Because of the global nature of our economy, the world has become a much smaller place. You may therefore find yourself speaking more and more often to predominantly foreign audiences. This will necessitate learning a new set of ground rules for each country and each cultural segment you are addressing.
No matter how experienced a speaker you are, rehearsals are necessary each time you make a presentation.
Preparing for a seminar is not only hectic and time-intensive, it can also be incredibly stressful for the organizers. It's inevitable that something will go wrong. But you can stay ahead of the game and maximize the number of things that go right with some careful planning.
This is the final article on conducting a due diligence review when purchasing a business. This article lists relevant records, contracts, financing and credit arrangements, and brokerage commissions relevant to the transaction.
"Administration" includes all of the procedures, policies and records related to the day-to-day operations of the company. A well-run company keeps good, thorough, accurate records. You will need to review copies of all the administrative records, including:
Get a list of all property (real and personal) owned or leased by the business, and review all documentation related thereto.
Review all loan and credit agreements, and any other documentation evidencing material borrowing, including:
Lastly, is there a broker involved in the purchase and sale transaction? Who is the broker representing? If you're liable for paying any portion of the broker's commissions and other costs, you must have a copy of the broker agreement.
Once you have had a chance to answer all of the questions and review all of the materials listed in these last few articles, you should know all you need to know to determine whether to go ahead with purchasing the business. If you and your lawyer and accountant are happy, it's time to negotiate the Purchase and Sale Agreement.
In our last post we discussed the importance of a due diligence review when you're considering purchasing a business, and covered the questions that should be answered with respect to the business' financial and corporate history. This week we talk about legal and regulatory matters, customers, goodwill, market share and potential for growth.
Today we start a 3-article series on how to conduct a due diligence review when you are considering buying an existing business. Part I of the series covers the financial, corporate and historical data you should look at with your accountants and your lawyer. If you're thinking about purchasing a business, there are many issues you need to consider and many documents you need to review with your legal and financial advisers before you close the deal. It's not only important to know the current status of the business, but also its past history, its long-term viability, future market opportunities, and potential for growth.
But what should you be looking for in the commercial lease agreement? Before you sign anything, review the lease and make sure it answers each of the following questions:
If you are satisfied with the answers you get to these questions, you should submit a Letter of Intent (LOI) or a Lease Proposal to the landlord which sets out all the negotiable elements of the lease.
The LOI or proposal should set out such details as square footage, initial term, renewals, base rent, rent-free period, allowance for leasehold improvements, etc., as well as the relevant tone of your negotiations to date. This will allow the parties to continue to negotiate the final terms of the lease. Keep every draft as a paper trail documenting the negotiations.
Finally, have your lawyer review the lease BEFORE you sign. And never sign anything that you don't fully agree with.
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When you're starting up a business, cost drives every decision you make. And when it comes to business equipment, you need to determine whether it is most cost-effective and advantageous to lease or purchase the equipment necessary to your business.
There are essentially three options available for acquiring the equipment you need: (1) a straight lease, (2) lease-to-own (also called a finance lease), or (3) outright purchase. The term "business equipment" can apply to anything you need for your operations, including computers, printers, and other electronics; office furniture; communications systems (smartphones, pagers, etc.); alarms and security systems; shelving and storage; specialized machinery; warehouse forklifts and loaders; and vehicles.
The upside of leasing is that it requires less of an initial outlay than purchasing, so you're not tying up so much money right off the bat. And for computer equipment, it can be the best option.
Your lease costs can be deducted as an operating expense, and they don't depreciate. Since the average equipment lease runs for 3 years, your lease will be expiring right about the same time that your computer equipment is obsolete, and you can upgrade to a new system under a new lease. (Review the lease terms to make sure they provide for maintenance, updates and support.)
Your overall costs are almost always higher because of interest and fees, you don't own the assets, and you build no equity in the equipment.
In addition, the lease agreement will contain restrictions on how you use the equipment: such as whether, and how much, you can customize the equipment for your business.
LEASING | BUYING |
Lower upfront costs have less impact on cash flow | Higher initial investment required |
Higher total costs overall, interest rates much higher on lease than financed purchase | Lower total investment over the life of the equipment |
No ownership or equity until end of term | Ownership of and equity in assets upon purchase, with option for resale |
Easy upgrade options during and at end of term | Full control over use and customization of equipment |
Maintenance and insurance can be added as option to lease | Maintenance and insurance costs must be fully covered by owner |
Lease costs can be deducted as operating expenses | Equipment can be depreciated over a period of years which can be a tax benefit, but can mean loss of value |
Fixed monthly payments which can end up costing more than the value of the equipment over the term of the lease | Large upfront cost, but fewer ongoing expenses |
Penalties for early termination |
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When you buy it, you own it. And you can probably deduct a good portion of those asset purchases on your business income tax return. You also get the benefit of the depreciation deduction. If the equipment you need has a lifespan of more than 3-5 years and you've got the capital to do it, you probably should purchase instead of leasing it.
Office furniture is a good example of equipment with a long lifespan. While you may replace the chairs every few years, it's likely that the desks, shelving and filing cabinets will be around for a long time. These items are readily available from second-hand office suppliers, which can save you money. Buying second hand can be a great way to save money and still get what you need. Look for classified ads, listings on Craig's List and Kijiji, and shops that specialize in used office equipment and supplies.
Check out the local and online auctions as well. You have more recourse when buying from a dealer since you can usually take the item back, although there will probably be no warranty. The price might be higher than if you bought it from an individual, but the ability to return the item is worth paying more for. The risk you run when buying from an auction is that you can't actually test the equipment beforehand. Many auctions sell goods as seen, which means if the goods do not work, you have almost no chance of getting your money back, except for online auctions such as eBay. Find out what the restrictions are - and what your rights are - before bidding on any auction items.
Many start-up companies will need to finance any equipment purchases. There are some questions that you will have to get answered in order to determine what the actual cost of leasing versus purchasing will be.
Now that you know what the costs will be, ask yourself whether the business can afford it? Do you have sufficient cash flow at present to support your monthly lease or loan payments? If your business is seasonal, you'll need enough cash to support those payments during your off-season. And what about the maintenance costs? Are they included in your lease? Did you provide for them in the loan calculations? Do you know what they are? Then there's insurance. How much is the annual insurance cost to cover the equipment? Is it included in the lease?
If the answer to any of the above questions is "No", you should determine which equipment is absolutely essential for your business, and which items can wait until your cash flow improves. If you have to have it and the cash isn't there to buy it, then talk to several leasing companies and negotiate the best lease you can.
Image by xuefei wang from Pixabay
