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Dec 18 / New Year

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Inside this Edition of Dec 18 / New Year 05 News Bites 12 Locating your business: Help me find a great site for my business! By Peter Buckingham 16 Buyer Help: Your search is over? 6 key things By Rob Semmel

FRANCHISES - WHERE TO FROM HERE? By Paul Robinson

[08-11]

20 Business Technology: Smarter Video Surveillance By Robert Marsden 24 Finance: The Role of Responsible Lending By James Scurr

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w w w . f r a n c h i s e b u y e r . c o m . a u Published by

FRANCHISE MEDIA GROUP PTY LTD Editor GLENN WALFORD glenn@franchisebuyer.com.au Digital & Technology Strategy ROBB SNELL Writer PAUL ROBINSON

Art Director KATHERINE BERCASIO

Contributors PETER BUCKINGHAM ROBERT MARSDEN JAMES SCURR ROB SEMMEL

Published by Published by Franchise Media Group Pty Ltd Opinions expressed in Franchise Buyer are not necessarily those of Franchise Buyer or the Publisher. Persons entering into a franchise agreement are strongly urged to seek their own independent advice. All material is copyright and reproduction in whole or in part is not allowable unless specific permission from the Editor is provided.

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News Bites

PACK & SEND adds to its suite of technology enabled logistic solutions.

o build further on its existing status as a significant player in the movement of parcels for Australian SME’s, PACK & SEND has recently launched its eSender solution. Greg Prussia, Network Growth Manager explains that “The great thing about this product is that it provides a one-stop shipping solution to help businesses of all sizes to take control of their deliveries following shopping cart purchases from their websites. But, it also provides our existing and new franchise partners with another form of income to their businesses – a passive one at that.” The eSender platform solution “…integrates into leading eCommerce shopping platforms like Magento, Shopify, WooCommerce and eBay. Essentially, businesses can consolidate the services of PACK & SEND’s world’s top carriers into a single shopping cart shipping solution, giving a

seamless offer of the best rates and more delivery options.” “We like the phrase we use a lot in our business – No Limit Logistics, and that is the way we approach what we do. We don’t see limits when it comes to better ways to service the market in providing logistics solutions. We’re investing heavily in technology to exceed the expectations of our customers, and at the same time adding value to each franchise partners business. The roll out of eSender is another example of that, and we’re pleased to see it come to life.” The launch of eSender coincides with the launch of Despatch Manager, a technology platform that enables the creation of consignments, labels and manifest in bulk from a customer’s premises. The driver for this according to PACK & SEND is to allow SME’s to leverage off PACK & SEND’s buying power and take control

of their business’ shipping and logistics needs. “Despatch Manager means that a customer (business) can send domestic or international and be their single interface for multiple carriers and even consolidate payment into one invoice. Our focus has been to simplify logistics, control costs and save time.” Says Greg Prussia. “The challenge has been for businesses with a logistics requirement, is that it mostly means multiple carriers to get the job done for their customers. Multiple carriers also means multiple booking platforms, invoices, manifests and account managers, all adding complexity.” “Put simply, Despatch Manager gives business customers access to a wide selection of PACK & SEND’s world class carriers at competitive rates with one account and a single invoice for all shipments.”n

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News Bites

10 things to do now to take control of your 2019 taxes With the new year only just ticking over, thinking about 2019 tax already may be the last thing you want to do. But, in advice issued by Chartered Accountants Australia and New Zealand (CA ANZ), mid-year tax planning is essential. “Taxes are not just an annual event,” said Michael Croker, CA ANZ Australian Tax Leader. “Some Australians stress out about tax, but it doesn’t have to be that way. “Preparing for your 2019 taxes throughout the year can not only make the tax return process smoother, but it may also help to maximise your return”. Here’s 10 things you can do now to take control of your 2019 taxes:

Look back at last year’s return. Hopefully by now you’ve already filed your 2018 return. If you haven’t, now’s the time to get cracking! However, if you’ve already done this year’s taxes, take some time to reflect back and think about the areas that were particularly demanding or complex for you. Now is the time to plan, so that your next tax return is stress-free.

Set up a system. Much like skinning a cat – there’s more than one way to organise your tax records. Don’t wait until the end of June to start organising your important tax documents and receipts. Have a system to keep everything in one place.

Adjust your PAYG withholding or hang out for a tax refund? Why is it important? The amount of PAYG tax withheld each pay day determines whether you’ll get a refund, break-even, or owe tax when it comes to filing your tax return. Whether you want your tax return to act as an annual savings plan, or prefer to break-even, the goal is to eliminate any surprises at tax time.

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News Bites

Retain your receipts. If you own a business or plan to claim taxable deductions, it is imperative you hold onto your receipts. Whilst receipts are not needed when filing your tax return, they are usually required should the Australian Tax Office (ATO) decide to audit your tax return. There are helpful smartphone apps to help keep track of your outgoings, but when it comes to filing, you should speak to your local Chartered Accountant about what you can and can’t claim, as it varies person to person, and year to year. This is especially true of big-ticket deduction claims, like car expenses, travel and self-education.

Chart your charitable contributions. Fortunately, doing good for others has the benefit of giving your tax refund a boost. Keep records of all tax-deductible gifts and contributions you make over the year.

Sort your super savings. Employers pay 9.5% of employee earnings into super, but are you thinking about contributing more for your retirement yet? If you have some funds to spare, extra contributions can be tax effective. Learn more about your super. Log into your super fund account, check your balance, and know what’s going on including what option(s) you have invested in. Also make sure all your super accounts are consolidated into one as having multiple accounts means paying multiple fees, so take the time to roll your accounts into one if that makes things easier and less costly for you.

Check for new tax rules and policies. Tax and super rules change constantly so don’t wait till tax time 2019 to check-in with your accountant for an update.

There may have been tax breaks you have taken advantage of in the past that are no longer applicable, or there may be tax legislation changes that have come into effect impacting how much tax you will owe. With a Federal Election coming in 2019, think about the tax policies of the major parties and the impact on your finances. It pays to know.

Don’t make financial decisions based solely on potential tax breaks The ATO offers plenty of deductions that have the potential to reduce your tax liability. But if you’re spending the cash just to get a tax break, you may end up worse off.

Plan for the unexpected. Nobody likes receiving an unwanted tax or super top-up tax bill – let alone an unexpected one. The ATO expects you to manage your cashflow and pay your tax when due. Your local Chartered Accountant can help you anticipate, and plan for, your personal and business tax requirements.

Use a Chartered Accountant. When it comes to managing your finances, you want to be sure that your money is being cared for in the best, most professional way possible. While many can technically call themselves an ‘accountant’, how do you know you’re choosing a good one? Chartered Accountants must meet educational, ethical and professional standards. The bar is set high, so choose a CA and be in safe hands. www.charteredaccountantsanz.com

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COVER STORY

FRANCHISES WHERE TO FROM HERE? The franchise business model has a had a very rough 2018. Sector legend, Len Ferguson reckons it needs even more shaking up in order to move forward. By Paul Robinson

Len Ferguson 8

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ranchising legend Len Ferguson reckons the industry needs a major shake-up if it’s going to survive current criticisms and the impact of online business. The Finn Group is Australia’s largest network of business and franchise brokers with offices in all major cities and regional areas. When co-founders Len Ferguson and Steve Finn decided to set up the business with sales agencies in Brisbane and Perth in 2004, their background was in franchise recruitment. “The franchise market in the scale we now know it, was just emerging,” recalls managing director Len Ferguson. “Boost Juice wasn’t even around, although we did sell a lot of franchises when they started. We franchised our business in 2009 to become Finn Franchise Brokers. We’re a national agency now, with franchisees all over Australia, selling hundreds of businesses a year and

dealing with thousands of potential buyers a month. After 10 years as specialised franchise brokers, in 2013, the pair expanded into general business, eventually franchising that as well. “Franchising only makes up 10 per cent of all businesses in Australia,” says Len. “So general business was obviously a market we wanted to take advantage of and it’s now our biggest. But franchising still punches above its weight as regards how many sales are made per enquiry.” As the major franchise-focused broker network in Australia, the group works closely with franchise head offices to grow their networks, and with individual franchise owners who want to sell. After some 20 years in the business, there isn’t much that Len doesn’t know about the game. “I’ve probably seen it all in this business,” says Len. “I was a franchisee [Kleenmaid] initially and I went through the same processes I see now with our franchisees. Then moving into being a franchisor, and selling franchises in between that space. It’s changing a bit now in that there are a lot of good service-based franchise businesses — like what we do now. We offer professional services and you don’t really need to have experience in that to do what we do — you just need a good business sense and sales skills.” Len is concerned about the increasing instances of franchisee dissatisfaction and conflict with franchisors he has witnessed in recent

COVER STORY

years. “As a broker, I’ve seen the dramas that can occur between franchisor and franchisee, how emotion drives a lot of that,” he says. “As a franchisor, I’ve had it happen to me. It’s pretty endemic in the industry. There is generally angst between franchisees and franchisors and I’m not sure why that is because ideally they should both be working towards common goals.” Recognising things need to change within the industry, The Finn Group has rethought its own franchisor business model to offer specialised services such as financial planning and lending solutions on a fee-for-service basis. “We had to evolve our business,” says Len. “We reduced our support staff and moved to a ‘user pays’ model. We

The past couple of years have seen major upheavals in the industry, culminating in the senate inquiry into the operation and effectiveness of the Franchising Code of Conduct, which Len reckons may well cause more problems than it solves.

had franchisees paying us $100,000 a year in franchise fees and I hardly ever talked to them. They’d developed their business skills and grown their business to the point they didn’t need what we were offering in support. So we needed to develop a fairer model. We had staff and resources we had to pay for as a franchisor that the majority of our franchisees weren’t using. Now the franchisee pays to access the tools we offer — generally a lot less than they paid in the percentage — and only interacts when they need us. It put more money back into the bottom line of our franchisees.” The past couple of years have seen major upheavals in the industry, culminating in the senate inquiry into the operation and effectiveness of the

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COVER STORY

Franchising Code of Conduct, which Len reckons may well cause more problems than it solves. “We’re approaching a new environment now, with changes in government regulations, where unfortunately we’re focusing on who to blame,” says Len. “To give you an example, I did an interview where the journalist said franchisors were to blame for franchisees’ high costs because they weren’t negotiating good enough leases. But when the franchisor is negotiating a lease and the shopping centre won’t budge on the rent, what’s the choice? If the franchisor says ‘’we’re out of here, the franchisee loses their investment. So the franchisor makes the best deal they can to get the franchisee in there.” The Retail Food Group (RFG) was a major target of the senate inquiry and Len says that while much of 10

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the criticism of that franchisor was justified, the fallout will actually affect its franchisees substantially. “RFG had about 3000 franchisees and 150–200 of them were being treated badly. But 2000-plus RFG franchises were good. After all the bad press, RFG has been dragged through the mud and even if you own a good RFG business, you can’t actually sell it. Any equity you had in that business has been destroyed. The media has done more damage to RFG franchisees than RFG ever did.” For Len, this is symptomatic of the conflict he sees permeating the industry. “Conflict solves nothing. I’ve seen it happen where the franchisee sinks absolutely everything into the business and when things go wrong, panic sets in. They attack the franchisor, asking ‘what are you doing for me?’ What they should be doing is trying to build up goodwill with the

franchisor to get help. When they attack the franchisor, the franchisor often retaliates in kind, which only exaggerates the problem.” He says that frequently a lack of business expertise on the part of the franchisee is the problem. “A lot of the time, you’re dealing with people who have no real business sense. They’re first-time operators who haven’t gone through the trials and tribulations of owning a business. Through the Franchise Council I work with a lot of franchisors. Generally, they want their franchisees to succeed and grow. But we see franchisees banding together against the franchisor, feeling like they’ve got a common target. I don’t know of any franchisor in Australia that hasn’t experienced that.” Taking ownership of a franchise should be a lot more than just picking up a key to the shop. “Responsible franchising is a good term for

COVER STORY it, because that means keeping expectations realistic,” says Len. “Franchisees often go into a business with the wrong expectations, thinking they’ll buy the business one week and be driving a BMW the next. Owning a business is bloody hard work, whether you own a franchise or not. The franchise gives you a leg up, but it doesn’t mean you don’t have to put in the hard work.” Conceding that some franchisors also have to pull their heads in a bit and not over-extend their brand by trying to squeeze too much juice from the orange, Len flags the need for responsible marketing and professional impact studies. The unsustainability of the current franchising model is something Len feels should be the subject of an urgent and ongoing conversation within the industry. “I’ve come to the conclusion the franchise model is pretty much unsustainable in its current format. There’s not enough money in it now in Australia. A lot of businesses don’t generate more than $10,000–$15,000 a week. When you’re talking an average $150,000 occupancy cost, then wages and cost of goods on top of that, you’ve got retail businesses turning over much the same as they were 20 years ago. The person running the place, the franchisee, is not making as much money as he pays his staff. We’ve got franchisees not paying themselves anything — they’ve got nothing left after paying their franchise fees. But it’s a really crowded market and people are scared they’ll lose business if they raise prices.” Despite the risk and because many franchises are at critical solvency levels, Len advocates raising prices. “We’ve got to have price rises or franchisors have got to find a different model. Maybe franchisors should learn to live on less and provide reduced services to their franchisees, but I’m not sure the majority of them are ready

for that because it would be such a big change. From my perspective it’s common sense. The franchise model has been the same for quite some time. In good times, when prices are in sync with inflation, it’s OK, but right now we’ve got franchisees earning less than $50,000 a year. It’s a very thin margin and it doesn’t take much negative impact for those businesses to start really hurting. It comes down to sustainable business — for franchisee and franchisor — and that probably means charging higher prices and not being so fearful of losing customers that you keep prices low while everything else climbs through the roof.” The banking Royal Commission has also had a knock-on effect in the franchising industry, restricting finance availability to potential small business owners and franchisees. “Finance is the life blood of franchising — to grow your network. But as a broker trying to sell businesses

“A lot of the time, you’re dealing with people who have no real business sense. They’re first-time operators who haven’t gone through the trials and tribulations of owning a business. now, it’s virtually impossible to get finance,” says Len. I was at a conference in Sydney run by the Australian Small Business Association where they said the situation is critical.” The five-year loan terms “that banks love imposing” can also be a

two-edged sword. “Five-year terms can be a noose around the necks of franchisees, the thing that drives them to the wall. Unscrupulous franchisors will make them pay out their contract. It sends them bankrupt. A franchisor should never want to send a franchisee bankrupt — and vice versa.” With the advent of low-overhead online businesses, restricted finance and tightened regulations under the Protecting Vulnerable Workers Act, Len is dubious about the immediate future for franchising. “There will be a bit of a slump over the next couple of years. With all the new regulations, many franchisors have to hire new staff to meet obligations. There’s not enough money in the model to do that well. We need to re-evaluate and we need responsible franchising laws. We [Finn Group] used to get 2000-3000 buyers a month coming to us. That’s basically halved. There are less buyers looking to get into business, not just a franchise but small business ownership in general, less to take the risk. A lot of people don’t see franchising as less risky now — they see it as just as risky as normal business. The ripple effects are pronounced. Government will implement changes in a kneejerk reaction to the senate inquiry. Eventually, they’ll realise it doesn’t work and wind things back. But in the interim, franchisors won’t invest so brands won’t grow. I’ve spoken to a lot of people in the industry who say they’re getting out. They don’t want to do franchising any more because they can see there will be a responsibility shift back to the franchisor. Under the Protecting Vulnerable Workers Act, if the franchisee does the wrong thing, I’m now responsible as the franchisor. If I’m responsible, why would I franchise? Why wouldn’t I just change the way I do business? Franchising must think about building a model to appeal to the future. That’s the real challenge for franchising — it needs to evolve.” n franchisebuyer.com.au

LOCATING YOUR BUSINESS

HELP ME FIND A GREAT SITE FOR MY BUSINESS! What are you looking for in a potential site for your business? How do you tell all the leasing agents and developers what you are looking for? In many cases many donâ&#x20AC;&#x2122;t actually know what they want, so the bad options just keep on coming! By Peter Buckingham

s a potential Franchisee, either in a greenfield (new) location, or purchasing an existing business, location will be one of the most important factors in the long term success of your new business venture.

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In my past life as a Network Development Manager with a major oil company, it became obvious to me that if you did not clearly explain what you were looking for, you wasted a great deal of your time looking at rubbish locations. To try and filter the good location opportunities from the bad, I developed a two-page Property

Guideline of my requirements, that I would happily send to all parties, that included leasing agents, developers, land owners, who indicated they may have a potential site for us. The Property Guideline was a mixture of information to help filter the sites, yet not too much to totally give away our strategic thinking.

LOCATING YOUR BUSINESS Accompanying the Property Guideline use to go a small Checkchart, and the proponent was invited to read the Property Guideline, and if they still felt the block of land was of interest to us, fill in the Checkchart and send it in. This could be done in minutes. The process was always done to try and work with agents and developers, and if you found they repeatedly chose to ignore the guidelines, then you started to think you were wasting your time looking at what they had to offer. We would be offered about 3 or 4 “opportunities” a week. The oil industry works to some reasonably clear parameters, and it was just a matter of filtering real opportunities from time wasting ones. Our Property Guideline use to address the following types of issues,

that you could also adapt to create your own: • SIZE – That we were looking for mid blocks of around 80 m long X 40 m wide approx. If a corner block, then around 60 m X 60 m. • PHYSICAL CHARACTERISTICS – our preference was a flat block, or if possible slightly above the road rather than below. We would prefer to be on a flat section or slightly uphill section of the road, definitely not a steep decline. • SIDE OF ROAD – we would prefer to be on the “going home” side of the road, or the “neutral direction. Inbound was not so good. • COMPETITION – we obviously did not want to be on the same traffic flow as any of our other sites. Even better if few or no other

competitors were servicing the area. • ROAD TYPE – Traffic flow was important, and the more, the better in general. • VISIBILITY – we would want good visibility for our signage. The best was on the outside of a right hand curve in a road, so our signage was directly ahead of the traffic. • ACCESS – you had to be able to come in and out easily. No much good if you could not come in off the main road. • DEMOGRAPHICS – in Australia probably the highest fuel users are medium income people, living in outer suburbs of the capital cities. • SUBURBS OR AREAS – we would nominate suburbs or specific areas we were actively seeking new sites in, and not be afraid to mention

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LOCATING YOUR BUSINESS areas we were not looking at, either because we were well serviced in the area, or we knew the land cost would be prohibitive. Once this was all formed in the Property Guideline, it was willingly sent to all agents, developers and other interested parties we knew. The accompanying Checkchart allowed them to “tick the boxes” and if they felt they had something along the lines of what we were seeking, we would then start to arrange meetings and open discussions. The Property Guideline can assist the network development process in the first step in filtering the opportunity, before time is wasted on full analysis. It is all about improving the quality of what is offered to you for consideration. The Network Development Process as I see it as a flowchart is in most cases as follows.

LOCATION IS SUGGESTED FROM THE FIELD OR A POTENTIAL AGENT

BASIC INTERNAL AGREEMENT IS SOUGHT TO EVALUATE

REJECTED

INTERNAL INFORMATION GATHERED

SALES PREDICTION MODELS OR TOOLS APPLIED

FINAL MANAGEMENT DECISION TO PROCEED OR NOT

APPROVED

Peter Buckingham is the Managing Director of Spectrum Analysis Australia Pty Ltd, a Geodemographic and statistical consultancy. Peter is the Go To person as to where to open new stores in Australia. Peter is both a Certified Franchise Executive (CFE) and a Certified Management Consultant (CMC). To contact Peter email peterb@ spectrumanalysis.com.au or visit www.spectrumanalysis.com.au

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BUYER HELP

YOUR SEARCH IS OVER?

IF YOU THINK YOU’VE FOUND THE RIGHT BUSINESS, BE VIGILANT ON THESE By Rob Semmel

any businesses advertised are described as outstanding investments, rare opportunities, have excellent returns, potential to grow, operating under management, no experience necessary, high growth business or will be sold soon so get in quick. These phrases and thousands of others describe a business on the market to be sold. Each of the above have hidden meanings and the challenge is to find out the real facts about the business 16

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without wasting too much of your valuable time. Here are six (6) key things to look closely at when investigating a business to buy.

The WIWO sale – must sell

Walk In Walk Out. Typically we would tell our clients to quickly walk out as there is a good chance this business is on its last legs. In most cases what WIWO means is that the vendor is not going to provide you any details on the business, apart from maybe the lease. A

KEY

THINGS WIWO typically is a cash business that will not show a profit and is looking for a buyer that has cash, no borrowings and is priced for a quick sale. There are few conditions so Caveat Emptor – Buyer Beware. When dealing with a business broker selling a business advertised as a WIWO, ensure you don’t lose the envelope that they have provided with the business details because it’s unlikely you will have any more information to decide whether this business is suitable to invest your hard earned money.

BUYER HELP security and income. Be careful of any business advertised as operated under management or can be operated under management. In many cases where advertised under management, investigate how often the owner is at the business and the role they undertake. Under Management may just mean the owner does not work twenty four hours a day any more in the business just eight. Where cash is involved, the owner needs to be involved. Purchasing a business to be operated under management without your involvement is a risk, and you need to be totally satisfied that systems and procedures are in place along with stringent internal controls before you let go of the reins.

The SHORT LEASE the disappearing act

A major issue with any business purchase is the lease. Whilst rent and outgoings are obvious costs in the lease, a major consideration is the term or length of the lease and options. Most shopping centres will only negotiate any extended lease within the last six months of the lease term, so there may be uncertainty as to obtaining a

new lease. There are so many hardship stories of lessees not been granted new leases and having to close shop or be relocated somewhere else in a shopping centre which may not be an ideal location. In most cases, as part of negotiations, ensure you address the lease and prepare an offer where possible with a lease extension as a condition of the offer. Let the vendor or business broker work on your behalf.

RENT â&#x20AC;&#x201C; keeping you awake at night

In many shopping centres where businesses and particularly franchises are for sale, have a close look at the lease payments and outgoings. Many of these businesses have a high volume of sales and require significant transaction counts on low margin items to pay the rent. If rent and outgoings exceed 10% of turnover, there is a significant ongoing financial commitment. The business broker wonâ&#x20AC;&#x2122;t tell you but the main motivation of many shopping centre business sales are motivated by the vendor wanting to be released from their lease commitment. Look closely at the Security Deposit

The UNDER MANAGEMENT business â&#x20AC;&#x201C; maybe too good to be true Under management is a term loosely thrown around to attract passive investors. Passive investors are keen on businesses that operate automatically with supposedly minimal human intervention such as a coin laundry, vending machine operations or automated car washes. Having a day to day job and a passive investment appears to provide a balance of franchisebuyer.com.au

BUYER HELP may end up wasting you so much time and effort as you continually seek information that is not forthcoming. We steer clients away from businesses that do not have the information ready and available on request so an informed decision to purchase can be made in a timely manner.

PROFIT – Dig deep to find the facts

or Bank Guarantee to be held which can be from three to six month’s rent. Funds tied up over the length of the lease.

The BUSINESS PROFILE – No profile then beware Many business brokers prepare a Business Profile or Information Memorandum on the business for sale. Firstly, if a business broker has prepared a business profile then the broker has done an excellent job and saved you time and money. The business profile should provide a summary of the business and include the business financials, including sales history, a copy of the lease (where applicable), Profit and Loss Statement and comparable year on year results, staffing requirements, list of plant and

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equipment, location details, asking price and a general business overview. If a franchise, then franchise details including payments and terms and franchisor costs should be highlighted within the business report. Not all business brokers or businesses for sale have a business profile prepared. Beware, as these businesses

Trying to work out the true profit of a business can be a challenge in itself. Whilst most business incur personal expenditure in the business with a view to minimising their tax obligation, when the time comes to sell, these expenses are typically ‘added-back’ to reflect the ‘true profit’. Add-Backs need to be addressed when determining the valuation of the business but not necessarily reflect the purchase price. Add Backs may include but not limited to the owners salary, motor vehicle expenses, depreciation, and interest on borrowings. Remember, if you are purchasing the business you will also incur these costs and this should be reflected in your purchase price. The key takeaway here is for you to invest in finding the true profit of the business, because that is the bottom line of purchasing a profitable business… n

Rob Semmel is General Manager of Business Buyers Advocacy Australia. An agency exclusively representing the business buyer to find the right business on the right terms at the right price. As a CPA, licensed agent and Business Buyers Advocate, Rob and his team can help buyers navigate the murky waters of the business search. To contact Rob email; rob@ businessbuyersadvocacy.com.au or visit www. businessbuyersadvocacy.com.au

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BUSINESS TECHNOLOGY

SMARTER VIDEO SURVEILLANCE – SO MUCH MORE THAN JUST SECURITY FOR A BUSINESS. I bet you had no idea just what extra capability the right security cameras can give to your business – way beyond security. By Robert Marsden

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n the retail industry, video surveillance usually forms the basis of a business’ security system. Reducing shrinkage (theft) and providing evidence in the event of theft, have traditionally been the main motivations for installing cameras. According to The Sensormatic Global Shrink Index 2018 report , $99.56 USD Billion is the price tag of annual retail sales losses

due to shrinkage globally. Of this staggering amount, 34.34% is attributed to shoplifting and organised crime. Whilst traditional CCTV has now rapidly evolved into HD IP Video Surveillance systems with the cost of price per pixel plummeting, Video Analytics based surveillance goes beyond security only applications and will be a key area of investment for retailers looking to invest wisely

BUSINESS TECHNOLOGY within their loss prevention budgets. Video analytics allows a retailer to substantially improve their store levels of security as well as offering clear business advantages. Video analytics are usually softwarebased systems running either directly at the edge (camera) or at the server or workstation level that use ‘metadata’ to add a sense of understanding and give useful meaning and structure to captured video footage. This ‘metadata’ can be used to classify objects within the captured video such as people, cars, the presence of or disappearance of objects as well as sudden or unusual behaviour from any given scene. In essence, the Video Surveillance system as a whole becomes ‘smart’, enabling advanced combinations or rules or triggers to be included which can immediately alert operational staff or guards to real-time security threats as

well as significantly cut down the time record for a post-event investigation. Modern surveillance systems generate a whole host of useful business data allowing retailers to make smarter decisions, they can also significantly reduce operating costs and network strain with the ability for entire scenes to be analysed and therefore only needing to store or transport across the network the areas of importance or change. Here are some common examples of how video analytics can be implemented throughout your retail outlet.

Entry & Exit Whilst using the same cameras to secure entry and exit points to their shop, retailers can also gather business statistics like people in and out counts, as well as the direction of movement within the store to give

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BUSINESS TECHNOLOGY more accurate data which can both aid in the optimisation of endcap pricing and product positioning.

Unusual Motion Alerts The unusual motion of running through an area can be alerted instantly to an appropriate person, or the entry and exit of an unauthorised area such as an emergency exit. Beyond security applications, the blocking of an emergency exit being detected is a great example of the safety benefits also now possible via intelligent video analytics based surveillance system.

Automated Queue Management Building queues can be recognised quicker and appropriate measures activated such as the automatic announcement for another checkout lane to be opened over a public address system all without human intervention and at the same time giving management reportable data of how many times this type of occurrence took place.

Facial Recognition Appearance-based search technology and facial recognition adoption can dramatically reduce occurrences of ‘Sweethearting’ within retail stores (staff allowing friends and family to steal goods by not transacting fully at point of sale), and be identified and compelling HD evidence compiled easily.

Persons Tracking Missing persons or persons of interest in identifying clothing colours can be tracked across multiple cameras or even followed automatically within a few clicks of a mouse. Smarter integration with modern point of sale systems and scale of both these to linked multi-site operations is now common and offer great insights into multi-site operations. All the above examples are now being offered with less complexity also for operators or guards. No more are giant walls of surveillance screens needed as event-driven data is able to make its way to alert the appropriate people at the appropriate time. Dramatically cutting down on missed events from guard fatigue and too much motion going on screens at the same time. Whilst this technology is exciting and many basic video analytics functions are now becoming standard within most quality systems, some vendors take vastly different approaches to how they implement this type of technology. This includes varying performance in system ability to perform video analytics at the network edge

independently of the chosen NVR (network video recorder) solution or their amount of GPU power needed at the client workstation level to perform appropriate searches. With many vendors more interested in merely selling cameras and not an actual ‘solution’, it is crucial that retailers understand fully the key areas that they would like to address or gain advantages from such technology, and marry these up to the capabilities of the chosen system and not ‘promised’ future capabilities. Whilst there is always great benefit in standardising a solution with one vendor, at the moment in the industry, I’m yet to see one vendor cover all scenarios well. My personal preference is to utilise the power of a leading ‘open’ based video surveillance platform. One, that can allow the integration of the best cameras including those that can run at the ‘network edge’ utilising Video Analytics from multiple vendors. Additionally, allowing for the best options from 3rd parties that can be ‘plugged in’ to give the ultimate Surveillance System that goes beyond security is also best practice in my view. n

Robert Marsden is the founder of Addictive Technology Solutions,a one-stop-shop for business technology solutions. Addictive works with businesses (franchises) from start-up, all the way through to enterprise level, on a broad range of technology uses, implementation and ongoing IT management support. “Stopping the finger pointing by multiple suppliers in technology in business” is the reason Addictive exists.

MAGAZINE

NOVEMBER 2018 EDITION

Do you need insight or assistance in your franchise with? 1. BUSINESS IT 2. COMMERCIAL SECURITY 3. RETAIL TECHNOLOGY 4. DIGITAL TRANSFORMATION

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FINANCE

THE ROLE OF RESPONSIBLE LENDING Yes, everyone wants finance approved for their business dream – but at what cost? By James Scurr

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s alternative lenders rise in popularity, the options available to SMEs looking for finance have multiplied, filling the gap left by the bank’s tightened lending standards. Increased competition in the sector has led lenders to seek more efficient

processes to provide funds to their clients in order to gain a competitive edge. However despite this rapid growth, it is important that responsible lending behaviour underpins the actions of the industry to ensure its future. Martin North, Director of Digital Finance Analytics has said ‘Irresponsible lending is endemic in

FINANCE Australia’. ASIC are already working to address the issue, taking on a systematic approach to reduce the number of non-compliant lenders failing to meet the responsible lending requirements over the past 12 months. Many believe that the damage has already been done, through the heavy use of benchmarking tools within the banking industry, which don’t adequately assess a borrower’s unique position. However in the aftermath of the Banking Royal Commission, the focus has turned to the offerings from non-bank lenders. Alternative and specialist finance providers have seen a rise in adoption rates as consumers’ confidence in traditional lenders fades. As a result, the lending practices of this portion of the industry have been put in the spotlight, and the outcome is a positive reflection of their diligence to upholding responsible lending guidelines. The alternative finance market boasts a healthy level of competition, and as a result its offerings to Australian businesses and consumers are of a high standard. Not only do alternative lenders often provide a simpler application process and faster approvals, but their high levels of transparency drive more responsible lending behaviour. The topic of responsible lending has been at the forefront of the finance industry for many years. As demand for better access to capital for SMEs is increasing, many within the industry have acknowledged

the importance of balancing this demand with responsible lending practices. However, the question has been raised, does the burden of responsible lending fall solely on the finance provider, or does the borrower play a role as well? Public perception of irresponsible lending stems from the view that financial institutions are taking action to maximise their revenue, even if that involves reckless lending. This is further supported by data that shows 75% of consumers do not trust bankers to tell the truth, reflecting a long-held mistrust of the finance industry and the banking providers within it. It is important to consider that for responsible lending to be effective, both the lender and the borrower must practice transparency and honesty. A recent survey found that one-in-three people admitted to making false claims on loan applications, which means that lenders are making decisions based on inaccurate data. Such behaviour ultimately results in what could be a poor financial decision for both parties.

There is hope that the shift away from the strict lending standards of banks to the more flexible offerings of alternative lenders will encourage more honesty in finance applications. Many borrowers, SMEs in particular, struggle to meet the requirements laid out by the big banks, resulting in inaccurate applications due to fear of facing rejection. However, overall the burden does fall onto the lender to follow responsible lending guidelines. This involves making reasonable inquiries about the borrower’s financial situation, requirements and objectives, taking reasonable steps to verify this information and make an assessment about whether the contract they are providing is suitable for that borrower and their circumstances. As Australia’s finance landscape continues to evolve as new forms of finance become available, responsible lending will remain at the cornerstone of any successful lending business and helps ensure the long-term sustainability of the industry as a whole. n

James Scurr is the Founder and Managing Director of Cashflow It, a specialist equipment finance company and the only equipmentfunder focused solely on the Australian franchise industry. He has almost 20 years’ experience in the franchise industry having spent time as a successful multi-unit franchisee for campanies, including Boost Juice Bars. James has extensive franchising and small business experience and has an acute understanding of franchisees’ requirements. Phone: 1300 659 676 Email: james@cashflowit.com.au Web: www.cashflowit.com.au

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