JPAbusiness

When it comes to franchising, our message is consistent: get robust, independent advice before you buy a franchise (or any business, for that matter!)

The recent release of a damning federal parliamentary report into Australia’s franchise sector has reinforced the importance of this message.

The parliamentary inquiry into ‘Fairness in Franchising’ recommended an overhaul of the industry's regulatory framework, stating that it had “manifestly failed to deter systemic poor conduct and exploitative behaviour”. It said the existing rules had “entrenched the power imbalance” favouring franchisors.

However the report also acknowledged there are good franchise systems that “operate to the mutual benefit of the franchisor and their franchisees”.

We provide a range of services to business buying clients, from initial review and feasibility, through to business valuations, a preliminary assessment of the strength of the opportunity, full due diligence services if the party has lodged a non-binding offer and is seriously interested in the business, through to merger and acquisition facilitation services.

We have helped some clients find the right business within six months while, for other clients, it has taken over three years.

The key phrase is ‘the right business’; I’m sure we could speed up the process if our aim was just to help our clients buy ‘a’ business, but that’s not our job.

When business owners come to see us, wanting to sell their business, we often get involved in providing what we term ‘vendor due diligence’.

Vendor due diligence has two main components:

1. Understanding what my business is really worth

This is something we have covered previously in eBooks and blogs about business valuation and market appraisals.
It involves getting independent advice on what your business is really worth in the market, on a realistic, fair value market basis.

We have written a number of blogs on franchising and also created a free Buying a Franchise Planning Sheet.

This week I've published a video highlighting 4 issues you should consider very carefully before buying a franchise.

When business owners come to see us, wanting to sell their business, we often get involved in providing what we term ‘vendor due diligence’.

When conducting vendor due diligence for clients, our role is basically to ‘pretend’ we are the buyer.

We look at a range of business health factors including:

• financial performance
• business performance
• staff and organisational aspects
• contracts, systems and suppliers
• how the business creates and drives value in terms of its point of difference in the market
• forward order book i.e. the pipeline, to understand the true nature of the business as a going concern
• how exposed the business might be to individuals or particular customers or suppliers.

Preparation is a critical component of a successful business sale and you can't start preparing too early.

With this in mind we have created a new eBook for our readers and subscribers: How to Prepare Your Business for Sale.