Let's Do Business
For many years the BEC has done a fortnight column in the Queanbeyan Age. It covers a range of topics of interest to business people. Here are some examples you may find useful to your business.
Topics:
Business New Year Resolutions
January - February is a great time for business people to think about their business for the year ahead.
And it's a great time to make some "Business New Year Resolutions".
So, here are some things you may like to do this year.
Some of them might even make it into your "Business New Year Resolutions list.
Develop your own local Networks. There are many ways individual businesses can give each other mutual support whilst maintaining their own independence. The CRBEC Networking Breakfast is a good place to start.
Revisit you marketing - Have you a marketing plan? In what ways has your market changed? Have you adapted to these changes? Have you anticipated your competition's strategies? Have you a marketing budget?
Make the most of technology - IT has come a long way in the past couple of years. E-commerce has many aspects from simple Eftpos transactions to interactive web sites. Have you considered all the options?
Promote your business effectively - have you a promotional calendar? Does this integrate with known community promotions? Is your business 'visible' to your potential customers?
Shop locally - Support your local retailers, manufacturers and service providers.
Assess your business systems. - Have you documented the way you actually do things in your business? By documenting how you do things you will often see the ways you can be more efficient so more profitable.
Analyse your financial records? - Are you really in charge of your business? Now is a good time to have a chat with your accountant as they are often quieter half way through the financial year.
Revisit your Business Plan - Every Business should have a plan covering Operations, Marketing and Finance. This plan should be revised and updated on a regular basis, comparing actual results with forecasts.
Educate Yourself - Have you been keeping your business skills up to date and in line with the size of your business?
I hope there is an idea or two here you can turn into a "Business New Year Resolution for this year.
Registering your Business name.
A company can conduct business under the company name without registering a business name.
You can conduct business in NSW under your own name without registering a business name, provided you don't change or add anything to your name.
To conduct business in NSW under any other name, that name must first be registered as a business name.
Selecting a business name
You should not commence business under or print stationery for a name until it is registered.
The Department of Fair Trading considers each proposed name individually to determine whether it is available for registration. The name you select must not be misleading or offensive, and there are some words or phrases that you cannot use without consent.
Names that are identical to an existing business or incorporated association name in NSW or company name anywhere in Australia will not be registered, although a company may apply to register its company name as a business name.
They will not register a proposed name if, in their opinion, it is too similar to an existing business or incorporated association name in NSW or company name anywhere in Australia.
Is your proposed name already registered?
The Australian Securities and Investments Commission keep a record of all company and business names registered in Australia. You can check to see if your proposed business name already exists on the National Names Index.
How do I apply?
Registration is simple and fast. It can be done over the counter with the friendly people at the Queanbeyan Fair Trading Centre located at Shop T 7, CityLink Plaza Morisset Street Queanbeyan.
Business Structures
Before throwing yourself enthusiastically into that new business venture, thought must be given to deciding which business structure most suits your situation.
Deciding which business structure is most suitable can be difficult, however factors such as the number of business owners, tax liabilities, personal exposure and establishment costs must all be considered. It is critical that you discuss your own situation with your accountant and with us at the CRBEC before making that decision. The most common business structures are: Sole trader, Partnerships and Proprietary Limited Company.
Sole Trader
If you conduct your business alone, without a partner, and not within a company structure, then you will be a sole trader. Some of the advantages of being a sole trader include:
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It is an inexpensive structure to set up
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It is the easiest and least expensive to maintain
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The least amount of reporting to Governments is required
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In some cases losses from the business can be offset against any other income for tax purposes
Some of the negatives include:
Partnership
A partnership enables a group of people to contribute their time, talents and money towards the business. In return they share the responsibilities and the profits (and losses). A formal partnership agreement clearly spells out the conditions of the partnership and decreases the likelihood of disputes.
Advantages
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Tax obligations are shared and can be apportioned more effectively
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Responsibilities for running the business are shared
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Ability to raise finance may be increased
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Easy to establish
Disadvantages
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Liability is unlimited. If a partner absconds, or dies, the other partner/s is/are left with the business' liabilities.
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Partners may not agree on the direction or decisions being made by the business
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The absence of a formal 'partnership agreement' can be cause for present and future problems
Proprietary Limited Company
A 'Pty Ltd" company is a separate legal entity established for the sole purpose of carrying out business.
Advantages
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The liabilities of the shareholders are limited to the level of their shareholding
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It is easier to spread the ownership of the business
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The company is a separate legal entity and can continue (or be sold) in the event of death of the directors or shareholders
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A Pty Ltd company provides more options with regards taxation liability and payments
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It is easier for people to join and to leave the company
Disadvantages
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Establishment costs are high
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Ongoing maintenance costs are high (ASIC and legal and accounting)
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Lenders often seek personal guarantees from directors
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Directors have substantial obligations under the Corporations Act.
There is, of course, much more about Business Structures than this. We can discuss this or any other business topic at the CRBEC. We are located behind the Visitor Information Centre. Our service is confidential and mostly free of charge thanks to the support we receive from NSW Government, Queanbeyan City Council, Australian Government and the local business community. Phone us on 6297 3121 to make a time.
Buying a Business
For many people the best way to get in to business is to buy an existing business. It always amazes me that many people rush into this major decision without adequate preparation. It may be OK to buy a car, or clothing because you like the colour or the style, however buying a business is a different proposition.
Whatever you do, do not be forced in to a rushed decision. It is better to lose the opportunity than to act without adequate research and all the facts.
When you are contemplating buying an existing business, there are seven key areas which you need to consider.
Sales
- What is the sales pattern of the business? Is it consistent, is it seasonal, is it related to other external influences?
- Are nearby developments happening which are going to affect your trade?
- Has the business been expanding, declining or remaining static over the past few years?
- What is the business' ‘sustainable competitive advantage'? Can you as the new owner continue this advantage?
- Do a small percentage of customers represent a large percentage of the sales of the business?
Costs
- Are all ‘usual' expenses shown in the financial records?
- Will you be able to maintain the same cost base?
- Is the business going to generate sufficient profits to give you a reasonable income and a net profit?
- You must allow for additional payments of loans (if required) to purchase the business, or return on investment of your own funds.
Profit
- Analyse the financial records for as many years back as possible – at least three years. This should include Profit and Loss Statements, Balance Sheets, Sales and Purchases records.
- Has the gross profit margin been increasing, decreasing or remaining stable over the period?
- Be wary of any business which does not have complete and accurate records.
Assets
- Know exactly what it is you are buying. If there is an asset list, inspect each item and compare with the book value. Is it reasonable?
- Check the depreciation schedule.
- Check that the equipment is in good repair and serviceable.
- When will you need to replace any item? Include this cost in your own forecasts.
- Are any of the assets currently leased? Make sure these costs are documented on the P & L.
The Seller
- Why is the business being sold? Do you believe the reason given?
- Has the business changed hands often, recently?
- Is the seller being cooperative in supplying the information? If not – why not?
Legal
- You should not ever enter any agreement to purchase a business without first obtaining legal advice.
- What effect will the sale have on any contracts the existing owner has entered in to, eg leases? What are your rights under these agreements?
- The purchase agreement must include the assets being sold, the liabilities being assumed and any intellectual property required to run the business.
- Are you purchasing an existing structure (company) or using your own?
This is a very brief overview of some of the questions you should be asking. You must seek assistance and advice from as many people as possible, including an accountant, a solicitor and your friendly face at the BEC.
Buying an existing business can be an ideal starting point for many entrepreneurs. There are many advantages, however there are also many pitfalls, so be careful.
Cash flow is the lifeblood of small business –it's important to know how much money is coming in and going out and when. This saves nasty surprises when the telephone bill arrives. Paying attention to your debtors and having good collection policies and procedures is the other and equally important side of the cashflow equation.
Successful businesses take active control of their cashflow cycle, even though it may mean time away from your core business activity. With early and careful intervention, you will reduce the money owed to you, send a clear message to debtors that you have firm policies about payment, and eventually free up staff time from chasing debtors.
With many businesses currently feeling the pinch, now is a good time to review your credit practices. Let's look at the three stages of a customer's credit history and see how small business can adopt sensible practices.
Taking on new credit accounts
Even reputable customers can experience financial difficulties, so no matter how big or well known your new customer, run three credit checks on them before setting up a new account.
Initially it is also prudent to limit the size of order new customers can place – if a new customer owes you a lot of money, you have a problem. Oddly enough, a customer placing a large order may not be experiencing good times and huge demand, it may be the reverse – they are attempting to trade their way out of trouble.
The other potential source of false hope is the prospect who suddenly becomes a customer after years of refusing to do business with you – it may be they have seen the light, but it may be that they have been refused supply by another company.
Extending credit
If your customers ask for extended credit limits, ask them for guarantees in return. If they simply ask for an extension of the time for payment, ask for a signed agreement to pay interest.
Late payments
It is important to keep on top of late payments. Every dollar due to you in unpaid accounts is money you can't be using to pay your own bills or grow your business.
Some good things to do are:
Staffing for Success
If a staff member has resigned, or your business has expanded to the point that you need to take on a new staff member, a few aspects need to be considered before the new employee starts.
If you are re-filling a position, think whether you want the new person to do the same job, or if it's time to re-allocate some tasks. Also make sure you know why the previous employee left. Maybe there are some work practices that need changing or some conditions that were unsuitable and might need changing.
If you are growing your business and taking on new staff, think carefully about what type of person you want and what work you want them to do.
One option for some businesses is to take on an apprentice or trainee. The government's New Apprenticeships scheme offers apprenticeships in over 500 occupations in industries as diverse as agriculture, hairdressing, tourism, retail and property services.
Training can be on the job, off the job or a combination of both. The flexibility of these new apprenticeships, comes from the change to competency based training – this means that once your apprentice has reached the required skill level, they may be able to complete their training sooner, rather than having a rigid three or four year apprenticeship.
Apprenticeships are covered by formal agreements known as “Training Agreements” or “Contracts of Training”. These set out the employer's obligations with regard to training and supervision, and the employee's obligations as an apprentice.
For employers there are financial incentives paid out on commencement and at completion of the apprenticeship. There are also additional benefits for regional and rural areas with identified skills shortages.
Apprenticeships Centres are the support arm that can help you with all the paperwork and administration. You can find one on the New Apprenticeships website: www.apprenticeships.gov.au or telephone 1800 639 629 for more information.
Systemising, your first Step
A proven method of running a successful business is to systematise as much of the business as possible.
Systems and procedures will not only help to run your business more effectively and efficiently (and there by more profitably) but it may also provide you an opportunity for you to set up the business to be able to run with out you!
If you successfully set up a system for your business, then the system runs the business. You and your staff then run the system.
One important area where you can easily systemise is by having a database of your customers.
We all know it is far easier and less expensive for us to keep our existing customers than it is to find new ones.
If this is so, how many of us in business are keeping track of who our customers are and what they buy from us?
Keeping a database of existing customers which includes details such as:
· what they bought from us,
· when they bought from us,
· how often they buy and
· any other useful information relevant to your business
is a very good place to start systemising your business.
Having a useful and informative database on your clients also helps you to target your marketing activities more effectively.
You can design specific promotional activities to a targeted market, which will help you to get a higher ‘hit rate' for your advertising dollar.
It is vital to know who your customers are, what it is they buy from you and what else potentially they could be buying from you. You can use this knowledge to help you re define the products or services you sell.
Each year you should be reviewing your products and services and dispensing with those that don't sell or do not have any relevance to your current customers. At the same time you should be looking at what new products or services you could be offering. Your sales figures will be able to tell you what does not sell, and if you don't know what products to add - ask your current customers!
We need at all times to be pro active in our business if we are to be successful. We need to be thinking about customer needs and how to satisfy them more effectively. We need also to spend our precious advertising budget wisely. For all these reasons, it makes sense to keep up to date information on our customers. If you need some assistance with, or wish to discuss setting up and maintaining a customer database, give us a call on 6297 3121.
What's In A Name?
Business names, company names, domain names and trade marks
Choosing the right name for your new business or company is vital to creating a niche in a congested marketplace and to distinguish your goods and services from your competitors. In effect, you are creating an identity - something both memorable and meaningful.
In the market place, names can be both trade marks and business names, company names or domain names. This can be confusing, so it is important to understand the differences.
If your company name, business name or domain name is identical or similar to a registered trademark, you could be sued for infringement.
Company name
A company name must be registered under the national Corporations Act 2001 administered by the Australian Securities & Investments Commission (ASIC). If a company wishes to trade using a name other than its registered company name, the trading name must be registered as a business name.
Business name
A business name is a name under which a business operates. Business name registration is compulsory and must be completed before the business starts trading. Registration is obtained under state or territory legislation, National Names Index. so businesses trading in more than one state or territory must register their name under the laws of each one.
Domain names
Domain names are the addresses for sites on the Internet. au Domain Administration Ltd (auDA) manages the .au domain. The registration of com.au and net.au domain names for commercial entities is carried out by auDA accredited registrars. AuDA maintains a list of these accredited registrars. Their Email address is info@auda.org.au. Website www.auda.org.au .
Trade Marks.
A Trade Mark is a letter, word, phrase, sound, smell, colour, shape, logo, picture, aspect of packaging, or any combination of these. It identifies a product or a service of a business and distinguishes it from similar products and services.
As the owner of a trade mark you have exclusive legal rights throughout the whole of Australia to control the use of your trade mark for goods or services for which it is registered.
For Peace of Mind - Search the Trade Marks Database.
A search of the trade marks database can help reveal any registered or pending trade marks which are identical or similar to your proposed business, company or domain name.
The trade marks database is accessible via the Internet on IP Australia's web site http://www.ipaustralia.gov.au. You can also visit your nearest IP Australia Office and conduct a search of the database yourself, at no cost. Professional searches are also available from legal practitioners and search firms.
IP Australia also provides a professional search service called the Business Names Applicant Search Service (BASS). For $40 their trained staff will conduct a thorough search of the trade mark database and issue a report for any existing registered trade mark which is identical or very similar to your proposed name.
If you pay by credit card, you can apply for a BASS search by telephoning 02 6283 2999 during normal business hours.
If you are considering applying for registration of a trade mark, IP Australia also produces a more comprehensive guide, The Trade Marks Application Kit, which is available free of charge from the Helpline or by contacting your nearest IP Australia Office on 1300 65 1010. |
