Vacuum your business.

Tags

, , , , , , , , , , , ,

If you think your business is just breaking even, and you are unsure what if any value you could realise, take action. Put your business in a vacuum. Take yourself out of the picture entirely. Delete your approach, your mindset, the way you do business.

The business sale process starts months before you list the business with a broker or put the ad on-line yourself. If you want the pay-day to come, you have to clean up.

Look at things as if you were not around.

If you’re not great with figures, accountants can identify and reconstruct the performance of a business through “add-backs”. Basically, they tidy up by adding-back into the equation everything you have taken out. Car leases, free meals, mortgage payments, personal expenses are just one step towards a clean set of figures.

Once in that vacuum, where your way of doing business is (for a moment) put aside, consider subtle changes to your business like removing table service, closing the kitchen 15 minutes earlier, removing slow-moving or low-margin menu items etc etc…

Together, add-backs and accurate thinking could add hundreds to the weekly bottom line and thousands to the sale price.

Advertisements

Leasefix™ Report

Tags

, , , , , , , , , , , , , , , , , ,

All food businesses are second-hand.

Painfully, the biggest mistake business buyers make when negotiating is to set the price without understanding the lease. If this is you, it is almost certain you are buying a dud, or have overpaid. It is the lease that drives business value, nothing else.

As a business buyer you have an advantage, you have the right to a copy of the lease before you agree on price, sign or pay a deposit.

Do not fall for the tricks – get a Leasefix™ Report.

A Leasefix™ Report is a pre-purchase inspection of the lease to make sure the business is not in decay and strong enough to justify you taking the next step.

Each Leasefix™ Report:

  • contains a 27-point lease safety check;
  • is written in plain, easy to understand language;
  • provides clear explanations of the legal jargon in the lease;
  • identifies and explains unusual risks;
  • contains a traffic light assessment of the risk;
  • will allow you to make an informed stop/go decision,

The return on the price of the report is immediate, guaranteed to alert you to a potentially costly mistake and giving you the ammunition to negotiate a better deal. For your convenience, you can choose to receive your report verbally during a half hour, over-the-phone consultation at a time of your convenience.

Leasefix™ Phone Consultancy $590

Leasefix™ Report $880

Leasefix™ Report and Phone Consultancy $880

To book your report, email a copy of the lease to peterp@craftlegal.com.au. All enquiries are strictly confidential. A no-obligation email checklist will then be sent to you with the starter information. Standard turnaround time is 24 hours.

Benchmarking B.llshit

Tags

, , , , , , , , , ,

Just a quick word on benchmarking.

I often refer food businesses to industry benchmarks not to establish target sales or profitability, but to underline the importance of establishing them.

Comparing your business to your neighbour, direct competitor, local champion or industry leader can give you great insights, but you are not them, nor should you become them.

The number one goal in any food business is not to make food, but to make money.

You can make food at home. Your business is a profit-making machine, but just because your competitor is paying $1600 per square metre or is operating at a 11% occupation cost doesn’t mean you should. It means you need to calibrate your business so it delivers the profit you want given your circumstances and financial situation.

It is preferable to understand how profit is measured and recorded, rather than the back-of-the-book benchmark answer.

 

 

Prevention v. Cure

Tags

, , , , , , , , , , , , , ,

Some food businesses are genetically predisposed to success. The success gene is hidden in plain sight in the cafe’s DNA, a.k.a the lease. The lease is the foundation on and around which every  retail food business is built.

Every other risk, challenge, threat and opportunity in the business plan will show up in its own time, but leases have a peculiar characteristic that gives every food entrepreneur a glimpse into the future. You see, the landlord must first give you the lease before you sign it.

A bad lease, will always be a bad lease. No matter how well you tell your story or connect with your community, a good business on a bad lease is still a bad business. Businesses fall down when they fail to take that chance to glimpse the future. If you knew you were guaranteed to lose money, would you sign the lease ? Do you think businesses that go broke never get advice ? Of course they do, but they may just get the wrong advice.

A sound lease is always sellable, even if the business is not. Good location, secure tenure and a solid platform will always be in demand. All of these things are discernible when you are given the lease, and even earlier (if you are familiar with my philosophy). By extension, the right advice is useless if you get it at the wrong time. Get help early.

Would you rather cure or prevent a poor business outcome ?

cafelawyer®

m. 0414 257 298

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keep your options alive.

Tags

, ,

If you have an option to extend your lease, and you wish to take up that option then you must give written notice of that desire to the landlord in the form and at the time required by your lease.

That is called “exercising your option”.

If you forget to exercise your option, or if you send the wrong notice, or the right notice to the wrong person or at the wrong time, your option(s) are lost and your lease runs out.

To most operators, its means they have just destroyed their business.

Dramatic perhaps, but it means the landlord can force you to de-fit and strip the shop, make good and return the keys, or (more often than not) increase the rent well beyond any reasonable measure.

Don’t risk it. Keep your options alive. Check your lease now.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Soft Skills and Hard Yards

Tags

, , , , , , , , ,

An important skill for all players in the food game is the ability to listen. Not listening as you pause to consider your reply, rather listening to understand the other person.

Whilst it is rare for you to immediately connect with your opponent, I find it even more rare for players to actually seek to understand the other person – his or her attitudes, biases and dispositions are the filter through which you communicate.

From my experience you can often figure out how the other guy thinks by picking up cues from conversations unrelated to the subject matter of the negotiation. Hence the importance of small-talk and building rapport. If you know how the other person will filter what you will say,  you can frame your proposal and your language so your point is taken the way it is intended. You can only do that by first listening.

It’s been a (too) long break between posts.

I hope we can take the hard yards together in 2018.

 

 

 

 

Got the smarts ? Don’t Intimidate.

Tags

, , , , , , , , , , , , , ,

I found this passage in a book recently. I was so taken by how perfectly the author captured the agent / buyer sales dynamic I took a photo of the page on my phone and promised myself I would blog it word-for-word. Pay attention, it is intended as a lesson for agents on how to play the game.

If someone feels intimidated, they’re not going to be relaxed and they’re not going to feel comfortable moving forward. If they feel like you’re smarter than they are, they’re going to want to talk to their solicitor and accountant and get advice from their family. But if they feel they are smarter than you, they’ll relax and feel free to give you more information. They’ll also feel more comfortable than you , they’ll feel like they are getting a bargain, and they’ll want to seal the deal fast, before you go get advice and change your mind.

– Rick Orton, 2012 How to buy a house for $1.

When the fact lady signs…

Tags

, , , , , , , , , , , ,

Sadly, yes today does not mean yes tomorrow.

It is common for would-be tenants to feel like they have a deal only to find out later the terms they thought were agreed upon weeks – if not months ago – are no longer acceptable to the landlord. The reason for this is simple.

FACT: preliminary agreements of themselves are not binding until the lease is signed. Because of this, landlords and tenants can change their minds.

If a tenant changes his or her mind, then they probably lose most, if not all, of the leasing deposit. But what if a landlord changes their mind and no longer agrees to give exclusive use of the courtyard or a sufficiently long lease ? What do they lose ?

Negotiating a lease is a balancing act. Avoid the trap of giving landlords or their representatives a reason to look for a way out. Understanding the landlord’s reality and acting consistent with it plays a major role in how well a landlord will adhere to the original understanding set out in the letter of offer or invitation to lease.

Play it cool. Play it smart.

Price pressure

If you are hunting for a home for your new food concept, you will have to deal with real estate agents and leasing executives well versed and well scripted in the art of pushing the price. Take a look at some of these sample scripts real estate agents are trained to apply when you finally make an offer…

“Thank you for that offer, but that price level has already been tested and it is unlikely to be accepted…”

“How did you arrive at this figure?”

“Are making a decision based on the market or based on your understanding of the market?

“I’d like you to give me an offer at a level I can look the landlord in the eye and recommend they take it”

The goal is to forcefully reinforce: (a) your offer is inadequate; and (b) you have no idea what you are talking about. Because you are leasing space for a business, and not the next family home, you must avoid emotion and importantly, avoid getting upset by these common scripts. Recognize that overpaying for your premises is the first mis-step into the weeds. I am working on the counter-scripts for food entrepreneurs…

 

 

 

 

 

 

 

 

 

Lowest common denominator

The comparable square metre rate for premises you are looking to lease and establish your food business is a false god. While $/psm will give you an indication as to what other leased space is selling for in a location, it has absolutely no bearing on profitability.

By definition, profitability must be a driving force in structural business decisions such as where to pioneer. It is therefore imperative that start-ups perfect their sales projections so the occupation cost (%) relative to turnover is within the benchmark for comparable profitable businesses, not comparable empty spaces.

Occupation cost is fixed and known upfront. It is the only solid input operators can base their sales projections.