Seller Logon Log in Register

Lead Generation Explained:

Lead generation, or marketing, for a small business, referes to identifying and attracting potential customers who have expressed interest in your products or services.

 

Leads are considered potential customers, either individuals or businesses who have shown interest or engagement with your business, typically by providing their contact information or taking a specific action.

 

When selling a business, we will ask you to explain how you generate existing leads and what is the most efficient and effective lead-generation strategy.

 

Why is this important to business buyers? Most business buyers are set on growing the business, and understanding how the business currently advertisesand generates leads helps the buyer understand what investment is requried to grow the business.

 

If you are not convinced, consider the old concept of 'goodwill'. Small business goodwill refers to the value and reputation of a business beyond its physical assets.

 

Let's say your business turnover is $1,000,000 anually, and the total spend on lead generation/advertising is $5,000.

 

This ratio means your business invests as little as $5 to generate $1,000 in sales - or as little as 0.05% of total sales to generate all thoe leads.

 

If you want to demonstrate a business's goodwill or reputation, showing how much, generally how little, is invested in lead generation is the best way.

 

Lead conversion: if lead generation is the marketing of the 'marketing and sales' equation, the sales is the lead conversion process.

 

Most businesses need a documented sales process, and this is your documented process of converting a lead into a paying customer.

Example Documents:

Frequently Asked Questions

Add Backs - Explained. LG

An add back is an expense that is added back to the profit/loss of the business for the purpose of showing a more accurate reflection of the earnings that the owner has generated from the business.

 

The theory behind these add backs is that these expenses are purported not to relate to the operations of the business, one-time, and/or specific "owner's" expenses

 

What types of add backs are commonly applied?
 

  • Adjustments to owner’s compensation: some owners pay themselves above market value this can also include, superannuation and bonuses. A buyer may not necessarily spend that rate of pay to themselves or a replacement employee.
  • Personal expenses: Running personal expenses through the company is a frequent occurrence in closely held businesses. Personal expenses may include the following
              - Owner's vehicle expenses (monthly payment, insurance, fuel, registration)
              - Owner's telephone or internet expenses
              - Family members or associated persons on the payroll.
              - Travel, meals, entertainment for personal use, not business purposes.
              - Any other expense that is personal in nature and not a business-related expense
  • Lawsuit settlements and other legal fees: These payments can be another example of a legitimate add back, assuming these sorts of payments are truly rare and extraneous for the company.
  • Rent of Facilities at Prices Above or Below Fair Market Value: Many businesses pay rent for the space they occupy. It is often the case that rent is arbitrarily set above the going market rent. PEBITDA would be adjusted upwards by adding back the arbitrary, non-arms-length rent and subtracting the true market rent.
  • Depreciation: This is a non-cash expense incurred by a business.
  • Interest: This is a non-operating expense incurred by a business and is added back to better reflect earnings.

 

One common strategy used by business to reduce the reported profit is to claim non-operational expenses. Some owners might claim phones, vehicles, home office expenses and related expenses like travel. 

Could we observe the business before making a decision about buying it?

With previous sales, we have facilitated observation periods. This is when a buyer comes and examines the business for a longer period, commonly 5-10 days.

 

In retail and hospitality businesses, the observation period usually involves the buyer watching the operations for the whole day to try and ascertain the sales volume and business processes.

 

Most business sellers are apprehensive about allowing a buyer to use an observation period. Nevertheless, handled correctly and with certain conditions in place an observation period can be a beneficial process for buyer and seller alike.

 

We recommend that the buyer and seller agree and or resolve the following before commencing with an observation period:

  • a clear understanding of why the observation period is required
  • broad agreement on the sales terms and conditions is reached
  • what will happen in the during the observation period
  • a holding deposit into the brokers trust account is provided
  • a confidentiality agreement is entered into

 

What we often find is that a buyer initially requests a two week period and after several days they have confirmed what they wanted to know.

Do you pay GST when you buy a business?

Most business sales are GST-free.

 

The reason that most business sales are GST-free/exempt is that the business being sold is a going concern. To meet the criteria outlined by the Australian Taxation Office (ATO) of a going concern, it means that the business to continue in operation up until sale and straight after the transfer of ownership.

 

To fully understand and read more please visit; ATO Understanding GST on a business purchase.

test done by kunal