One of the most common ways to grow your business is through a merger or an acquisition. Today on the show we wanted to discuss some of the benefits and risks of taking that route. Mergers and acquisitions are terms that are used interchangeably but they are actually quite different. A merger occurs when two companies decide to combine their businesses into a new entity. An acquisition, on the other hand, takes place when one company buys another outright.

The advantage of using mergers and acquisitions is gaining a firm that has already been operating successfully. You can acquire the structure and market share of that company overnight. That said you need to get advice before heading down that road.

Today we are going to discuss the difference between franchising and licensing. It’s an important distinction that you need to understand while considering expanding your business. This is a really detailed part of the law and you need good advice before proceeding.

The franchise model was developed in the United States and other Western countries to allow entrepreneurs to expand a business by essentially leasing the intellectual property to another operator. The IP and branding remains under the control of the original businessperson while the new business is operated by the franchisee. The Franchising Code of Conduct details how the relationship between the franchisor and franchisee should operate. If you fail to live up to those standards there could penalties. Royalty fees will be paid to the franchisor each month and there are other fees during the start-up phase.

Licensing, meanwhile, allows another businessperson access to your IP and branding. The difference is that the original owner maintain very little control over the new business. If you are going to license your IP to a new business but demand a lot of control over that new business you are actually a franchisee. You can be liable for any disputes in the future. It can be tempting to get around the franchise fees by using a license but that is risky. You can end up paying a lot more in penalties.

As part of our larger discussion about how to effectively expand we wanted talk today about taking your business international. To that end we have invited an expert on how to go global. Cynthia Dearin has led a remarkable life working as an entrepreneur overseas. She is the CEO of the International Business Accelerator and has written the best-selling book Camels, Sheiks and Billionaires. She has worked in the Arab world for many years both as a diplomat and a management consultant.

Cynthia initially worked as a diplomat including a four year stint in Iraq during the worst fighting there between 2006 and 2010. She says that her time there hugely helped her to develop the skills to solve problems under extreme stress. She returned home to her native Australia and worked with the Arab Chamber of Commerce. It was in that period that many foreign companies were trying to expand into the Middle East with little to no success. In 2012 she created Dearin and Associates to help change that. Her goal is to help small businesses to expand into new markets around the world.

The top seven problems you will encounter when growing your business

Cash flow crunch

You really need to be careful about you cash flow when expanding your business. That includes both operating cash flow and financing cash flow. You have to be able to keep your business operating and you need to carefully plan where the money is going to come from.

Spending spree

As you begin to expand your business there is a temptation to go out and buy the biggest and best equipment and locations for that growth. That can lead to major problems when the financing dries up. Be extra careful with your money while growing the business.

Operational clumsiness

When you expand your business any problems you have in your business are going to be multiplied. When you open a new location you have to ensure that the new location communicates effectively with your other offices. If that gets neglected you are going to create additional problems.

Leadership

Any leadership faults that currently exist are going to be exacerbated by expansion. The leadership needs to be as effective as possible well before you plan on growing the business.

Customer service

This is a problem that businesses always run into as they grow. As you grow you have to bring in new people to help and that can alienate existing customers. You have to ensure that your customers are receiving a consistent level of service.

Management disconnect

Your time is going to be filled with the expansion of the business and that is going to leave a lot less time for your staff. You have to ensure that there is a good level of communication with your staff during the expansion or you are going to contend with worker alienation that will affect your productivity.

Human Resources

Whenever you expand the business you are going to have to bring in new people. Making sure you hire the right people is crucial. Proper staff selection and integration with your current employees is going to be a big component of your future success.

All this month we are going to discuss Phase 7 of the Business Legal Lifecycle. Expansion, Franchising and Licensing are the decisions that you have to make as your business grows. Today, we want to focus on how to franchise your business and to license your intellectual property.

Franchising

The whole point of a franchise is selling your systems and branding to another person to operate. A franchise agreement will cover all the details about what you are providing to the franchiser. A key part of the decision about whether or not you want to franchise is time management. Operating a franchise is an entirely separate business from the one you are currently operating. Do you have the time to do that? If you don’t both you current business and your franchise will suffer.

In Australia there is something called the Franchise Code of Conduct. This legislation regulates things like what needs to be disclosed and the expectations of the ongoing relationship. The whole point of the code is to ensure that everyone acts in good faith. The franchiser has to give a disclosure statement before the signing of the agreement. It’s very tempting to fill out the disclosure agreement yourself. That’s very dangerous. Mistakes can lead to legal headaches in the future. If you haven’t provided the right information you could end up in years of litigation. Among the things you are required to disclose include revealing all current and previous franchisees that have been in business with you. You also have to be clear about all payments that will be required of the franchisee. There are standard fees that are outlined in the Franchise Code of Conduct. Another common element of a franchise agreement is the marketing fund. All franchise members can pay into the fund in order to purchase advertising and other marketing services. You also need to be clear about what is going to happen at the end of the franchise agreement. The final thing you need to disclose is all your financial information. You have to provide access to your books so that that the franchisee knows how much the business is making.

Choosing the right franchisee is a critical decision. You don’t want to allow someone access to you business model who is going to foul up your brand. You have to make sure the person you are entering into an agreement with has a good reputation and a solid track record in business. We had a client recently who set up a franchise system in the coffee business. He brought in anyone that wanted to buy the franchise license. The problem was that he wasn’t training and selecting the right people. He eventually amassed something like 50 franchises. Unfortunately he was having massive problems with a number of the franchisees. We had to go through a long process of revamping his franchise process. Once that was done he stopped having all those problems.

Another important part of setting up a franchise is the manual. It’s the instructions for the franchisee about how the business should run. All the details of the business need to be included in the manual. Putting those down on paper is good for the business whether or not you plan on franchising the business. It’s not an easy task and you will need advice along the way. There are services that will write a manual for you but we recommend against that. You know how to run your business – they don’t.

Licensing

There are significant differences between a license agreement and a franchise agreement. A license agreement is much cheaper to setup. It essentially allows someone else to use your intellectual property. The problem is that you have very little control over the business once it’s licensed. You can’t dictate how they use the brand. It’s very tempting because of the lower cost upfront. But it can end up costing you much more in the long run.

Today on Fast Fix Monday we are going to discuss the top three tips for expanding your business. This month we are focussing on the best ways to grow your business in a way that is sustainable. Without the proper

Planning

If you haven’t planned out the expansion you are going to be in trouble. It can mean everything from how the business will operate in a new location to

Fixing problems

Any problems you have now are going to get worse as you expand. If you have cash flow problems now it’s going to be even harder after expansion. You have to solve your current problems now before you can even think about getting bigger.

Staff

You ‘re going to need more employees if you get bigger. Different people means more complications. You need to carefully think about who you are hiring and how they are going to work with your current staff. Communication between your new and old staff will be critical to your success.

Today we start a new feature to the show – The Monthly Legal Updater. We discuss the top ten legal changes that have occurred over the last month.

Can a mobile text be a Will?

The Queensland Supreme Court seems to think so. After a man passed away an unsent text message was found in his mobile phone. The text was intended for the man’s brother. In it he essentially disinherits his estranged wife and leaves the bulk of his assets to his brother. The court found that this was a legal will.

The East Brisbane Resumptions

Residents of Brisbane’s Eastern suburb are well familiar with the nightmare that is the daily commute. Litton Road and Wyhnam Road suffer from horrible bottlenecks during the morning and afternoon commute. The council decided two years ago to expand the roads and that required the purchase of a number of properties to facilitate the expansion. Ten properties still need to be finalized with the council. Construction is slated to begin in 2018.

Bankruptcy and Insolvency changes

The Australian Government passed a law in September which made a small but significant change to the Bankruptcy Act. Prior to the change the director of a company could be liable for the insolvency of his firm in certain situations. The new section allows directors to avoid liability for if they make a good faith effort to right the ship. It’s called a safe harbour provision and it’s quite controversial. The government believes it will incentivize companies to take more risks to prevent bankruptcy. Others feel it will encourage company directors to gamble with creditor’s money.

Plastic bag ban

Residents of Queensland will soon no longer have access to plastic bags at local shops. Starting July 1st, 2018 single use plastic bags will be banned. An astonishing number of those bags end up in landfills each year. This has big implications for local business owners who will now have to come up with alternatives.

Miller Murder

A New Zealand man was convicted last month in the death of 18-year old Australian Cole Miller. Miller died after being punched by 23-year old Armstrong Renata in 2016. Renata only punched Miller once but that was enough to end the young man’s life. He was sentenced to seven years in jail.

Data Breach Laws

In the wake of massive data breach scandals like the Equifax and Ashley Madison breaches, Australian firms are now required to notify their customers if they expose their personal information. The US has had a law like this on the books for 15 years and Australia is just now catching up. The law comes into effect in February of 2018.

ASIC changes for liquidators

The Australian Securities and Investment Commission has introduced some peculiar new regulations for liquidators. The regulations allow liquidators to assign rights to sue. The problem is there is little clarity about how the new rules will work in practice.

Australian politicians booted out

Australia’s strict citizenship laws have ended the political careers of seven high profile MP’s and Senators in recent months. The Australian constitution forbids dual citizens from holding elected office. The row has already claimed the Deputy Prime Minister and a Senator.

Baccarat Cheater

Phil Ivey is one of the most successful professional poker players in the world. Last year he turned his attention to another card game, Baccarat. Ivey won $10 million dollars playing the game at a UK casino. The casino accused Ivey of using a technique called edge-sorting, a form of card counting, and refused to pay him. Ivey sued but last week he lost his case. The court found that what Ivey did was dishonest.

Eminem copyright case

New Zealand’s National Party lost a big court case to American rapper Eminem. The party was accused of using a song in one of their ads that was very similar to the hit song Lose Yourself. The company that owns the rights to Eminem’s music sued and won NZ$600,000 in court.

Today we start Phase 7: Expansion of the Business Legal Lifecycle. Expansion, franchising and licensing is the goal for many business start-ups. We all want to create a profitable and stable company. Once that’s achieved new problems begin to raise their heads. When should you begin to expand the company? What about franchising your business model? It’s those questions we want to address today.

How can I expand?

Everyone wants to expand into a new market or grow their business in some other way. The question is when to do it. We have come across many business owners who want to expand but at not in the right position to do so successfully. You need to have all the systems in place that are able to scale up. When we first expanded our business to two offices we didn’t have the right business software in place and it created a lot of headaches. You have to ask yourself where the bottlenecks are in your business. What is going to slow you down? What is your business plan for the future? Without answers to those questions you are going to run into problems.

Space

Expansion often means increasing your physical footprint. To that end you are going to need new office space. Getting that right can make or break your growth plans. Is the building you’re purchasing correctly zoned for your business? Do you have all of your financing in place? Do you have a plan if you can’t make your mortgage payments? Planning out all the possible scenarios will help you make your physical expansion work smoothly.

Employees

More work means more staff. Who they are and what that looks like is a question you need to put to your lawyers and mentors. Do you need a receptionist in both offices? Or is one enough? You also need to think about your employment policies. You need to ensure that you have a consistent policy in place before expansion about their rights and responsibilities. This becomes even more important if you are planning on franchising your business.

Mergers and Acquisitions

Both of these are the riskier methods of expanding your business. You need your lawyers involved from the start. A hand-shake agreement is not going to work. We have seen on a number of occasions where two friends merged their businesses only to realize that there visions are not compatible. All of those agreements need to be worked out well in advance so there are no surprises.

Equipment

You can expand your business by acquiring new assets to do more work. How are how are you buying that equipment? Most businesses are not going to be able to use cash. That means your lease or mortgage agreements need to maximize your cost-savings. The Personal Property Security Register is also useful to ensure that the equipment you are obtaining doesn’t belong to somebody else.

Today is the last episode of Phase One: Conception. To finish off this phase we wanted to invite Rob and Faye Caughey from Kaibizzen to talk about the importance of clarity and mindset. Rob and Faye have a lot of experience running their own businesses and now work as business coaches. We’ve known them for many years and we think they have a lot to teach our audience. After years in the corporate sector they realized that there were better ways to operate a business. They thing that makes them different from other coaches is that they base their model on athletics. Rob believes that his sporting background as a rugby player has helped to instill the tenacity required to truly succeed. They also have the added experience of actually running a small business. They can empathize with people. They have lived through the bad experiences and the good ones.

They’ve divided their business into six specializations. Their clients don’t just get one coach, they get a team of coaches to help them to achieve their dreams.

Clarity Business owners need to have clarity of vision, clarity of purpose and clarity of strategy. Lack of clarity is one of the prime reasons why businesses don’t succeed. You need to have a destination you want to arrive at and a reason for why you are getting there. There is a huge difference between being a lawyer and running a law firm. Most people start a business without a clear idea of why they are doing it. It will save you a lot of time and energy if you start with a clear vision.

Growth Customer care and client retention is the key to ensuring sustained growth for your business. The best way to grow your business is to monetize your current clients first.

Wealth You have to totally understand your business numbers, both financial and non-financial. Improving your cash position will help you to improve profitability.

Health The efficiency and operations of the business.

Team People management and people leadership.

Performance What is holding you company from really achieving it’s potential?

Today on Fast Fix Monday we are going to talk about a business coach. We’ve touched on the importance of a business coach in previous episodes. He or she should be part of your initial team in the first phase of your business. Doubtless, you are great at your chosen profession. But you don’t know what you don’t know. The biggest problem we see with our clients is that they think they know what’s going on when they don’t. Business is a lonely place and you need someone else to bounce your ideas off of. Mindset and clarity are a critical part of your future success a business coach can help provide that. The most important advice we can give is to make sure that both you and the business coach are on the same page. Take the advice you are given.