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The Founder - McDonalds Story Take aways

 

 

The Founder - McDonalds Story Take aways

 The story of how McDonald's became a worldwide phenomenon has been turned into a Hollywood movie on the big screen. Award winning actor Michael Keaton plays "The Founder" Ray Kroc, in this nostalgic tale. You are taken back to 1954 for a delicious serving of what it took to build this grilled cash cow. The lessons provide powerful meaning still to this day and is a must watch for any entrepreneur at heart.

You might have read my previous blog on Franchising, and to follow on from that here are some of the key take aways that stood out for me in this historical business tale:

Market disruptor

Kroc was a salesman in the foodservice industry which gave him great insight on the current market offering. Traditional drive-in restaurants had large overhead costs and the customer experience was poor with slow service and often attracted trouble makers. When he saw what the McDonalds brothers had done with their own small business, it really stood out and an opportunity to disrupt the market.

Would you like fries with that?

By changing the traditional drive-in restaurant model, McDonald's had an edge on the competitors by being family friendly and offered a quick inexpensive menu. The McDonald brothers started the hamburger restaurant with 27 items, but soon realised it was too complex. They discovered that the majority of sales were in only 3 items - hamburgers, french fries and soft drinks. So they shifted focus and removed items that did not add value.

Efficiencies

Their stores were redesigned from the ground up to ensure that all parts worked together as smoothly as possible. The way in which each item was cooked and prepared was measured and refined with a stop watch. This allowed predictable results with greater quality control and they named it the Speedee Service System.

Persistence

Kroc would eventually persuade the brothers to go into business together and franchise their business model. But it was not without trials and tribulations. The fact that the brothers say they were an "overnight sensation, thirty years in the making", goes to show that even the best ideas take a lot of hard work to execute.

Be sure to check out this movie for yourself and if you would like to supersize your business contact the accountants who know first hand what it's like to work in a McDonald's.

Click here to find where to read the rest of my blogs

 

Clean up with a Franchise Business

Clean up with a Franchise Business

What are you actually paying for when you buy a franchise?

We met Joe in my earlier blog series, where he looked at the option of starting a business or buying an existing one. Joe is a little frustrated by the choices and just wants to speed up fulfilling his dream. At a family gathering Joe bumps into his nephew Lee, who owns a franchise, and they get talking over a few drinks.

Joe asks "Why would you pay someone for a mop and bucket to start a cleaning business?". Lee is taken aback by his uncle's bluntness but Lee has asked himself this question before. "Look uncle Joe" Lee snaps, cutting off his uncle's banter. "There are many benefits of a franchise. It even helped me fast track my own business and I would not have been this successful in such a short time by myself". Joe finally comes around to Lee's point of view and realises he shares a similar passion. Joe leans in and says "tell me more about the benefits of franchising".

Turnkey Business

Buying a franchise lets you operate a proven business model with a structure that has been tested and refined in the real world. Actual costs and profit margins are well established and this helps give you great insights for your expected return on investment.

Systems & Procedures

Having efficient steps to follow for each job task enables even difficult tasks to be performed by the lowest level of staff. For example McDonald's don't hire chefs to work in their restaurants. Better still, by having a standard way of doing things you are able to replicate results more consistently.

Brand Power

A franchise helps potential customers to recognise your business and associate the value of its products and services with you. This allows customers to anticipate the same level of experience when dealing with you, based on what they may have experienced elsewhere or heard about from friends & media. People will actually line up for hours just to buy the latest iPhone, or even an In-N-Out burger.

Support Network

Most franchise opportunities give you access to a broad range of benefits that you wouldn't get if you went it alone. Many franchise opportunities include training and ongoing management to ensure that you meet the returns promised in the glossy sales brochure. In addition they can provide access to reduced costs through their supply chain and larger buying power. Even to the point where most fast food chains get their stores built through prefabricated designs and literally pop up overnight.

Buyer Beware

Eagle Boys Pizza recently showed that owning a franchise can still be risky. And you also need to be wary of the restrictive nature of a franchise. You are buying into the way things are done around here and you will be paying a pretty penny in royalties for it. There is also a marketing fee to keep fuelling your brand.

"Gosh Lee, I'm glad that you know more than you let on. Is there any chance I can get you to help me clean up after this party?". "Not a worry Joe. And you best go see the taxman again, if you are going to finally make a move on your business dream".

Do you have an idea brewing for a small business? Call the barista's of books at Logan & Hall Accountants on 03 5032 1121. Because our business is more than just counting beans and we're pretty grounded in your passion, whatever that might be.

Click here to find where to read the rest of my blogs

Road house blues

 

Road house blues

 

Tax office crackdown on truck drivers

Strewth! You've been driving all day in this heat with two trailers full to the brim and then your workmate Bruce catches you at the roadhouse waiving a letter. "What the frying pan in hell's kitchen do you call this balls up?". Moments later you finally catch on that Bruce, has just been audited by the tax office and "they've dragged me over the hot coals by the bluey singlet. Who do they think I am, a bloody croc dundee movie star?"

Turns out Bruce had been using a less-than-reputable tax man and claimed way too much in travel expenses. Two mixed grills later and Bruce confesses to not even spending as much as he was being paid for travel expenses. And most of the time, made it home so he didn't sleep over in the truck.

"Bruce, check this out" you say as you take out your new smartphone and google ATO Truck Drivers. "Says here mate, you've been doing it a bit wrong and you should follow these steps when claiming your expenses:"

  • You must be paid travel allowance that could be reasonably expected to cover travel costs and not just a token amount.
  • You must stay away from home to claim travel expenses.
  • You must have incurred and paid for the expenses.

You don't need to substantiate expenses if you play it by the book and in fact you may be able to claim $95.40 per day in travel expenses. But the fine print says that you need to be able to show a basis for your claims by keeping the following records:

  • Written evidence: invoices and receipts relating to travel allowance expenses incurred.
  • Travel diary: documentation showing dates, places, times and duration of travel. Along with the name of the supplier, amount and type of expense incurred.
  • Bank records: this may be used to help support the records of your travel diary where receipts are not available.

Or better yet, try the new Tax Office myDeductions App!

Bruce, is a little gobsmacked by the whole internet in your pocket concept and says "stone the crows, where you do you get your tax done?" "Well if I tell you, you better wash me truck for a week…."

"Bruce, the tax office guidelines are tricky but they are looking at simplifying things to make it easier. It's best if you give Logan & Hall Accountants a call on 03 5032 1121 and they'll help you get back on track."

Under New Management

Under New Management

Three things to consider before buying a small business

I've been on a mission to share Joe's dream of owning his very own coffee shop. First we looked at Joe starting a business from scratch. But perhaps buying an existing small business sounds more appealing? Wrap your hands around a nice hot cup of coffee, put your feet up and take a read, as our friend Joe assesses this option.

There are three fundamentals to consider when buying a business and you really need to get them right to achieve a self sufficient profit generator:

  1. Business Valuation
  2. Business Performance
  3. Return on Investment - ROI

Business valuations are about as accurate as a Melbourne real estate auction starting price. The best way of working out the value of a business is to base it on the cost of setting up from scratch. This will enable you to compare various businesses for sale & potentially set a limit on your budget. Knowing what you'd pay for new plant & equipment vs. worn down plant & equipment in an existing businesses is an obvious advantage.

If you are looking at an existing business that is more expensive than starting from scratch - why? Most likely it will relate to the goodwill of the business, the warm fuzzy feeling that keeps customers coming back. Goodwill represents intangible things like the value of existing customers & any business systems in use.

Be wary of business valuations that don't include a value for goodwill. This could indicate that the plant & equipment is overvalued, or the business isn't generating a profit.

Business performance shows how successful a business is currently running and is typically compared against industry averages. The tax office keeps a close eye on different industries and even provide you with various benchmarks to assess against.

By reviewing key financial ratios of various business candidates, you can compare:

  • Expected net profit for a given turnover;
  • Profit margin on goods sold;
  • Staff costs for size of business; and,
  • Rent

Get the skinny on coffee shop performance benchmarks. Or better yet, click here to see an evaluation of a coffee shops business performance.

Return on Investment is the percentage you get back from the amount of money you have invested. It shows how efficient a business is, against the cost of your investment. To work out the Return On Investment (ROI), take the net profit and divide it by the cost of the business. You can then use it to compare against other businesses.

ROI is a crucial factor of owning a business, your money is at risk and could be easily invested in a fixed term account in a bank where the return is around 3%. But this is a historically low rate of return for interest rates and you could get a higher return with more risk i.e. the Australian share market has averaged 9.6% return over last 20 years.

By using the coffee shop benchmarks mentioned above, we can work out that $600k in sales would yield $72k net profit after expenses. If this business cost $200k to purchase, then this would result in a 36% ROI. Which sounds pretty good on paper, but you will need to consider the reliability of this size of return and make certain allowances for capital replacements and market trends.

Getting these fundamentals right will help you select the right business to purchase and you'll be able to enjoy all of its perks. Alternatively, if are thinking you could start a business from scratch, best click here to read my blog to help you with that.

Need a refill? Stay tuned for the final instalment where Joe looks at starting a franchise business.

Do you have an idea brewing for a small business? Call the barista's of books at Logan & Hall Accountants on 03 5032 1121. Because our business is more than just counting beans and we're pretty grounded in your passion, whatever that might be.

Starting your business from scratch

 

Starting your business from scratch

Tips for entrepreneurs to make your new business a startup success

In part one of Joe's journey into business we discovered his passion for coffee and explored if he was really cut out for small business. Let's now look at what is involved in starting your own business from the ground up, to see if it's your cup of tea?

Supply and demand

You can build or buy as many different products as you like, but that doesn't mean anyone actually needs or wants to buy them from you. Joe is pretty lucky, with his business dream, as there's a constant demand for coffee, which gets customers through the door where he also sells complimentary items like macaroons, muffins, etc. What need or demand is your business going to supply?

Convey your value proposition

Your value proposition is what differentiates you from everyone else in your field. Clearly defining "Why should I buy from you?" will not only help you stand out in the marketplace, but connect your customers with your vision. Joe's too old school to be a hipster - so he aims to focus on quality products & superior customer service, to keep his customers perked up. His motto is "Taste the difference experience makes". So consider what makes you different from your competitors and why should I buy from you?

Make it a Side Hustle

Starting a business on the side, while still working as an employee, is a great way to see if your entrepreneurial idea is more than just hot steam. This is great during your initial growth phase when you don't yet have regular cash flow. You can give your business the opportunity to build regular sales to the point where it can replace your wages.

Not sure if you have enough spare time? Well STOP watching Masterchef and get some inspiration from startup guru Gary Vaynerchuk. Gary is the epitome of time management and has created unique YouTube content to build his brand. He has since launched into public speaking, publishing books and runs a media business with his brother. Gary has a unique search engine where you can quickly access tips that will help with your business.

A side gig might be all you need, as Tim Ferriss, author of four hour work week, shows in his #1 rated business podcast. He examines world-class professionals, so that you can learn from their path to success and generate value in your own business.

 

Start small & then scale up

Why just rent an empty shop? When you can partner with a complementary business. Joe teamed up with his local bike shop and put a cafe in the showroom - Après Vélo. Doing something like this lets you leverage an existing customer base and limit your initial outlay.

If this isn't realistic then consider bringing your goods to where the party's at with a completely mobile business like Luxury Van - that sells right to your door. Can your business go mobile?

I've covered some helpful ways to avoid the common pitfalls of starting a business from scratch. By considering these questions you'll avoid getting the jitters when the caffeine wears off.

Need a refill? Stay tuned for the next instalment where Joe looks at buying an existing business.

 Do you have an idea brewing for a small business? Call the barista's of books at Logan & Hall Accountants on 03 5032 1121. Because our business is more Starting your business from scratch than just counting beans and we're pretty grounded in your passion, whatever that might be.

 

Your new business idea has bean brewing but is it water tight? Consider these five questions to avoid getting burnt.

Small business can be a grind - come with us as we follow Joe on his journey to fulfil his lifelong dream of owning his very own coffee shop. Often aspiring small business owners, like you, come to a crossroad: do I buy an existing business; franchise; or, start from the ground up?

Joe like many of us these days has an appreciation for the finer things in life - like coffee! He would rather go without than circum to drinking instant coffee. Joe's pride and joy is an old Italian coffee machine that sits proudly on his kitchen bench, much to his wife's disapproval. But he adorns their house guests, treating them to his freshly made coffee.

His friend's often comment that there is nowhere in town that even comes close to his coffee and he should open his own shop. "Your wife could even sell her delicious pastries" they comment eagerly.

Joe and his wife reflect on their friends comments after they leave. Joe says "Screw it! I'm going to do it. I'm going to be my own boss." "Oh dear" Joe's wife says, with a worried look on her face. "Joe, you better go see the Accountant".

Many hours latte of Joe googling and trying to figure out what to do next by himself - his wife suggests he see a specialist (click here to read more). Joe goes to see his accountant and lays out his grand plan, all the while admiring the leather patches on the bean counters tweed jacket.

"Joe, I hate to be a Debbie downer but more than half of small businesses fail in the first 3 years. To overcome these odds, I always ask my clients just like you a few questions to see if they are up for the daily grind of small business:"

  • Have you ever worked in this industry & are you qualified?
  • Experience matters & would you buy a coffee from someone that doesn't drink it?

  • Have you run your own business before?
  • Marketing, extra hours and the pressure of making payroll are just the tip of the ice mocha. Do you know what you are getting yourself in for?

  • Do you have the personality to work in customer service?
  • If family and friends look at you weird when you suggest the idea, then best look into some training to perk things up a bit. When was the last time you went the extra mile?

  • Are you good with money & can you count beans?
  • You need to be able to track where your money goes on purchases and be able to forecast upcoming expenditure like GST, Wages tax & super. Do you have a personal budget/savings habit?

  • What is your purpose for the business?
  • You need a clear vision of your goals & core values. What do you stand for and why should customers buy from you?

    Make the best decision and don't froth it up

    "Joe, I know we have covered a lot today, but basically you have 3 options here - startup your own business, franchise a business or buy an established business. Let's explore them in more detail, so that you make the best decision and don't froth it up". Stay tuned for our next instalment where Joe considers starting his own business from the ground up.

    Do you have an idea brewing for a small business? Call the barista's of books at Logan & Hall Accountants on 03 5032 1121. Because our business is more than just counting beans and we're pretty grounded in your passion, whatever that might be.

Welcome to our newly designed website!

Welcome to our newly designed website!

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Phone: (03) 5032 1121
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Email: service@loganhall.com.au

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