Business Topics

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Promotional Mix

Posted on by Julian Gooden

The promotional mix is the combination of tools used to promote a product. There are four aspects to the promotional mix; sales promotion, advertising, personal selling and public relations.

This article looks at sales promotion and advertising.

Sales Promotion

Sales promotion is the process of persuading a potential customer to buy the product. It is designed for immediate results and is usually for a specific time period. It can also be used as a part of the personal selling process. Sales promotion supplement advertising and other aspects of visual promotions. Examples of sales promotion are trading stamps, free gifts/gift tokens, loss leaders, competition, production demonstrations, exhibitions, free samples among others.
Sales Promotion

Some methods of sales promotion:

Cash discounts – These can either be in cash refunds or deductions from invoices over a specified period of time.

Money off coupons – Customers receive coupons, or cut coupons from newspapers or take along with product packaging when they go to purchase. This enables them to buy the product at a reduced price.

Competitions – Customer take part in a chance to win by buying the product.

Discount vouchers – A voucher (like a money off coupon) that will allow the customer some discount on the purchase price of the product.

Exhibitions and Trade Shows – Items are neatly displayed to promote sales and attract potential customers at shows.

Free gifts – Customers get a free product when they buy another product. This is normally given out to customers according to how much they spend, so the criterion could be purchases of $100 and over.

Point of sales materials – E.g. posters and display stands; these are ways of presenting the product in its best way or showing the customer that the product is there and available for purchase.

Loyalty cards – Customers earn points for buying certain goods or shopping at certain retailers, which can later be exchanged for money, goods or other offers. Loyalty cards have become an important form of sales promotion. Loyalty cards can offset the discounts a business offer by making more sales and persuading the customer to come back. They also provide information about the shopping habits of customers – where do they shop, when and what do they buy. This is valuable marketing information and can be used in the planning process for new and existing products.

Loss leader – A loss leader is a popular product being sold at below market price to encourage customers to enter the store in the hope that they will make other purchases.

Trading stamps – These are given freely to purchasers by merchants. The customer can then save them until they have a certain number; when returned to the shop or some specified dealer, the customer get goods or money in exchange.

Premium offers – These include self-liquidation devices (being asked to return empty bottles etc for cash or product), gifts, contests, bargain packs (such as buy one get one free).

Sweepstakes – Contest or race on which a lottery is run, the money is usually contributed by the applicants, maybe through tickets sales.
Sales promotion

Advertising

Advertising presents or promotes the product to the target audience through media such as TV, radio, and billboards to encourage them to buy. When deciding which type of advertising to use (known as an advertising medium) the business needs to consider the following factors:

Reach of the media – nationally or locally, the number of potential customers it could reach.

Nature of the product – the media need to reflect the image of the product; a recruitment ad would be placed in a trade magazine or newspaper but a lipstick ad would be shown on TV or in women’s magazines.

Position in product life cycle – launch stage will need different advertising from extension strategies.

Cost of medium – radio is cheaper than TV, but you may want to consider cost per head if reaching a larger audience.
advertising
In the printed media, advertising can take two forms:

A classified ad is normally put into a newspaper by an individual and is expressed solely in words and numbers.

A display ad is where space is bought in the newspaper or magazine and can be filled with words and/or pictures.
Display adverts have more impact, but are more expensive.

Advertising can also be split into types:
Persuasive advertising – This is to entice the customer to buy the product by informing them of the product’s benefits.

Informative advertising – This serves to inform the consumer.

Comparative advertising – This is used to compare your product to others, of course pointing out the positives of your product compared to the others.

Reminder advertising – This serves to inform that the product is still available. This is usually used in areas with a lot of competition or when the product has been around a while and you need to increase its popularity.

Advertising serves to:

  • To announce new products
  • To highlight the unique features of a product
  • To build a firm’s image around its product
  • To increase market share by stimulating demand
  • To educate customers about the products
  • To highlight special events, such as concessions, sales or late opening
  • You will need to be fully aware of the laws that govern advertising.

Sometimes a business will employ an advertising agency to deal with its needs. An agency plans, organizes and produces advertising campaigns for other businesses. The advantage of an agency managing the campaign is that it has the expertise a business may not have, e.g. copywriters, designers and media buyers.

ADVERTISING MEDIUM

  • Electronic
  • Radio
  • Television (TV)
  • Telemarketing

Advantages

  • Creates and maintains public and consumer awareness of the product.
  • Attracts different demographic segments of the population.
  • A medium such as radio is not very expensive and so affordable for small business owners.
  • The visuals produced by television make it a powerful means of persuasion.

Disadvantages

  • Telemarketing is a turn-off for many consumers and it is also very expensive
  • Sometimes there are several laws and restrictions to observe
  • Ads usually have to be aired at a certain time for better effect and those time periods are usually more costly such as morning peak hours or primetime

Print Media

  • Newspaper
  • Magazines
  • Periodicals
  • Journals

Advantages

  • Creates credibility
  • Printed words last a very long time.
  • Customers can refer to it when they need to

Disadvantages

  • Less use of colour
  • Presentation is not as lively or friendly
  • There is no way of knowing if target audience reads it

Cinema

Advantages

  • It’s animated and thus eye-catching
  • You can target a specific audience more easily

Disadvantages

  • In recent times there are limited audience because of the competition from TV and radio
  • Others
  • Billboards
  • Buses
  • Postcards
  • Signs

Trains

Advantages

  • Can create strong impact
  • Signs can be attention grabbing

Disadvantages

  • Often have to be updated or replaced
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Starting Your Small Business? Get Organised

Posted on by Julian Gooden
Getting organised - Think big, learn fast and adapt

Proper planning will reduce the ‘stress’ that could come with starting your own small business; an ad hoc approach is often a recipe for disaster.

Here are a few things to keep in mind when starting your own small business:

Do you have what it takes to run a business?

Ask yourself why is it you want to run a business – is it because you want to take control of your future or are you hoping for a bit more free time than your current job offers? Make sure you are going into business for the right reasons.

Confidence

You will need a dose of confidence, do not think failure before you even begin and also be mindful of the fact that things will not always go as planned. Set standards and goals for yourself. Even if you decide to work from home, you need to approach your business with a level of professionalism; this could mean the difference between failure and success.

Get a notebook

Get a notebook, it will help you to keep track of the things you have done, things you need to do and people you have to see.

Get a calendar

Get a calendar alongside your notebook. Set time periods for accomplishing goals, if you have to get a permit for example, before starting your business mark a period on your calendar as to when you will get it done and do it at that time. Once you have completed a task, mark it complete and always check your calendar just to ensure you do not miss any important appointments.

Necessary tools

Consider the tools that you will need to start your business – list them. If you are unsure, take a look at similar businesses to the one you intend to start and use them as your guide.

Make it happen

Raw material

Where will you get the raw material to operate your business? Make sure you have information on more than one supplier, do not limit yourself.

Currently in a job?

If you are still in a job and are thinking of leaving to start out on your own, consider getting all the important things in place before taking the leap.

Prepare to work hard

Prepare to work hard. In the beginning there is no doubt that you will have to put in many hours to get your business going, accept this as fact from the outset.

Realistic projections

Make realistic projections about your needs. Will you honestly manage on your own at the start, or will you require assistance? What about finances, do you have enough cash to meet your projected budget or will a loan be necessary?

Assumptions

Do not be guided by assumptions; if you are unsure about anything find out from relevant sources or do your research.

Office at home

If you will be working at home, set up an ‘office’ there. It does not have to be anything fancy; just set aside a room or an area that is strictly for work.

Procrastination

You might find yourself in the uncomfortable state of ‘indecision’. Procrastination is not your friend. Set your goals, be reasonable with your decisions and just do it!

Personal weaknesses and strengths

What are your personal weaknesses and strengths? Whatever effects they had on you while you were in a job will be the same when you are operating your own business. Take note of them; capitalise on your strength and find ways of dealing with your weaknesses.

Support

Find out about organisations or groups that offer support for your type of business.

Self-incentive

Think of an incentive scheme to reward yourself for goals accomplished, this will be good encouragement for you. Please be moderate.

Remember things will not just happen because you want them to…make them happen!

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Employee relations

Posted on by Julian Gooden
Employee relations

Employee relations refers to the management of employees in an organisation. Good employee relations is important to any business; this article looks at management’s responsibilities to workers.

As a business grows, so will the need for various skilled personnels. It will therefore become necessary to hire, fire and deal with employees.

In many instances the employee / employer relationship is affected by the structure of the organisation. However, whatever structure or leadership prevails, for the business to succeed there must exist good employer / employee relationship. The following should be taken into consideration:Labour laws

Labour Laws

The business owner must be aware of the various laws governing employment of workers within the industry in which they operate, and also other relevant laws that exist within the country.

Compensation and taxes

Knowledge must be acquired having to do with calculating, deducting and paying over to government the various taxes that employers’ must be paid on employees’ behalf. You should be aware of the minimum wage that prevails, as it is illegal to pay employees below this level.

Remember that employees receive benefits from having paid taxes, such as assistance in owning a home, tax credits and tax payback. Taxes deducted from workers salaries/wages must be paid over to the relevant authorities, it is not yours to keep!Employee motivation

Motivation

Motivation is the will to work. The employer should help to motivate the employee. A well-motivated work force can provide the following advantages:

  • Better productivity – This can lead to lower unit cost of production and so enable a firm to sell its product at a lower price
  • Lower levels of absenteeism as the employees are content with their working lives
  • Lower levels of staff turnover – This can lower training and recruitment costs
  • Improved industrial relations with trade unions

Contented workers can help to give the firm a good reputation, making it easier to recruit the best workers in the market. Motivated employees are likely to improve product quality and consumer service associated with a product.Communication is key

Communication

Communication is key. Clear two-way communication should exist between employer and employees. A well-organised business will have good communication between management and workers.

Responsibilities to employees

The employees are the ones who produce the company’s products for sale or are the source of its services. The owner and managers must show respect to workers. If employees are not satisfied in their jobs then they will soon leave to seek satisfaction elsewhere.

  • Salaries and wages should be commensurate with productivity, taking into consideration cost of living, inflation and other expenses such as transportation costs.
  • Wage negotiations with trade unions should be a matter of give and take and decisions from management side should be carefully considered before given to trade unions.
  • Rest-room facilities should be available to employees, and where feasible medical and canteen facilities.
  • Adequate working conditions must be provided, for example enough ground space should be allowed between two workers so that they can work comfortably or machines placed reasonably apart.
  • Employees should be properly safe-guarded against any likely industrial injuries, which would be detrimental to them.
  • In order to improve performance, the immediate work environment should be kept sanitary and safe.
  • Stick to agreements or verbal promises, employees will view it as unreliable if you break promises. If you can not keep an agreement, inform them and give a plausible explanation.
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Single and Double Entry Bookkeeping

Posted on by Julian Gooden
Single-entry accounting and Double-entry accounting

It should not matter what type of business you operate, and even if you are a freelancer, it is important to keep track of your work or business expenses. The type of business you operate, the level you are at, and your potential for growth and expansion, should all play a part when choosing bookkeeping methods.

Single Entry or Double Entry Bookkeeping

Bookkeeping Methods

The two main options for keeping your accounts are the single and double entry systems of accounting.

Single-entry Accounting

The single-entry accounting system is often likened to a register. It only takes account of what comes in and what goes out, nothing else. In effect, it is a daily and monthly summary of cash disbursed or received. The two tables below show examples of accounting records using the Single-Entry Accounting method.

Example 1

Date Description Amount ($)
Jan 3, 20xx Starting balance (Capital) 2,500.00
Jan 4, 20xx Office Furniture (833.40)
Jan 9, 20xx Digital copier 100.00
Jan 13, 20xx Scanner 89.00
Jan 18, 20xx 4 Piece Office set 599.00
Jan 19, 20xx Repairs and maintenance (1,100.00)
Jan 23, 20xx Utilities (205.00)
Jan 28, 20xx Scanner 89.00
Jan 31, 20xx Ending balance 1,238.60

Example 2

Date Description Revenue ($) Expenses ($) Balance ($)
Jan 3, 20xx Starting balance 2,500 2,500
Jan 4, 20xx Office Furniture (833.40) 1,666.60
Jan 9, 20xx Digital copier 100.00 1,766.60
Jan 13, 20xx Scanner 89.00 1,855.60
Jan 18, 20xx 4 Piece Office set 599.00 2,454.60
Jan 19, 20xx Repairs and maintenance (1,100.00) 1,354.60
Jan 23, 20xx Utilities (205.00) 1,149.60
Jan 28, 20xx Scanner 89.00 1,238.60
Jan 31, 20xx Ending balance 1,238.60

While Single entry accounting is very easy to implement and use, it is criticised for being an incomplete system. It is not guided by rules and principles, does not allow for arithmetical accuracy, proper checks and balances or show a true profit and loss position.

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Double-entry Accounting

In the double entry accounting system, each account has a debit and a corresponding credit. At the end total debits must be equal to total credits – if they do not equate then this is an indication that something is incorrect – maybe an item was omitted, a wrong figure was recorded or it could be a number of other possibilities.

One can choose between using an accounting software or a double entry spreadsheet to record financial information. If you are not familiar with bookkeeping, an accountant should be able to help you with the basic set-up and explanation as to the use of one of the more manageable accounting systems available. This is especially important for limited liability companies since more is required of them by tax authorities, for example, they are required to file annual returns, and pay specific taxes. An accountant can also help to direct staff as to proper record keeping procedures.

Despite the benefits of using an accountant, due to finances, it is not always possible to hire help; so if you prefer, you could opt to learn the accounting basics first, then try to manage on your own using an accounting software. There are many accounting tutorials available online to help you get started.

The double entry system of accounting by design is the more detailed and accurate of the two. Its balance sheet allows for a check of arithmetical accuracy of the accounts, it works within specific time periods, looks at both sides of a transaction and incorporates real and nominal accounts. Guided by many accounting rules and principles, it is also viewed as scientific and systematic, and gives a more accurate reflection of a business’ profits and losses and overall financial position.

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In addition to choosing a bookkeeping method, here are some things to do in order to put your business expenses into perspective:

Bank accounts

  • Keep separate accounts for business and personal use
  • Establish an overdraft facility with your bank even if you do not think you need it now
  • Deposit cash with the bank as soon as it is received

Budget

  • Make budgets for production, sales and cash flow. Always match your budgeted projections with what actually occurred and analyse the results

Cash

  • Make payments by cheques
  • Set credit limits for each supplier, make sure credit terms are agreed to and complied with. Of course in business you will need to ‘give and take’ at times but be careful of what you give and what you take
  • If possible, establish a fund for petty cash. Do not make purchases from sales or your cash register!

I will be posting other articles and resources to help in this area.

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Entrepreneur or Self-Employed

Posted on by Julian Gooden
Entrepreneur or Self-employed

Often we hear the terms entrepreneur and self-employed used interchangeably, but they do not necessarily mean the same thing. So who is an entrepreneur and who is a self-employed?

Merriam-Webster defines the Entrepreneur as one who organizes, manages, and assumes the risks of a business or enterprise. They define a Self-employed as one earning income directly from one’s own business, trade, or profession rather than for a specified salary or wages from an employer .

self-employed-or-entrpreneur-who-are-you

While they both will operate a business, the self-employed will create a job for her/himself. They usually work long hours and sometimes do everything, as in some instances they might not have anyone else to assist them. The entrepreneur on the other hand is the inventor and visionary behind the business, but not necessarily involved in day to day tasks. They are more interested in creating new businesses and ideas.

Here are three points to take note of when deciding whether someone is self-employed or an entrepreneur:

Entrepreneur
  • visionary/creator of new businesses and ideas
  • grand architect, directing overall business, hire others to carry out vision
  • take financial risk above usual to bring an idea into reality
Self-employed
  • creating a job for her/himself
  • success is largely dependent on his own skills/abilities
  • usually integrally involved in the day to  day tasks
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Management Responsibilities and Skills

Posted on by Julian Gooden
Management Responsibilities and Skills

As a manager you have responsibilities to:

Employees – To ensure that there are good working conditions and proper remuneration.
Customers – To deliver quality products and good customer service.
Government – To observe various laws and the necessary taxes imposed.
To society – To ensure you do not pollute the environment and that you are an asset to the community in which you operate.
Yourself & other owners – To ensure that the business is conducted as effectively and efficiently as possible and that the business is not just making a profit but making the ‘best’ profit possible.

MANAGEMENT SKILLS

What is management all about? Management can be described as the effective means of handling your business. So your aim ought to be to increase efficiency, productivity and hence profit, through your administrative and leadership control.

As a manager of a small business more often than not you will be responsible for paying your suppliers on time, recording financial information, keeping the books updated, tax payments, getting licenses, permissions and permits –  so yes, there is quite a lot to do.

You should be able to direct, delegate, control, organize, hire/fire, communicate and also motivate those working for you. Even if you are working as a freelancer and intend to keep it that way some of these skills will still come in handy.

Plan – All businesses need a management plan. Planning involves looking at the future prospect of the business, when planning set a goal for your business as to what you hope to achieve within maybe the next month or even the next year. Maybe as a freelance writer you want to make $1,000 per month, how will you achieve this? When you make a plan and write it down, it serves as a ‘road map’ for future development and you can refer to it from time to time to see if you are accomplishing your goals and whether changes are necessary. Plan for recruitment and capital expenditure and make a budget. Planning should be a continuous process.

Direct – If you will have people working for you will have to direct your employees effectively. This gives you the opportunity to guide them, so they are aware of what their job functions are.

Delegate – Don’t be afraid to delegate responsibility. Assign each employee a duty, let it be clear that each person is responsible for that particular duty and is accountable for their performance and if possible set a time frame for completion of each task.

Control – This might seem a scary word but in this context it is not. What you will need to do is to monitor your employees from time, just to ensure that they are performing their jobs according to instructions so you can identify issues before they escalate.

Organize – Plan the work you need done, set time for its completion and once again, do some supervision. Organize method of remuneration and make an organizational chart.

Communication – It is often said that communication is key and this is quite true, don’t leave you employees guessing, there need be a two-way dialogue. Employees must also be able to express their concerns without feeling threatened.

Motivate –  You might say, ‘Well I employed that person to do a good job, so they are doing a good job – just what I am paying for’. Wrong! Often this is not enough. Workers like to feel appreciated, tell them they are doing well, give bonuses if you can, pay workers for overtime on the job. When you build loyalty in your employees they will more often than not strive for perfection on the job.

Educate – As your business grow, with time you will realise that you might not only have to further educate yourself but your employees also; you do not have to take on huge expenses, even one day workshops could prove quite beneficial. Ensure you train new employees as it relates to your company’s procedures and their job functions. Also when you implement new systems or functions to a post, train the employee.

Hiring – Your employees can help to make or break your business; you want the right people for the job. Note beforehand the particular skills, qualification and experience levels you need. Design a test or questionnaire for prospective employees to complete.

Firing – When an employee is not an asset to your business, especially where that person’s attitude negatively influences others, you need to let that person go. It is important that you have a good deportment from the beginning, let your employees know that you are approachable and make them feel they can come to you to discuss issues, however never let yourself be seen as weak, this will not benefit you over time, be ‘nice’ within reason.

NB. Even if you are a sole trader just starting out with no employees to speak of, make a plan of your goal, have a mission statement about the aim of your business. Then write yourself a plan as to how you intend to reach those goals.

If you think that proper Management in unimportant, here is why you should rethink.

Poor management will:

  • Kill productivity and growth
  • Decrease business’ profits
  • Result in poor information recording
  • Result in poor communication
  • Result in poor planning and organization
  • Result in bad decision-making

It’s never late to make a fresh start. If you are operating in a structure or way of business that isn’t working for you, then take the opportunity to change the business management.

 

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The S.W.O.T Analysis

Posted on by Julian Gooden
The SWOT Analysis

The S.W.O.T analysis is a technique used for analysing the strengths, weaknesses, opportunities and threats that a business faces.

Strengths and weaknesses examine the internal pros and cons, while opportunities and threats examine the external pros and cons.

What are your strengths?

What advantage(s) do you have over competitors?
What features are positively unique about your business?
What do others (customers or competitors for example) see as your strength?

Write a list of the positive features of your business and go from there. Anything special that you offer or a positive image you may convey.

What are your weaknesses?

What do others see as weak about your business?
In which areas do you need to make improvements?
What should you avoid?
Is the quality of your product up to the market standard?
Do you have a bad reputation?
Are you or your workforce up to par in terms of experience and expertise?

Look at the aspects of your business that need improvement.

What are your opportunities?

Where are the opportunities?
Are there any new trends in the market that you could benefit from? What are they?
How can you create your own opportunities?
Are there new markets available overseas – maybe you can now export products?
Is there a new market segment or have you discovered a niche market?

Look at your strengths; see how they can aid the opportunities. What about the weakness, once you change those negatives how can you benefit from them?

What are the threats that face you?

What challenges awaits you?
Do you have any critical weaknesses?
Are there new tax laws, for example?

Look at the changes in the industry and what challenges these pose for you. Can you meet them head on, if not what’s the next best alternative? Do your competitors have new innovation or technology that you don’t?

A S.W.O.T analysis could prove important no matter what stage your business is at. Looking objectively at your business can aid you in making better decisions for growth and improvement.

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Business Goals

Posted on by Julian Gooden
Create SMART goals

Business goals are embodied in its plan. What are these goals that businesses need? Simply, business goals need to be SMART.

S -pecific
Set specific goals for your business. Don’t just say, I want to improve profits next year or I want to increase sales. State how much you want profit increased by, so a plan that states that I want a 10% increase in profit or a 300 units increase in sales volume is far better. When you don’t have specific goals you will have nothing to measure against.

M -easurable
Your goals must be measurable. Therefore, if you want to achieve your goal of 300 units in sales within 12 months then you need average sales of 25 units per month, you can measure in smaller stages to achieve a bigger goal. You should have a method in place for achieving this, maybe you need more material, new equipment, more employees or you need to re-assign work tasks.

A -chievable
It must be possible to achieve your goals. Therefore your goals should be within reach, if not, you are setting yourself up for failure and disappointment. If you are a newcomer and the industry’s average sale for the top business is 200 units per year, how likely is it that your sales would be 300 units for the same period?

R -ealistic
Goals must be realistic. Realistic goals are challenging, but attainable. Mind you, there need to be optimism, but within reason. You have to be willing to work towards accomplishing your goals or it will not be achieved.

T -imely
Every goal must be set to a specific time period. This will help you to measure your progress and keep you on the necessary path.

Your SMART business goal must answer the… What? Why? Who? When? How? Questions.

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Buying an existing business – What you need to know

Posted on by Julian Gooden
buying an existing business | Julian Gooden

You probably do not want to go through the process of starting a business from scratch, and therefore, might consider buying an existing business. This could be a good idea since an established business should already have built in customers, is hopefully profitable and thus likely to be less risky. However, that is not always the situation and bad purchases are often made. In order to increase the chances of making the right decision, please consider the following:


Type of business
When buying a business it is not wise to go into an area you know absolutely nothing about, think of your qualification, experience, hobbies and interests.

Finance
Do you have the money to purchase this business? If not, how will you finance this venture? Look at small business schemes – what kind of finances, if any are being offered? Also, is the owner willing to be paid in instalments, how will this be done, can you make these payments?

Financial statements
You want to look at the company’s detailed financial statements, over several years, preferably at least five (5) years. Match what is reflected on the statement with what is happening in the industry. Has the business been making a profit, if so, over what period of time? Look at the taxes paid and compare them with income reflected.

Payables
A company’s payables history can tell a story. A company that is really viable is able to pay its current liabilities as they fall due. Look at how long the company takes to pay its suppliers or other short-term creditors. Thirty-to-sixty (30-60) days are acceptable, but ninety (90) days and over are too long a period, this business could be struggling.

Receivables
Do a credit check on the company’s major debtors. How long are their receivables outstanding for? Also, bare in mind that for the purpose of the sale the receivables figures might be inflated, check invoices. You will want to determine how likely it is that some receivables may become ‘bad debts’ (unrecoverable).

Employees
Look at current employees, how critical are they to the business’ success? Are there employees that are more liabilities than assets? Which employees will you need to keep, which do you let go? Take into consideration their overall performance and what customers think of these persons.

Customers
Is there a close relationship with the current owner and customers? Will they leave or stay if you take over?

Competitors
How does this business stock up against the competition? What has been happening in the industry, is it growing? Have sales fallen, if so, why? Have competitors been leaving the industry? If so, why?

Corporate Image
Does this company have a good corporate image? Is there potential to improve the image? You do not want a company that is riddled with scandal or that people in general have negative views towards as this will undoubtedly affect future growth.

Trade secrets
Does this company have trade secrets, are such secrets protected? How are they protected?

Ask questions
When you meet with the seller ask questions and make sure you are satisfied with the answers given. Always ensure that your doubts are addressed and NEVER push them aside.

Location
Where is the business located, is it a good strategic point? Sometimes location may not be important, but depending on the type of business you intend to operate, location could be critical.

Evaluate the seller
Would this person ordinarily be someone you would do business with? Do a credit check on the person.

Lawsuits
Have there been any lawsuits filed against the business, if so what were the outcome? Are there any pending? You don’t want to walk into a liability.

Taxes and expenses
Check to make sure that taxes and other major expenses are paid and are not left for you to undertake. A prudent business will ensure that its taxes and important expenses are paid when due such as sales, corporate income and property taxes.

You could add more checks as you go along but these would uncover a lot of important information. If you are unable to soundly analyse the information, enlist the help of an experienced accountant or businessperson who could assist you in understanding what is happening.

Also, it is advisable to always seek the services of a lawyer before undertaking such a venture.

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Operating a Franchise

Posted on by Julian Gooden
Advantages, disadvantages of franchise

It is quite likely that having decided to start your own business you might consider a franchise. A franchise is basically the sharing of a business idea; you will be buying the right to use the name of an already established business, that is familiar to many people. The person selling the opportunity is known as the franchiser and you will be known as the franchisee. Examples of popular franchises are Kentucky Fried Chicken (KFC) and MacDonald’s. A franchise opportunity will have its pros and cons.

ADVANTAGES

  • You will be acquiring a product that is already tried and tested.
  • You will likely be given help with staff training.
  • You won’t have to worry about stock as the franchiser usually supplies stock.
  • You are given business advice to help you, such as that of location choice, staffing hours and regulations, advertising and promotion.
  • It is easier for you to acquire finance. Banks will feel more secure loaning money to undertake a venture that has already acquired a status in the market place

DISADVANTAGES

  • The franchiser has the real control; you do not have as much autonomy. You probably at some point have patronized or entered a franchise, or maybe quite a few, have you noticed that there is a large similarity in the products offered and also the look of the organization? That is because things are pretty much prescribed for each of these ventures
  • Franchise ventures are usually very expensive and after paying a hefty price to acquire a franchise you will still have to pay a levy on sales or profit to the franchiser
  • You will not have much flexibility since pretty much everything is chosen for you. You must use the franchiser’s name, stock and follow business practices laid down by them

Having said that, franchises can be quite lucrative ventures; most are expensive but depending on your area of interest you might find a franchise to suit your needs.

If you decide to buy a franchise, it is advisable that you seek the advice of an experienced lawyer who is familiar with franchise agreements. Make sure that you understand the terms of the agreement before you sign.