Could This Simple Mistake Cost You Your Business?

closed-for-business

Imagine this.

You’ve worked hard to build up a solid base of clients in your hairdressing or beauty salon business.

It hasn’t been easy, but you began to see the fruits of your hard work, long hours, and commitment pay off around 12 months ago.

In fact, it got so busy that you had to take on another hairdresser and, after fielding applications and interviews, you took on Nigel 9 months ago.

Nigel seemed to be the perfect person for the job; he was originally from the area and had spent the last 5 years in Dublin working in one of the country’s top salons gaining valuable experience.

You agreed the main parts of his employment contract-his salary and working hours-and things have gone surprisingly smoothly. You didn’t give him a written contract because you were both happy enough and the real meat of the agreement was how much he would be paid and how many hours per week he would work, and you were agreed on this.

You noticed that he got on great with all your clients and they really liked him.

Last weekend, though, you heard some disturbing news: you were told Nigel was going to set up his own salon on the Main Street in your town. You didn’t believe it at first, but couldn’t help worrying about it because there was a nagging concern in the back of your head.

If it was true, it would not be hard to imagine pulling a lot of your clients with him.

Then you notice a friend of his wishing him well on his new venture on his Facebook page.  You can’t wait any longer and you confront Nigel and put the disturbing rumours to him.

Nigel confirms your worst fears and gives you a month’s notice.

You ring a solicitor with your questions:

  1. Can you dismiss him immediately?
  2. Do you have to give him notice? If so, how much?
  3. Will he have a case for unfair dismissal?
  4. Do you have to pay him if you terminate his employment today?
  5. Can he bring your clients with him?

You’re told that you can dismiss him and, while he is entitled to one week’s notice, he does not have the required 12 months’ service to bring a claim for unfair dismissal.

But you now quickly realise that the most serious aspect of this whole affair is Nigel setting up his new competing business on Main Street, and the danger of you losing a lot of your clients-clients you had spent years acquiring.

And the most stomach churning part of the whole affair?

You now know that if you had a written contract in place from the start of Nigel’s employment you could have protected yourself and your business with a non-compete clause.

This non-compete covenant may have only lasted for 12 months after Nigel left, and it may only apply to a limited geographical area, for example your town or County, but it would have been a huge help, wouldn’t it?

Because if Nigel had to click his heels and wait for 12 months before starting on Main Street maybe he would thought twice about quitting now; and if he couldn’t set up in your town maybe he would have started his business far enough away from you that it would have no impact on your existing clients.

The sad thing is you will never know now because there is no non-compete clause, because there is no contract.

There are plenty of risks involved in running your own business-some avoidable, some unavoidable.

Putting a written contract in place for all your employees is not expensive, and a well drafted one specifically for your needs might even help save your business.

Learn more about contracts of employment here.

The Death of the Newsagent: Lessons for Retailers

There’s nowhere on the main street in Kinnegad to buy a pint of milk or a newspaper now, you know.

death of newsagency ireland

Not since “Flemings”, the traditional “newsagents”, closed its doors a few months ago.

There was no big announcement, no social media campaign to keep it open.

Nada.

The doors just weren’t opened the next morning.

And within a fortnight the long established newsagents in Enfield, “Ryans” (formerly “Mulligans”) went the same way.

These shops occupy prime Main Street positions in the centre of Kinnegad and Enfield; and they used to occupy prime positions in their respective communities.

Before the internet, before social media, people used to buy newspapers and magazines.

And the National Lottery only put their Lotto machines into a limited number of outlets in any town. The local newsagent was generally their first choice.

Because the newsagent’s shop could guarantee footfall-plenty of it.

People needed newspapers and milk and cigarettes and pipe tobacco and pipe cleaners and petrol for Zippo lighters.

So, they had a type of monopoly because the newspaper and magazine companies only supplied official, recognised newsagents.

Throw in the Lotto franchise and you soon had farmers coming in, looking you in the eye and solemnly saying: “If only I had a yard of counter…”.

Well the shoe is on the other foot now. Farmers can afford plenty of yards of counter now-but don’t want them.

Now, Tesco, Supervalu, Lidl, Aldi, Centra, Spar, filling stations, and all the others sell newspapers and magazines and lottery tickets and tobacco, and anything else you need.

They almost certainly provide free parking too in a convenient, easy to access location on the outskirts of town; and Tesco allow you to quickly check yourself out, thereby preventing you from slagging anyone about “the yard of counter”.

I started my business life in a convenience store in 1986 and the 1st big job I had to take care of was to get a regular supply of newspapers. The newspaper companies wouldn’t supply because I wasn’t a recognised newsagent, and wasn’t permitted to become one. The paper companies were perfectly happy to have control of distribution through a discrete, controllable network of shops because it was cost effective and allowed them to wield inordinate power.

I used to envy the official newsagent. Yes, I mean real envy.

He was “official” and a “recognised newsagent” and the sales representatives from Independent Newspapers and the Irish Times and Easons and Newspread used to make regular calls to him, see was there anything he needed, and shoot the breeze.

Now? There’s nobody calling to him now. In fact, he’s closed the door, pulled the shutter, and gone home.

He’s discovered now that once lads like me could eventually-shock, horror-get the newspapers directly from the paper companies and his artificial protection was removed, he was in big trouble.

Throw in the typical size of the newsagent’s premises of around 500-1,000 square feet and a transition to a convenience store wasn’t on the cards for a lot of them.

Consider too that their advantageous centre of town location could now become a problem with an increasing number of people having motor cars and needing somewhere to park and the inevitable, inexorable decline of the traditional newsagent isn’t hard to explain.

I’ve always loved retailing and I was born into a family of small retailers. But one thing certain about retail is its competitiveness and ruthlessness.

It’s dog eat dog and the survival of the fittest and requires a great degree of flexibility, adaptability, and willingness to change or wither and die.

Unfortunately further closures of newsagents like Flemings in Kinnegad and Ryans in Enfield are as certain as night following day.

Because what they did, their franchise, is now being done by convenience stores, supermarkets, and filling stations.

If you’re in retailing, or thinking about getting into it, you should spend some time thinking about how quickly and substantially retailing can change, and think too about a plan B or C.

Because you don’t want to go the same way of the newsagency.

Looking to Start a Business? What You Can Learn From John Boyle of BoyleSports

John Boyle was fired from his job on a bread van, married at 19, has 7 kids, and turned down £200 million from a U.K. betting chain for his business.

boyle-sports

I listened to a fascinating interview yesterday on the Business Show on Radio 1-Richard Curran interviewing John Boyle of BoyleSports, the betting chain.

Boyle left school early and was married at 19. I missed the very start of the interview but he started out working on a bread van and was fired because of his problem with, I believe, drink.

Boyle was from Armagh and, with the help of his father-a small business owner himself- guaranteeing a bank loan, opened a betting shop in his home town.

He worked the shop himself for 7 years, with assistance only at the weekend. It went well and he made money and in 1989 he came south of the border to Drogheda to buy another shop unit.

Boyle remarked in his interview that buying a shop unit then at a very competitive price and with low rent was easy because everyone was closing up, or struggling badly with the recession in Ireland at that time, and shops were easily bought.

Incidentally, I started in retail myself 3 years prior to this in 1986 and I can confirm that things were very bad in the Irish economy with astronomical interest rates and nearly double the unemployment rate we have now; three general elections in 15 months didn’t help matters either.

Boyle did well from the outset and, despite the general gloom and doom pervading Ireland at the time, was profitable from very early on with all the shops he opened. Over time Boyle grew the business to over 100 shops.

He told Curran also about being approached by a leading British bookmaking operator who offered £85,000,000 for the business. Boyle was “chuffed” but wouldn’t sell.

They came back a few years later and offered £200,000,000. He didn’t sell then either as he has 7 kids or most of them are involved in the business.

I never met John Boyle but what I gathered from the interview is that he is an unsophisticated, straightforward man who had very little education, loves his business and family, and continues to do his business with a straightforward outlook and passion.

I also gathered that he will never sell the business.  As he says himself, he has a nice house, takes nice holidays, drives a nice car and, anyway, what would he do with the money.

I noticed two things with Boyle which I have seen before many times in successful entrepreneurs:

  1. They do one thing really well, with love and commitment. For them, it’s not just about the money-they actually love the business they’re in. As Boyle commented, the business he’s involved in allows him to pit his wits against leading experts in all sports, and he loves that and loves sports. It’s no coincidence therefore that his business is called “BoyleSports”.
  2. When Boyle came to Drogheda in 1989 he had a huge number of experts, commentators, and consultants decrying the economy and discouraging entrepreneurs to start up or have a go “until conditions improve”. These people understood the macro-economy, the “big picture”, and lads like John Boyle didn’t. But Boyle ignored them and all he knew was that his little betting shop which he had run single handedly for the previous 7 years was profitable; and he thought he could do it again in Drogheda.

I have a good friend who is a very successful businessman despite his lack of education-he didn’t even do the leaving-and his interest in anything apart from one thing: trading.

My friend has been a trader for over 20 years, loves doing “the deal”, went bust early, recovered, and is now spectacularly successful. And all he does is buys ordinary, prosaic, everyday products that the supermarket trade in Ireland sells all day every day.

It is a simple business, completely devoid of any social media or digital marketing aspect.

But, like John Boyle, he does one thing really well-buys and sells-and keeps things simple and ignores the experts and commentators who comment on the big picture.

Predicting the Past-Why Looking Good With the Benefit of Hindsight Is Not an Option for Your Business

Nauseating.

business-hindsight

That’s how I feel about the industry which has grown up since the catastrophic crash in the Irish economy in 2008.

The industry I am referring to is the large collection of individuals who I describe as the “I told you so brigade”.

These people would have you believe that, just as Cassandra foresaw the fall of Troy in Greek mythology, they knew what was going to happen, that the economic catastrophe and associated mistakes were entirely avoidable if only they were heeded or, indeed, asked for their view at the time.

The Man in the Arena

These people are the antithesis of “The Man in the Arena”, who Theodore Roosevelt spoke about in his speech, “Citizenship in a Republic”, in the Sorbonne, Paris in 1910.

“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”

When these individuals appear at Dáil committee hearings on the banking collapse, or on RTE radio, or Vincent Browne on TV 3, or on PrimeTime, or Newstalk, or anywhere else they might find a platform, I immediately think about

“the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds;… who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”

The honest public utterances of Dan O’Brien and John Fitzgerald in relation to their failure to predict the crash should be contrasted with David McWilliams’s claim to have spent a decade predicting the collapse.

There is something deliciously ironic about somebody predicting something for 10 years, isn’t there, when you consider that a broken clock will give you the correct time twice a day. In fact, the Irish Examiner reports that McWilliams first predicted a crash in 1996, some 12 years prior to the collapse.

12 years prior. How prescient is that?

If you are an entrepreneur, or small business owner, or investor you know that you cannot make decisions based on your forecast being correct once every 12 years.

You would soon go bust.

McWilliams also told the banking enquiry that the bank guarantee of September, 2008 was the correct decision because it was the only thing that would prevent a bank run. In fact, McWilliams described it in print at the time as a “masterstroke”.

But now, 7 years later, he says it should have been temporary and have had more conditions attached.

Well, it’s easy to say that now.

The Governor of the Central Bank, Prof. Patrick Honohan, had to write to the Oireachtais banking enquiry, within a month of his first appearance before it, seeking to go in again and “clarify” his thinking.

He was looking to distinguish

“between a “hindsight scenario” and what information was actually available to Government at the time”.

To put it plainly, Honohan had initially told the committee in January that Anglo Irish Bank should have been allowed to collapse. However, in March, when he got a 2nd bite at the cherry he said

“he thought this must have been a “senior moment”.

He had “leapt from one scenario to another” in his responses to the committee, he said.”

Keep in mind that this evidence is being given at a remove of 7 years later, with the benefit of all types of hindsight, opinion, reports, commentary, etc.

This second bite of the cherry was not something that the decision makers of September, 2008-in respect of the bank guarantee-could request.

As an entrepreneur or small business owner you need to be careful about relying on the forecasts of people for whom, quite frankly, the cost of getting it wrong is negligible or non-existent. You, like the Man in the Arena of Roosevelt’s speech, simply don’t have that luxury.

You also will not be able to rely on the benefit of hindsight at a remove of 8/10 years after the event, like the gentlemen above.

Every decision you take will be tested vigorously in the crucible of business, by competition (both national and international), and through the impact of international and national economic forces beyond your control.

Keep in mind: Predicting the past will not be a luxury you can afford.

Distribution Agreements and Agency Agreements-What You Really Need to Know

distribution-agreements

Distribution agreements, agency agreements and franchising agreements are three very common types of commercial agreement entered into by companies and individuals.

It is vitally important to recognise the differences between them.

All three agreements are, from a competition law perspective, known as vertical agreements.

When entering into these types of agreements the key considerations to be factored in include

  • Normal commercial considerations between the contracting parties
  • Competition law in terms of the restrictions placed on one of the parties by the agreement
  • Agency agreements need additional consideration as there is an EU Commercial Agents Directive and Commercial Agents Regulations to consider.

Elsewhere on our site you can read more about franchise agreements.

This piece will focus on distribution agreements and agency agreements.

The key difference between a distribution agreement and an agency agreement is that in a distribution agreement title to the goods passes from the supplier to the reseller. (In an agency agreement title does not pass)

Distribution agreements

Distribution agreements are generally for 5 years or less and are agreements between suppliers and resellers.

There are three types of distribution agreement:-

  1. Selective agreements
  2. Exclusive agreements
  3. Non-exclusive agreements.

Selective agreements

Selective agreements are where the supplier has applied some selective criteria in choosing a distributor. They are commonly used in the supply of luxury goods and allow the supplier have some control over how the goods are sold.

Exclusive agreements

Exclusive agreements are where the reseller has exclusive distribution rights in a geographical area and the supplier is restricted from supplying other distributors.

Non-exclusive agreements

Non-exclusive agreements arise where the supplier is not restricted from supplying other resellers.

Distribution agreements considerations

Some considerations to keep in mind when entering into a distribution agreement, apart from the normal commercial factors, include

  • The territory covered in the agreement
  • The use of the intellectual property rights of the supplier by the reseller
  • The terms and conditions concerning purchase and sale of the goods
  • The selection criteria in selective agreements together with any training/support to be given, any sales targets/criteria and the restriction on the distributor from supplying unauthorised distributors
  • The restrictions on the supplier from supplying other distributors in exclusive distribution agreements.

This is not an exhaustive list and if entering or negotiating a distribution agreement the normal commercial negotiating should take place to ensure that you get the best deal.

Agency Agreements

The Commercial Agents Regulations and Directive

Agency agreements are commercial agreements which see the agent sell goods or services on behalf of the principal.

Unlike a commercial distribution agreement, title to the goods does not move from the principal to the agent.

If you are considering entering into an agency agreement the key considerations will be under the heads of

  • Normal commercial principles and contract law
  • The Commercial Agents Directive and
  • Competition law.

Competition law

Competition law will only need to be carefully considered if the principal and agent are considered to be two separate “undertakings” and this will depend on the amount of risk borne by the agent.

Generally however, an agent is considered to be part of one undertaking with the principal; if this is the case then there should be no concerns in relation to the prohibition on anti-competitive agreements.

The Commercial Agents Directive

The Commercial Agents Directive (Council Directive 86/653/EEC) has been implemented in Ireland with the Commercial Agents Regulations of 1997 and 1994.

This law favours the agent to a large extent as it seeks to balance up the strength between the typically larger principal and more dependent and smaller agent.

This is given effect by imposing conditions in an agency agreement under three important headings:-

  1. How the agent is remunerated
  2. The notice required to terminate the agency agreement
  3. Any compensation to be paid to the agent for the termination of the agreement.

What is a commercial agent as defined by this legislation?

There are 3 broad criteria to be satisfied:-

  1. The agent must be self employed
  2. The agent must have authority to act on behalf of the principal
  3. The agent negotiates and concludes transactions on behalf of the principal.

It is important to note also that the Commercial Agents Regulations defines a commercial agent as someone selling goods, not services, on behalf of a principal.

Furthermore there are some important exclusions in the legislation as to who is a commercial agent, for example a partner in a partnership and an officer of a company who is authorized to enter agreements on behalf of the company.

In Ireland it is also necessary to have an agency agreement evidenced in writing to be covered by the Commercial Agents Regulations.

Remuneration of the Agent

The Commercial Agents Directive and Regulations contain some important provisions in respect of remuneration of the agent.

For example,  how the agent is to be remunerated where the agency agreement does not provide for this and the circumstances where the agent  is entitled to be paid after the termination of the agreement and requirements that the principal provide regular statements of the amount of commission due to the agent.

Termination of Agency agreement

The law in this area sets out

  • The necessary notice periods required before termination
  • Compensation for damage to be provided to the agent on the termination of the agreement
  • Compensation where the agent dies.

Summary

Clearly the Commercial Agents Directive and Regulations require careful consideration and legal advice prior to entering into such an agreement, either as principal or commercial agent.

In fact, any agreement which places obligations on you should be carefully considered by your solicitor or legal advisor.
By Terry Gorry
Google+

4 Things You Must Get Right When Starting Your Own Business

start-your-own-business-ireland

Deciding to start your own business is easy.

However, ensuring that your start up does not become an insignificant statistic in the “graveyard of broken dreams” is difficult.

85% of startups  fail within 3 years..

Despite the massive changes in technology in the last few years the fundamentals of starting and running a successful business haven’t changed much.

Let’s take a look at 4 critical areas you ought to think about to increase the probability of success for your business. There are many other fundamentals you will need to be concerned with but these 4 must be taken care of correctly.

1. Legal structure of your business

The legal structure that you choose for your new business will have far reaching consequences and you should be crystal clear as to what structure is best for you and why.

There are three common ways to structure your business:

a) Sole trader

b) Partnership

c) Limited company.

Sole trader

As a sole trader you will be solely responsible for the debts of your business. Clearly this is something that requires serious consideration on your behalf as failure could leave you saddled with the debts of the business, even after you cease trading.

Partnership

Setting up your new business with a partner and forming a partnership to conduct your business means that each of you will be liable for the debts of the partnership.

It is important to understand that this does not mean the debts are shared or split between you-each of the partners will be jointly and severally liable for all debts of the business.

Limited Liability Company

A limited liability company has a separate legal identity from it’s promoters, shareholders or directors and the company’s liability, if things go wrong, will be limited to it’s paid up share capital.

While this may seem to offer significant protection to you from exposure to creditors and/or banks if things go wrong, in practice the protection is illusory to a great extent as many suppliers and all banks will look for personal guarantees or bonds from you to cover the debts of the company.

2. Professional advisors

Having professional advisors that you can rely on and whose judgement you respect can provide a great sounding board for many of the significant decisions you will need to make on your own.

So get yourself a good accountant and solicitor to whom you can turn and rely on.

Things like registration for vat and as an employer, business name registration or company set up are necessary details that will need to be executed properly and which will allow you to spend more time on the overall development of your business.

3. Cash flow budgeting

A prime reason for the failure of startups is a shortage of cash.

Cash is king, especially in the early days and you need to be clear about the difference between profitability and cash flow and the ability of new businesses to suck considerably more cash than anticipated in the early days.

4. Human Resources

A vital part of the success or failure of your new business will be your people.

Choosing the right staff is one thing; managing them is another.

There are a number of key areas you need to be careful about as an employer. I have learned these things the hard way.

But the potential for costly employment related claims is fairly extensive.

In conclusion, starting a new business can be an exhilarating white knuckle ride.

Taking care of these four fundamentals will ensure that it will be an enjoyable and profitable journey too.
By Terry Gorry
Google+

7 Crucial Elements of a Shareholder’s Agreement

shareholders-agreements

Good fences make good neighbours.

A shareholders agreement can be every bit as important in a company where there are minority shareholders.

Because a minority shareholder(s) whose interests and rights can easily be ignored by being outvoted by the other shareholders, particularly in circumstances where the minority shareholder holds less than 25% of the shares.

A minority shareholder in this situation does not have the power to block the passing of a special resolution by the other shareholders who can ignore shareholders with less than 25%.

To counter this situation many shareholders will enter into a shareholders’ agreement to protect the rights of minority shareholders and this agreement will typically cover a wide range of topics.

We take a look at 7 of the most important issues below.

1)      Share subscriptions

When a new investment is made in a company the investor would be well advised to have a shareholders’ agreement drawn up which will govern how the company is to be run at the time of subscription.

2)      Sale of shares

The sale of shares, if there is a dispute between only two shareholders can be problematic but provision for such a turn of events can be provided for in the shareholders’ agreement. This could be done by a number of different procedures called tag along, drag along, offer round, lock in or a combination of these.

These type of arrangements are designed to provide a solution where shareholders have fallen out and cannot come to an agreement as to how to resolve it.

3)      Company operations

The agreement might also cover the operations of the company such as a right for a minority shareholder to appoint a director to the board of the company or to committees of the Board.

4)      Vetoes

One of the most important sections of a shareholders’ agreement is a vetoes section which lists out a series of transactions which cannot be carried out without the consent of the protected minority shareholder.

5)      50/50 shareholders and deadlock

A critical part of any agreement will also deal with a situation where there are two shareholders with each having 50% and no agreement in relation to a substantive course of action.

6)      Non-compete covenants

It is common to include a non-compete covenant to prevent shareholders from competing with the company as long as they are shareholders. This would seek to cover competition with the company’s business, solicitation of company’s suppliers and solicitation of company staff.

Set out above are some of the most common clauses in a shareholder’s agreement.

7)      Other issues

Other issues that might be dealt with include

  • confidentiality,
  • arbitration,
  • no partnership,
  • assignment of rights and
  • conflict with the Articles of Association of the company.

These are only some of the issues that should be addressed in your agreement. Circumstances will vary from situation to situation. But trying to draft one yourself or copying a template that you might come across is not the smartest thing to do.

A poorly drafted shareholders’ agreement, or none at all, will cost you  a lot more than the cost of having one drafted by your solicitor.
By Terry Gorry
Google+

Buying or Taking Over a Business-3 Critical Considerations You Ignore at Your Peril

Man in the Arena

Are you thinking about taking over or buying a business?

Perhaps a coffee shop, or retail business, or hairdressers, or restaurant?

It doesn’t really matter what type of business, as there are certain fundamental things you need to watch out for.

I’ve bought, developed and sold many businesses since 1986. I’ve made money, lost money, and learned many lessons along the way.

There is a number of critical factors you will need to consider.

In this piece I am going to look at 3 vital areas to consider.

Sounds good?

Okay, let’s get started.

1.How to structure the purchase

There is essentially two methods of carrying out the transaction-

1)   A share purchase

2)   A purchase of the assets and liabilities of the business.

The most popular method is by way of share purchase but you do need to carefully weight up the pros and cons with your solicitor and accountant.

The purchase of assets and liabilities approach to buying a business has the advantage of allowing you to choose which assets you will buy and which liabilities you simply will not take on.

It does run the risk though of being challenged subsequently by a creditor who has not been paid and whose liability you have not taken on as part of your purchase.

Comparison of Share Purchase v Asset Purchase

Asset Purchase

As the buyer you will choose which assets and which liabilities you are taking on.

However it is difficult to get your hands on any tax losses of the target company and you many end up paying significant stamp duty depending on what assets are included in the deal.

Share Purchase

With a share purchase you will only pay stamp duty at 1%, regardless of the value of the target business.

The employees of the company will be taken on as a matter of law as part of the transaction; you may however be able to benefit from any tax losses which pass from the target company.

All assets and liabilities pass as part of the share transaction so the potential for liabilities rising up to bite you down the road is high.

Due diligence essential

It is absolutely vital that proper due diligence is carried out before buying a company or business.

Depending on the size and complexity of the target business it may be necessary to carry out due diligence under the following heads (this is not an exhaustive list)-

  • Insurance
  • Legal
  • Accounting
  • Environmental
  • Statutory obligations (CRO obligations included)
  • Title

Other critical issues to be dealt with include

  • Warranties (statements given by the vendor to the buyer in relation to the business being acquired).

Warranties would normally cover matters such as the target companies accounts, pending litigation, taxation, employees, assets, liabilities and essentially all aspects of the companies affairs.

  • Disclosure letter ( a letter from the vendor to the purchaser which sets out where the target company has any issues in relation to the general warranties already provided).

This might include any problems the target company/business has in relation to employees, title to property, insurance, banking facilities and any number of other areas where the actual position on the ground deviates from the warranties given in the agreement to sell.

2) The premises

If there is a premises in which the business is carried on you will need to be careful that you are getting good title, regardless of whether it is freehold or leasehold.

Don’t take for granted that all is in order. The premises/property aspect of your business start up or takeover requires careful consideration and the usual conveyancing considerations will need to be carefully examined.

I have written many articles about commercial property and things to consider when buying or leasing a commercial premises. (See 10 things to ask when leasing a commercial premises).

Key issues here, if you are getting or taking over a lease, include

  • the length of term of the lease,
  • the annual rent,
  • whether you are responsible for rates and insurance,
  • how often are rent reviews,
  • is there a break clause to allow you exit relatively painlessly.

3) Existing employees

If the business you are taking over has existing employees don’t think that you can give them a trial or put them on probation and then get rid of them if they don’t work out or suit your approach.

Any existing employees are almost certainly going to enjoy the protection of TUPE regulations.

This means you must legally recognise their service to date and safeguard their existing terms and conditions of employment.

There could be aspects of their employment with which you don’t agree, for example sick pay or travel allowances. If you want to change anything you will need to reach agreement with them, because you cannot change the contract of employment unilaterally.

The protection of TUPE regulations will flow from the fact that, almost certainly, your takeover will be a transfer of undertaking from a legal perspective.

TUPE law is complex and affords significant protection to employees. I have written a couple of articles about TUPE, which will give you a good idea of what’s involved:

Other considerations worth noting

A vital aspect of any successful takeover is understanding the business, and industry, you are getting into.

Things change rapidly in business. I have written about the death of the newsagent, and how retailing has changed so much in the last 25 years.

I have also written about the growth of online business, digital marketing, social media marketing, copywriting, and how so-called experts can tell you after the event why you have failed.

If you are taking over a business, or starting one from scratch, you are entering into a potentially lonely station where the easiest thing in the world is to second guess yourself and fear the opinion of these “experts”.

Don’t.

Think about what Theodore Roosevelt had to say in “Citizen in a Republic”, in the Sorbonne, Paris, 1910 :

It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again..

Finally, good luck!

Enjoy the journey, and learn from it.

By Terry Gorry
Google+

How to Write a Small Business Plan-7 Essential Components

write-business-plan

The longest journey starts with a single step.

And the first step in starting your own business should be to draw up a business plan.

A good small business plan is critical to the success of any enterprise.

Whether it is a formal document or written on the back of a cigarette packet it is an essential first step on the road to building your small business.

Even though we in Ireland are coming out of one the worst economic situations that has ever prevailed here, many people are still intent on setting up their own small business.

Your plan can take many forms but most people are agreed that there are a few critical areas which must be addressed.

1. Overall tone of your small business plan

You need to be clear and concise with your plan with clear objectives/goals and a clear strategy.

It should be factual, not aspirational, and easy on the eye with plenty of white space.

2. Summary

The summary should be able to convey in a few sentences your strategy and goals and highlights the positive parts of your plan.

You need to think of the elevator pitch ie can you describe your plan succinctly to a stranger if you met him/her in a lift and were travelling from the 5th floor to the 1st.

3. Description of the business

This part of your small business plan should set out clearly the industry, type of business, any company history, the legal structure to be employed, any trading history and your vision for the future.

You will need to describe the USP (unique selling proposition of your business)-if it has one- and how you will grow your product/service with realistic achievable goals.

4. Marketing and Sales

You will need to set out how you will market your business and obtain sales, your target market and how you will handle competition if and when the squeeze is put on your business.

You will need to show some solid market research in this section and demonstrate that you know the industry that you will be competing in.

5. Your People

This part of your plan will deal with your people, your key personnel and will include your professional advisors such as solicitor and accountant.

You will also outline any recruitment plans you have and set out your salary structure which will show also that you are planning for growth.

6. Your operations

This section will essentially set out how you operate your business and include the location of your business, any production facilities if appropriate and information technology systems which should be robust enough to accommodate your future growth plans.

7. The Financials

This section will include your realistic achievable forecasts, both of cash flow and profitability.

It will also be critical to outline any capital requirements you will have into the future and demonstrate that you have actually planned for the growth that you forecast elsewhere in your small business plan.

These are the essential parts of a decent small business plan and can obviously be adapted easily depending on your particular circumstances and individual requirements.

A good business plan should be an asset to you when you walk into any meeting with a financier/investor/bank and should reflect your professionalism and overall business approach.

Make sure that it reflects well on you and your company or fledgling enterprise.

Good luck.
By Terry Gorry
Google+

30 Questions to Ask When Buying a Franchise in Ireland

franchise law ireland

Are you thinking about buying a franchise?

Finally setting up your own business and you’ve been told that franchising is a “safe bet”?

The failure rate for small business start ups is high, very high. So can franchising stack the odds in your favour?

Franchising can be a great way to start your own business.

And the failure rate for franchises is much less than for non franchise start-ups.

But you still need to do your homework and ask and be satisfied about many questions which you might not think about in your enthusiasm to start your own business.

Franchise Agreement

The franchise agreement from a major franchisor will generally be on a take it or leave it basis.

That is the franchise agreement will not be negotiable as the franchisor can’t afford to negotiate individual franchise agreements with each franchisee.

But that does not mean that you should not ask the right questions and satisfy yourself that the situation that arises when there is a dispute or the franchisee is incapacitated or dies is provided for.

Here are 30 questions to ask:

1. What law governs the franchise agreement?

Many successful franchises in Ireland are not Irish companies but the law applicable for an international franchise may well be another jurisdiction.

2. What happens if the franchisee dies?

Is there provision in the franchise agreement for the franchisor to provide staff to run the business to keep the show on the road?

3. Is there a renewal option when the franchise agreement ends?

If there is are you happy to commit to sign a franchise agreement in say, 10 years time, having no opportunity to see the new agreement? What are the terms?

4. Can you sell the business?

Can the franchisor veto your purchaser?

5. When the franchise agreement is terminated is there a non compete clause?

For how long?

6. If the franchise agreement is terminated and the premises is yours, how much will it cost to debrand?

7. Is the training and system manual up to date?

When was it last updated?

8. Is there an advertising fee payable? Can it be justified?

Is there marketing spend on the brand?

9. Is there a management services fee? How is it calculated?

10. Does the franchisee have to inform the franchisor of any improvements he has made to the system?

11. Is the franchisor the owner of the trademark? And if not will he provide a licence to the franchisee for the use of any trademarks and intellectual property?

12. Who will own the premises?

Will the franchisor provide any advice in relation to location and premises? Is this provided for in the franchise agreement?

13. How long has the franchisor been carrying on business?

How many company owned outlets?

14. If the franchisor is supplying goods is there a credit limit?

Will a minimum stock of products be imposed? Is a vehicle required?

Will it have to be branded?

15. What books and records will the franchisee have to supply to franchisor?

16. Will a confidentiality agreement be required?

17. Who will pay for initial and ongoing training?

18. Is there a territory?

Is it exclusive?

Is it stipulated in the franchise agreement?

19. How long will the franchise agreement last?

Is it compliant with competition law requirements?

20. Is training provided for staff?

Is it ongoing?

21. Is more than 10% of the initial fee for use of the name and trademark?

Can this be justified?

22. What initial stock will be needed?

Will the franchisee have to purchase equipment, stationery from the franchisor?

23. What ongoing obligations has the franchisor as per the franchise agreement in relation to problem solving, management, finance and marketing, provision of staff in an emergency, research and development and maintaining and improving the manual?

24. Will franchisee be required to advertise locally?

25. Does the franchisor have the right to communicate with the franchisee’s customers?

26. Has the franchisor the legal right to purchase the franchise from the franchisee?

On what terms?

Is that in the franchise agreement?

27. Is the franchisor entitled to appoint a manager if the franchisee dies or is incapacitated?

28. Who is entitled to terminate the franchise agreement? On what terms?

What events will bring this about?

29. What will happen when a dispute arises?

Is arbitration provided for in the franchise agreement? Litigation?

30. Does the franchisee have to enter into any restrictive covenants in the franchise agreement?

When looking at a franchise agreement with a view to buying either a new franchise or an existing franchise, a close perusal of the franchise agreement with these questions foremost in your mind is a good starting point.

But only a starting point.

You will need to engage a solicitor before signing any franchise agreement.

Hopefully these questions may assist you in deciding whether a franchise is for you.

If you are happy with the answers to the 30 questions above here is one more critical question to ask:

Does the franchisor make more money from selling franchises than running, marketing, and promoting a real business?
By Terry Gorry
Google+