profits. A myriad of organizations could be called social enterprises, but most will fall into one of the three board categories such as non-profit organizations, co-operative enterprises and mutual benefit societies.

WHAT ARE THE EMERGING TRENDS IN ENTREPRENEURSHIP EDUCATION?

Business school approaches has been changed and e tools available in schools and universities for teaching and also it will be helping in entrepreneurship as well as international development.

WHAT ARE THE MANAGEMENT ISSUES FOR SMALL BUSINESS?

We looked at management in terms of its broad functional areas or activities but for convenience these skills are grouped into four categories such as leadership skills, communication skills, organizational skills and crisis management skills.

In conclusion, the trends and challenges have been giving a new direction to small firms and changes the economy and environment so tremendously.   

THE PURCHASE ALTERNATIVES.

In this blog we will look at the purchase alternatives and the process of becoming an owner, or part owner, of a business that is already up and running. Just like starting a new business, this method of getting into business will require a business plan and it also include the following questions:

                                         

IS BUYING A BUSINESS RIGHT FOR ME?

Buying an existing business is usually expensive than starting a brand new company because you can shrink your ideas down to fit your budget in the market however, the existing business require the same expenses as an mature company spend in the market. Let’s talk about the merits and the risks of buying existing business.

                                                 

MERITS

• ·         Efficient methods and procedure: existing company systems have refined over time for some measure of efficiency that you would not have when starting a new business. The owner of the existing business should have made already most of the mistakes so it leave no room for error anymore.
• ·         Defined market: through several mistakes the existing company should have already found their potential customers and how to deal with them in an appropriate way.
• ·         Established customers: Existing customers have earned a great image and branding in the market; also they have build their customers with the goodwill in the market. Although a new business has to go through a hard time to build a great image and branding.
• ·         Established suppliers: this is important not just because of proven reliability, but also because of any credit terms that are in place with them.
• ·         Trained employees: having employees in place not only keeps the business going and generating cash, but these employees can also serve as a resource to help train you as the new owner.

RISKS

• ·         Overvalued assets and redundant assets: the assets are overvalued sometimes and as a follower you have to buy because the existing company rules.  Also redundant assets are owned by a business that are not necessary for it to produce profit at current or projected levels.
• ·         Lease problem: escalator clauses and inability to renew are major problems. You may be looking at a business whose success depends on the site, but the lease for the property runs out in three years. Alternatively, you can first make a offer on the business that is conditional on your being able to negotiate an acceptable lease with the landlord.
• ·         Negative Image: some business has a bad reputation among their potential customers. However it can be changed with changing the name of the company or have the same name but put up under new management.
• ·         Impending location changes: Some businesses are depending on the geographic area of the business like retails and consumer service business. If the location is not good to gain traffic for the business it is better to change the location and if planned changes will dramatically alter the traffic patterns around the business site, you might rethink your buying decision.

WHAT’S INVOLVED IN BUYING THE BUSINESS?

Many of the risks in buying a business can be minimized by properly assessing the business. The assessment should logically cover most of the factors in the business plan, looking whether the business is satisfactory in each area as well as identifying things you can do to improve if you owned the business. You should always consider before buying the business because sometimes business owner is in trouble and look for new capital to keep business alive but it only works for few years more and it end up in failing with the new capital with it. If you buying a part ownership in a business it should be because the business is growing and need capital for well-planned expansion; also you have some expertise that would be an advantage to the business and the current owner are willing to give up some equity in order to get you in his business.

               

WHAT SHOULD THE PURCHASE AGREEMENT INCLUDE?

           

• ·         Shares vs. Assets: the store, factory, or office will look the same and the company may have the same name and the same employees, but it will be a different legal entity consisting of you and any partners you may have. When you are buying a company either you can buy the assets of the company or the shares of the company.
• ·         Payment Options: in many cases, the seller wants to have the full payment on the finalization of sale. But the seller will be in trouble if a buyer found out the actual reason for selling the company. In that situation buyer will have leverage to negotiate with the seller on the payment or he can ask for the advantages or benefits from the owner to buy .
• ·         Non-competition issues: purchase agreement will often include the restrictions that prevent the old owner of a business from entering into any form of competition with the business. These usually preferred with the geographic range or a time limit. The need for such a restriction is obvious if the business involved the personal services of the owner.
• ·         Disclosure Issues: it basically says that the seller agrees to tell you about anything that might adversely affect your decision to buy the business. This covers all of the items listed in the risks of buying a business.
• ·         Continuing assistance: it is a fairly practice to have the old owner on the board to help as a employee or adviser, often for an extended period after business is sold. It can be arranged under the conditions of the purchase agreement.

                                           

HOW MUCH SHOULD I PAY? 

                                 

A business is constantly changing and adapting to the market place, the environment in which it lives. It grows, it shrinks, it gets sick or healthy. We use different methods to analyses the actual value of the business which includes valuation concepts which involves ratio analysis, rate of return and present value. However we can also use valuation methods like asset methods and income methods. In spite of many objective methods of valuing a business, ultimately the value of a firm is whatever price can be negotiated between a buyer and seller. In determining a price to pay for a business, however, it is only prudent to use a variety of different techniques for estimating the value of the firm.

In this process of purchasing you should consider all the possible alternatives you can think of. Buying alternatives will lead to the leverages and merits of existing business to buy at a negotiate price from the seller.

HOW TO MANAGE FINANCES AT WORK?

Organizing the finances is the last step in the basic business plan. But for many business plans it’s easy to prepare as much of the work is already done in first step. Now it is only matter of organizing numbers and work on the accounts of the business. For organizing the finance in an appropriate way, the best way is to go through the following questions.

How will I explain the Business Finances?

The standard way is to use the financial statements which have different purpose but they all lead to increase sales in future but in the business plan usually we consider three main types:

BALANCE SHEET-It is a statement of the financial position of a business at a particular point of time. They also include projected balance sheet which shows where the business will stand financially on opening day, at the end of the first year, at the end of the second year and at the end of the third year.

INCOME STATEMENT-it is a statement of a business‘s profit or loss over a given period of time. It also shows the projected income statement which includes first three years of business. They will show the year’s expected sales, costs, expenses, and profit or loss. In all it will show why the balance sheet has changed every year.

CASH FLOW STATEMENT: it is a statement of cash going into and out of a business over a given period of time, and how this has affected the cash balance. It also includes the projected cash flow statements which has three of these covering the same periods as income statements. By planning when cash comes in and goes out of your business, you will conclude that you will always pay bills that are due.

                                         

How will I track the Finances?

To have a profitable business plan, you should consider break-even point before start making profit in your business. However BREAK-EVEN is the point at which a company starts to make a profit; the point where sales are sufficient to cover all of the costs and expenses of a company. There is only one formula to calculate the break –even point. You may include this valuable tracking tool in your business plan.

                                                                     FIXED EXPENSES

                    BREAK –EVEN =   --------------------------------------------------------

                                                                  CONTRIBUTION RATIO

Secondly, you can also track you finance with CREDIT AND COLLECTIONS in which an entrepreneur assign the collector policy if their customers are not paying the payments within the time period. It will help to maintain the credit of the company by messing up the customer’s credit if they are not paying the money for the service/product. They also include the information such as the sales of the firm, the amount of assets and debts it carries, and the speed at which they usually pay its bills. Set limits of credit for individual customers and stick to these limits, regularly checking to see who owes you and how much. Your credit and collections policy and how you enforce it will have a big influence on when money comes into your business. This is important for you to be able to plan your cash flow.

    

                                              

Lastly, the cash flow as I described in first part of finance statements. Cash flow helps to maintain the day to day credit of your business and also helps to avoid bankruptcy. The first task in preparing cash flow projection is to look at your annual sales forecasts and then break this down into monthly forecasts. This is a guesswork, part experience, and part logic. For a new business, the problem of monthly fluctuations is compounded by the expected pattern of growth. This issue was examined when you prepared your sales forecasts and then look at the sales by monthly.

Where will I get the money?

This is the last big question in the preparing the business plan. It shows the sources required to start the business. You can use the following sources to start your business:

PERSONAL SOURCES- the new business owners contributes materials and equipment or personal cash, or puts up other personal assets as COLLATERAL for borrowing money from bank for from funding sources. 

LOVE MONEY- this source of seed capital is referred as love money because it is largely loaned on the basis of relationship as opposed to the strength of the business plan or the amount of collateral. Interestingly, the ease of access to love money seems to be culturally related, with some ethnic groups setting a higher priority on family entrepreneurship.   

GOVERNMENT PROGRAMS- many millions of dollars are earmarked each year by the federal and provincial governments to assist small entrepreneur in one way or another. But politicians and bureaucrats are much like managers in other large institutions: they need to prove their accomplishments with statistics. These programs involve the Business Development Bank of Canada (BDC), Canada Small Business Financing Program (CSBF) and Human Resources and Skills Development Canada (HRSDC).

                                 

CHARTERED BANKS

Basically banks lend money to small entrepreneurs in two ways:

TERM LOANS: these are loans given with a fixed repayment period, usually for fixed assets at a fixed interest rate. They are typically used for things like store fixtures, vehicles, and equipments.

LINES OF CREDIT: these allow a borrower to “overdraft” a cheque account up to a preset amount. Typically, the borrower pays back a portion of the outstanding balance each month at a variable interest rate. The amount the borrower has access to is often a percentage of inventory or account receivable.

  

                                                  

 INVESTORS

INVESTORS are the wealthy individuals who invest in independent small business and who are not related to the business owners. 

   

                           

The process of rewriting may be more necessary for the financial section of the business plan and than any other. Every other planning decision you make will have some financial implications and the above information will help you to prepare your financial section of business plan. After finance most of the work for the basic business plan will be completed.