Category: Business Plan

How does the Property Strategy -Purchase Lease Options and Purchase Options work?

happy couple holding and showing a house key

This is a relatively new strategy for residential property, although it has been used for many years in commercial property and property development. Basically, the seller agrees to lease the property now (so potential buyer doesn’t need the cash to buy it today) and then sell to buyer at future date at price agreed now. As property prices historically rise that means the future purchase will be at a discount to market price at that time.

Purchase Options


A purchase option gives the buyer the right to purchase the property at a specific price within a certain timeframe. This option is normally created by a written agreement between the buyer and the seller. The buyer must pay an option fee to the seller, which is normally non-refundable. If the buyer decides to exercise the option, the option fee will be deducted from the final purchase price. If the buyer decides not to exercise the option, the option fee will be retained by the seller.

Purchase Lease Options (Rent to Purchase/Rent to Own)


A purchase lease option (rent to purchase) allows the buyer to rent the property for a period of time with the option to purchase the property at a specific price. This agreement is normally set for a fixed term and in some agreements the monthly rent payments will be credited towards the final purchase price. If the buyer decides not to purchase the property at the end of the rental period, the option to purchase will expire and the buyer will not be entitled to a refund.

Advantages


Purchase options and purchase lease options (rent to purchase) allow the buyer to secure the property without having to pay the full purchase price upfront. This can be an advantage for buyers who do not have the cash available to purchase the property outright.

It may be of benefit to seller for example if they need to relocate, sales can take months to go through legals, this could be a faster option. It can also work well where the seller has little or no equity, so seller would probably leave them out of pocket.

Basically, this can be advantageous if the seller is in a hurry to sell but does not want to accept a lower price.

Disadvantages


Predicting the future is difficult and the option price agreed now might produce a big discount for the buyer, losing out on the sale uplift is potentially a downside for the seller, there is a risk that the buyer may not exercise the option, leaving the property unsold.

Heads of Terms in the Contract


The heads of terms in the contract should include details such as

  • Name and Address for both the buyer and seller
  • Property address
  • Agreed option fee which must be at least £1
  • The amount for which the property can be purchased
  • The length of the option period
  • Monthly lease (if applicable)
  • Any special terms and conditions

We recommend using a solicitor and taking legal advice Purchase Lease Option Solicitors | Bonallack & Bishop Solicitors (bishopslaw.co.uk)

Things to Check and what to say to vendors


Buyers should check if the mortgage lender will consent to letting the property as this may affect the agreement. Additionally, buyers should check the cost of the option and the typical length of the option period.

Typical Length of Option Period:
The typical length of the option period is between 3 to 5 years.

What to Say to Property Owners:
When approaching property owners, buyers should ask if the vendor would be interested in renting on a long-term let for between 3 to 5 years and if they would be interested in selling the property to them in the future.

In conclusion, purchase options and purchase lease options (rent to purchase) can be advantageous for both buyers and sellers. Buyers can secure the property without having to pay the full purchase price upfront, and sellers can secure a buyer without having to sell the property outright. It is important to have a written agreement in place and to ensure that both parties understand the agreement.

steve@bicknells.net

What is your plan for 2017?

Business Diagram

Now 2017 is in full swing, its time you thought about your business plan.

Before you do anything, sit down and think about

  1. How and where your income will come from
  2. What your Costs and Profit will be
  3. What your cash requirements are
  4. Which business structure will work for you and assess what tax you will need to pay

If you have a plan statistics show you are likely to make 20% more profit!

 

accountants-smaller

steve@bicknells.net

Business Planning made easy with Apps

Apps

A business plan helps you to:

  • clarify your business idea
  • spot potential problems
  • set out your goals
  • measure your progress

 

Businessman get idea

The problem with Business Plans is that they are time consuming to produce, so business owners put off doing them.

But new Apps might change this and make it much easier to produce high quality Business Plans.

http://www.enloop.com/features

There are other Apps too for example..

Business Plan Premier

StratPad

http://www.sage.co.uk/~/media/markets/uk/images/business-advice/infographic-starting-your-business.gif

steve@bicknells.net

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Do you have a great business proposal and strategy that will work?

Businessman get idea

Sometimes even the best ideas don’t get funding at first….

But if you have the right strategy you can still succeed, that’s why a business plan is really important

Approximately a third of all SME’s in the UK don’t have a Business Plan, that’s about 1.5m businesses, so if you don’t have one, here are some reasons why you should prepare one….

  1. Research by Exact Software shows that SME’s with Business Plans make 20% more profit
  2. Having a business plan doubles your chances of increasing profits, increasing revenue, attracting new clients
  3. A well-researched business plan which includes the right figures and realistic forecasts will reassure potential investors you are a sensible investment opportunity
  4. A Business Plan will help you set out and achieve your goals
  5. It will help you set goals for your managers and staff
  6. The Business Plan will help you plan your cash flow and forecast Capital Expenditure
  7. A Business Plan will help you secure Business Finance and Loans
  8. You can plan your succession strategy or prepare the business for sale
  9. A Business Plan tests the feasibility of your business idea
  10. It will help you plan for the recruitment of Staff

http://www.entrepreneur.com/dbimages/article/1392332798-how-build-business-plan-infographic.jpg

steve@bicknells.net

Will your Share Buy Back pass the ‘trade benefit’ test?

Successful Businessman With A Contract In Hand

Often as part of an exit strategy or succession planning companies will buy back shares.

Setting aside the mechanics, nicely explained in the ACCA Technical Factsheet 177 and the need for S1044 CTA 2010 clearance, the Buy Back has to be in the benefit of the trade not just the shareholder.

For example….

If the purpose is to ensure that an unwilling shareholder who wishes to end his association with the company does not sell his shares to someone who might not be acceptable to the other shareholders, the purchase will normally be regarded as benefiting the company’s trade.

Examples of unwilling shareholders are:

  • an outside shareholder who has provided equity finance (whether or not with the expectation of redemption or sale to the company) and who now wishes to withdraw that finance
  • a controlling shareholder who is retiring as a director and wishes to make way for new management
  • personal representatives of a deceased shareholder, where they wish to realise the value of the shares
  • a legatee of a deceased shareholder, where he does not wish to hold shares in the company

Assuming that the shares aren’t being bought back at Par Value, basic rate taxpayers will probably prefer dividends for any surplus where as higher rate taxpayer will want capital treatment.

Share Buy Back is complex, make sure you seek professional advice.

 

steve@bicknells.net

 

 

Government help to get new businesses started

Entrepreneur startup business model

The New Enterprise Allowance can provide money and support to help people start their own business if they get certain benefits and have a business idea that could work.

The scheme has resulted in:

  • around 460 new businesses being set up each week – around 53,000 in total
  • 12,360 businesses being started by people aged 50 or over
  • 10,040 disabled people becoming their own boss
  • 3,920 started by young people

People who don’t qualify for the scheme may be able to get other help with setting up a business.

Business Mentors have a key role to play

The New Enterprise Allowance is available to:

  • people over 18 who are claiming Jobseeker’s Allowance
  • lone parents on Income Support
  • people on Employment and Support Allowance in the work-related activity group

People on the scheme get expert help and advice from a business mentor who will help them to develop their business idea and write a business plan. If the business plan is approved, they are eligible for financial support payable through a weekly allowance over 26 weeks up to a total of £1,274.

There are also Start Up Loans…

A government funded scheme to provide advice, business loans and mentoring to startup businesses

steve@bicknells.net

5 key questions you need to ask your FD

Profitability

As businesses grow, their needs increase. The person steering the finances needs to be someone who can take on a broad commercial role. Forecasting, IT, tax issues, insurance and back office functions – all these need to run smoothly. But a fast-growth business needs someone who can anticipate both future opportunities and potential problems.

A good financial director will help owner-managers understand which aspects of the business are the most profitable, as well as forecasting ways to exploit other opportunities. (Santander)

So what key questions should you regularly ask your FD…..

  1. What is our cash cycle and how can we improve it – Cash Cycle Blog
  2. What Key Performance Indicators should we use and what are they telling us – KPI Blog
  3. How can we improve profitability – 15 ways to improve profitability Blog
  4. What is our Business Plan and is it the right plan – Business Plan Blog
  5. Can we reduce Overheads – 10 creative ways to reduce overheads Blog

steve@bicknells.net

10 reasons why you need a Business Plan and 10 tips for success

business plan tree

A business plan is a written document that describes your business. It covers objectives, strategies, sales, marketing and financial forecasts.

A business plan helps you to:

  • clarify your business idea
  • spot potential problems
  • set out your goals
  • measure your progress

Approximately a third of all SME’s in the UK don’t have a Business Plan, that’s about 1.5m businesses, so if you don’t have one, here are some reasons why you should prepare one….

  1. Research by Exact Software shows that SME’s with Business Plans make 20% more profit
  2. Having a business plan doubles your chances of increasing profits, increasing revenue, attracting new clients
  3. A well-researched business plan which includes the right figures and realistic forecasts will reassure potential investors you are a sensible investment opportunity
  4. A Business Plan will help you set out and achieve your goals
  5. It will help you set goals for your managers and staff
  6. The Business Plan will help you plan your cash flow and forecast Capital Expenditure
  7. A Business Plan will help you secure Business Finance and Loans
  8. You can plan your succession strategy or prepare the business for sale
  9. A Business Plan tests the feasibility of your business idea
  10. It will help you plan for the recruitment of Staff

 

http://www.entrepreneur.com/dbimages/article/1392332798-how-build-business-plan-infographic.jpg

steve@bicknells.net

Are you benefiting from the Online Sales Boom?

Online Shopping

Just in case you haven’t been watching the BBC News….

A record amount of online shopping was done in December 2013, says the British Retail Consortium (BRC).

Close to one in five non-food items was bought online last month, according to the BRC survey.

There was also a 19.2% growth in internet purchases from a year earlier, the fastest increase in four years……..

The online retail boom was very much in evidence in late 2013, with many High Street chains expanding their internet offerings, and some shops reporting record figures for the amount customers purchased online around Christmas.

In a recent AccountingWEB survey on average survey respondents said more than 80% of their customers use a smartphones or a tablet and almost all expect this number to increase over the next 12 months.

Without an online presence your business is likely to be become invisible to your customers.

Its not just about having a website either, there needs to be something that will keep your customers visiting your website and you probably need an app….

steve@bicknells.net

10 financial mistakes all new business should avoid

Stress business woman

Starting a new business is always a challenge but there are some common financial mistakes that all start ups should avoid.

  1. Lack of Planning – Businesses normally start with a great idea but you need to have business model that works and to at least have a basic business plan and cash flow.
  2. Over Trading – this happens when a business expands too quickly for its working capital, when you start a new business its tempting to accept every order without considering whether you can have the resources and the cash to deliver.
  3. Wasted Marketing and Advertising – new businesses are an easy target for marketing companies but its important to stick to the essentials to start with, having a website, e mail and business cards are essential, magazine advertising and other things can be done as the business grows, in the early stages you are experimenting and finding your market so if you spend too much too soon you might promote the wrong things at the wrong price.
  4. Wrong Business Structure – Before you start your business get some advice from your accountant, its important to choose the right structure not just for tax reasons but also for investment and ownership.
  5. Wrong Staff – Choosing the right team is critical for business success, choose staff that have the right skills, the right attitude and are dedicated to the success of the business.
  6. Over Ambitious – All too often businesses plans are over ambitious with sales growing rapidly, often they prove to be unrealistic, when preparing a sales forecast start with your order book and be cautious in your assumptions.
  7. Overheads – Many businesses over spend on overheads for example renting premises too early, work from home, if you can, to minimise costs.
  8. Stock Problems – Buying the wrong stock, under or over stocking are also issues for start ups, try to adopt a ‘just in time’ stock policy.
  9. Getting Paid – A sale is only a sale if you get paid, any one can give things away, make sure you manage your clients and get paid on time.
  10. Competition – Keep an eye on your competitors, they will be watching you and responding to maintain their market share.

steve@bicknells.net