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  • Social Bite CEO Sleepout - Breakfast With Nicola Sturgeon.

    Friday 16th December 2016

    A real pleasure to meet First Minister Nicola Sturgeon in Edinburgh’s Charlotte Square after last night’s CEO Sleepout. Not the best night’s sleep I’ve ever had, but a huge reminder of what homeless people go through every day and of the comforts that the rest of us take for granted, particularly at this time of year.

     

    It was great to be part of such a worthy event and to have contributed to some excellent fundraising for Social Bite. The morning roll from Nicola almost made it worth the 12 hours of discomfort!

    I'm still Fundrasing for this great cause. If you haven't donated and would like to please click here to make a donation.

     

     

  • Proptech, Fintech what next tech?

    Wednesday 9th November 2016

    Last week I was asked to be the opening speaker at the Scottish PropTech Roadshow in Glasgow by my friend Sam Zawadzki. Sam and I met a few years ago when I was doing a guest lecture at Edinburgh university. Since then I have, in an unofficial capacity, been mentoring him. Sam is a Proptech entrepreneur. His software Apply.Property allows property agents to offer prospective property buyers and tenants the ability to easily book viewings online 24/7, 365 days a year.

    It is gaining traction with a number of high-profile clients, including Rettie & Co and Rent Locally, adopting the platform. Apply.Property significantly heightens efficiency by providing instant responses to all portal enquiries, emails, and out-of-hours calls, automatically indicating the agent’s viewing availability. Apply.Property moves the application process online, reducing paperwork and enabling agents and tenants to sign a lease when on a viewing, or for buyers to make an offer while actually in the property.

     

    Prior to reading this, I am sure that quite a few of you didn’t know what a PropTech and its cousin FinTech were.

    Essentially, PropTech and FinTech are buzzwords used to describe two types of business which use software to disrupt current markets. FinTech companies use technology to provide and improve financial services. PropTech companies use technology to improve end user experience across the whole range of services in the property industry. From buying, renting, selling, building, heating or managing residential and commercial property.

     

    After speaking at the roadshow, it seems there are quite a few other PropTech start-ups being planned in Scotland.  Various entrepreneurs and agents are emerging out of the woodwork to talk about their take on PropTech. We have Chris Duff who has resigned from IME with plans to imminently launch his “disruptive” commercial property start-up. Meanwhile, Keith Watters from chartered surveyors Graham +Sibbald has been chatting to me about an innovative commercial property platform, and seasoned ecommerce entrepreneur Chris Jack has been picking my brains about raising money for his PropTech start-up.

    I think this interest in PropTech is great news for Scotland, which has developed into one of the biggest UK hubs for tech start-ups outside of London. I’m sure I don’t have to go through the exceptional businesses that have started here – but I’ll namecheck a couple – FanDuel, Skyscanner, Money Dashboard and Mallzee.

     Hopefully 2017 will see a couple of PropTech businesses join the Scottish start-up hall of fame.

     

     

  • Property problem killed the sale of this ecommerce business for me

    Tuesday 18th October 2016

     

    On Saturday afternoon, I received a call from a former client of one of my trading companies. He had been in protracted negotiations to buy a small e-commerce business from his so-called ‘friendly rival’ and the negotiations had been dragging on for some time. He now felt under pressure to quickly conclude a deal and just wanted to get a second opinion.

    It immediately became clear that if he managed to close the deal and purchase the business, then the main driver for my client was to sell off its stock between now and Christmas and get his money back.  Seasonal inventory in a small business is notoriously difficult to value, but he had agreed to buy it “at cost”. While a detailed stock check had not yet been undertaken, it was envisaged that it would be valued at around £150k.

    I spent an hour-and-a-half on the phone playing devil’s advocate with him, putting forward a number of arguments as to why he should think again about purchasing the business.

    My client is an internet retailer, who sells stock on marketplaces such as eBay and Amazon, and he was now buying another internet retailer that basically did the same thing. According to him, the acquisition would allow him to almost double his turnover and, in theory, increase his profitability. In practice, however, he was buying a limited company and taking on a workforce and a rundown warehouse at the other end of town.

    Tip from Shaf: When acquiring a company, don’t appear desperate to purchase. The more desperate you are, the less leverage you will have to strike a favourable bargain.

     

    What was he buying?

    I have previously blogged about how business can be valued - have a look here. What was my client buying? If you stripped away the veneer, he was buying a marketplace seller. As far as I am concerned, a marketplace seller has no value in terms of goodwill. It’s not as if they own a website - Amazon and eBay have the pleasure of owning that. Fundamentally, my view is that when someone is buying from Amazon, then they are buying from Amazon; they don’t think that they are buying from a specific Amazon seller.

    In other words, my former client was buying a customer database of people who had previously purchased from marketplace, but they still effectively belonged to Amazon and eBay. Some types of customers are more valuable than others, but in my opinion, these customers had no value – so essentially, the only assets he was really acquiring were the stock and anything else which was on the asset register.

    Tip from Shaf: During the negotiating process always focus on the weakness and vulnerabilities of the company you are acquiring. By focusing on these, you will be able to drive a better deal.

     

    What’s the real price?

    My client felt the best part of the deal for him was that he was paying for the stock at value and everything else was free! Basically, the deal he had agreed was that the shares in the company would change hands for the value of the stock. He had become so fixated on the price he thought he was paying that nothing else mattered.

    In reality though, he wasn’t just paying for the stock; he was paying a lot more. It was clear that the real purchase price he was paying was considerably more once he took the hidden liabilities into consideration. Post-Christmas, he planned to relocate the business that he was acquiring to his own premises, and invariably he would have to cut the workforce – which would result in cost. A further cost he hadn’t factored in was the fact that by acquiring the shares in the company, he would be taking on a lease. The worrying thing about this lease was that the business he was buying was in a rundown warehouse in a non-too exclusive part of the city.

    Tip from Shaf: If you are buying a marketplace seller, then ask a property expert to consider any leases you take on. With all due respect, most of today’s large marketplace sellers started their business in their garage or bedroom. When they eventually took on leases, most landlords didn’t want to rent to them due to their covenant so they ended up taking properties that no one else wanted – rundown buildings often in disrepair. They moved in with little professional advice and certainly no schedule of conditions, leaving them open to substantial schedules of dilatations at the end of the lease. The schedule of dilapidations can often wipe out all value in the Assets of the business.

     

    Abortive costs

    My client was fixated on the time that he had sunk into the project so far. He had been discussing the purchase since August, had developed tunnel vision and simply wanted to do a deal - he just needed someone to tell him it was a great move and that he should go for it. There was no way he wanted this one to get away.

    Tip from Shaf: There is a saying when it comes to sales and trading in inventory: “the first loss is the best loss” and clearly this was the case here. I felt he would be better off accepting the abortive costs rather than doing this deal in its current format as that would be the least of his worries!

     

     

    The DIY test

    This is a very simple test that I have used many times over the years. I ask myself, ‘What would it cost to set this business up from scratch?’ If you can put together a new business that is similar to the one being sold and do it in a more cost-effective, efficient manner, then it’s probably not worth bothering. As soon as I ran through the numbers with my client, his rose-tinted spectacles fell off.

    Let’s consider this further by looking more closely at the process of starting a similar business, and any potential challenges.

    Barriers to entry: Absolutely none. You can open an eBay and Amazon seller account within an hour!

    Developing a customer database: No investment required. The business sells goods on a marketplace, so the customers are already there. To gain traction you just need to be competitively priced. To build a good reputation on a marketplace, it’s a case of offering excellent customer service, and it won’t take long for the positive feedback to arrive.

    Recruiting and training staff: No investment required – my former client already had the resource in-house. In fact, his plan was that once the peak season of October to December was finished, he would close the acquired warehouse and make the vast majority of the acquired staff redundant.

    Stock: Fair enough, he was getting £150k worth of stock which, if things went to plan, he could sell for £300k. However, if they didn’t go to plan, he would be left with a lot of seasonal stock which he would then have to hold onto for nine months until he could sell it the following year. As the only real asset that he was buying was stock and he just wanted £150k worth of complimentary stock at cost, then surely he could just go and buy it from a wholesaler?

    By setting up the business himself, or in his case, expanding his product range to the same level as his friendly rival’s, he wouldn’t have any of the hidden liabilities I have mentioned. It’s important to remember that those hidden liabilities could be as much as the consideration for the purchase.

     

    Note from Shaf: On Sunday 16 October, I sent this blog to my client before publishing it. He called me within 10 minutes of reading the blog, asking me to remove a couple of his personal details that could have identified him as the purchaser. Once I had agreed to do this, he went on to admit: “When I saw it in black and white, it’s ridiculous that I was actually going to buy that business. I think the only reason I wanted to buy it was because it would make me feel good.”

     

     

     

  • Selling Kangaroo Pizza Online Gave My High Street Shop Traction.

    Thursday 13th October 2016

    Selling Kangaroo Pizza Online Gave My High Street Shop Traction.

     

    As you may have read in my last blog, there has been a lot of press recently on the death of the high street – but some occupiers are positively thriving.

    For this blog, in the same way as the last one, I decided to speak to some of our clients and find out why they are doing well when others aren’t, and if there are any lessons to be learned for entrepreneurs, property investment companies and developers when looking at their success stories.

     

    Last week, I had the opportunity to speak to Maciek Troscianko, the CEO of The Real Pizza Factory. Maciek has just opened two new ‘pizza showrooms’ as he calls them. One of them he happens to rent from SRA Ventures.

     

    Now here’s the unique thing about Maciek - he doesn’t consider himself to be a retailer. Instead, he considers himself a tech entrepreneur. How can a guy who runs a pizza shop be considered a tech entrepreneur, you might well ask? I asked Maciek that very question to give budding entrepreneurs a few pointers.

     

    Prior to setting up the Real Pizza Factory, Maciek ran the Kublai Khan restaurant. The restaurant wasn’t doing particularly well so Maciek decided to leverage the staff and the kitchen and set up an online pizza-only business. The new business grew exponentially and Maciek gave up the restaurant to concentrate solely on the pizza business.  To complement the pizza business, he has now opened some pizza showrooms on the high street.  At the peak of the business, Maciek delivers up to 10,000 pizza per month!  Here’s how he managed his astounding growth.

     

    Out brand the big brands….

    Maciek said: “When we first started out, we were an online-only business and we didn’t have a physical store. Branding and image was very important to winning the trust of potential customers and retaining the ones that we had won. Every aspect of our business oozed professionalism, from the way we answered the phone, to the way our staff dressed. When we opened our pizza showroom on Gorgie Road, we made sure we looked unique to give it the image of a rustic pizza shop and ensure there truly wasn’t anything comparable on the high street. The big pizza chains have the same look and feel, while every Dominos outlet looks alike no matter wherever you go in the country.”

     

    Tip from Shaf: Hiring an expert to do branding does not need to be expensive. There are hundreds, if not thousands, of branding experts on freelancer marketplaces who can do high quality branding for less than the cost of a good night out.

     

     

    Innovate, be quick and gain traction

    If you have an idea and your research indicates that it will work, then go for it. Believe in yourself, and your vision, and that you will achieve your goals. Don’t sit around, or someone else may beat you to it – and use technology to quickly build scale. Technology should be an inherent part of any start up.

     

    Maciek said: “All of our marketing is done online, all our order processing is done online, and social media recommendations play a huge part in our sales growth. We use standard off-the-shelf packages such as MailChimp and Mandrill to do our online marketing which we bolster with SMS marketing. The biggest challenge we faced was when we set up; how do you get people to try a new product in a fairly saturated market from a brand they have never heard of?

    “We decided to try a fairly well-tested concept - that of the loss leader - and put a 21st century spin on it.  We offered free pizza delivered to your home, and encouraged people to share it via their social networks and smartphones. Anyone that goes to the website can order a pizza and have it delivered to their home free of charge. You can imagine how this spread like wildfire on social media. Our cost of customer acquisition was initially very high. However, we now have a database of 10,000 repeat customers.”

     

    Tip from Shaf: A ‘loss leader’ is defined as a product on which you lose money, but through which you also generate sales of other products. Does it work well? You can be the lab rat - go to http://www.therealpizzafactory.co.uk/free-pizza-fb.html  and order a pizza free of charge that will be delivered to your door. If you reorder, then loss leaders definitely work!

     

    Be unique and Creative

    “We feel our menu is one of the most unique available. We offer exotic pizza toppings such as Kangaroo, octopus, caviar and Venison. People are often attracted to the idea of getting something different from a boutique, independently-owned business. Our marketing made great play of the exotic options that were available on the menu.

     

    One of the reasons why I wanted a chain of pizza showrooms in high footfall areas throughout Edinburgh - aside from the fact that it allows us deliver quicker – is that it allows us to roll out a revolutionary new product. We wanted to create a pizza which people could have while they were on the move. We wanted to completely revolutionise pizza as a street food and we came up with the ‘Pizza Cone’. Gone are the days of eating messy and impractical pizza slices in the street!”

     

     

     

    Note From Shaf: Please note the picture used in this Blog is not real it has been ‘Photoshopped’. No tortoises were hurt in the creation of this Blog.

  • Carnage on our High Street- Tips from the Survivors.

    Wednesday 5th October 2016

    There has been a lot of press recently on the death of the high street. Without going into details on the statistics, it makes for grim reading. All this doom and gloom about the high street would suggest that we ought to be suffering as a property investment company. After all, in theory, our extensive retail portfolio should be riddled with voids. Our income should be reducing as there would be a decline in top line growth due to reduced rental income. Correspondingly, our overheads should be increasing as we should be liable for vacant rates and higher insurance premiums - BUT this is not the case; we don’t actually have a single void in our retail portfolio.

    For this blog, I decided to speak to some of our clients and find out why they are thriving when others aren’t and if there are any lessons to be learned for entrepreneurs, property investment companies and developers from their stories.

    The first person I spoke to was Darryle MacDonald about his business Eden Aquatics which is based in Gorgie Road in Edinburgh. Eden Aquatics is one of the few places in the Edinburgh area that provides reptile and aquatic supplies for pet owners and has been voted by readers of Practical Fishkeeping Magazine as one of the best aquarist shops in the UK.

     Darryle’s business is on a bit of an accelerated growth curve. He contacted us earlier this year asking if we had bigger premises he could move to as his fish room wasn’t big enough. He also wanted to sell exotic marine fish such as seahorses alongside the tropical fish they specialised in. Rather than move premises,  Darryle worked closely with SRA Ventures and agreed to provide assistance to help expand and renovate the current location, while creating a bespoke marine fish room.

     Darryle took over the business in 2013, acquiring what was an ailing pet shop. However, since the change of ownership, the business has reinvented itself and has been growing from strength to strength. Here are Darryle’s thoughts on why he has been successful in the high street:

     

    David Vs Goliath: being small is actually an advantage.  Darryle compares his business to a speedboat: “It’s small, fast and agile.” If the business is heading in the wrong direction, whether it be the choice of products they stock, or even the customer perception of the business, they can correct the course in a matter of minutes. This nimble nature has provided him with the mindset that he is not afraid to try something new, learn from each failure and build on every success.   Darryle is unlike his competitors who he describes as oil tankers – able to move a lot of volume but tending to take a long time to change course.

     Darryle also feels that people are turning away from big business, especially with the tax-dodging shenanigans of the bigger chains. He says there is definitely a growing trend of people buying from smaller local specialist retailers.

     

    Specialise

    When Darryle took over the business, he immediately rebranded it to Eden Aquatics and changed the product range to specialise in rare tropical fish. “We just didn’t want to be another me2 retailer that sold goldfish, guppies, budgie seed and the odd hamster,” he said.

     Darryle continued: “I felt that that there wasn’t a specialist aquatics business in the marketplace which dealt in the most rare and exotic tropical fish. There is a specialist website, Hobbyist, which can purchase live fish from just about anywhere, but the cost of transport is prohibitive and there is a strong possibility of fatalities, while most aquarists don’t want to be responsible for a fish which costs £200 before dying in transit. We decided to carve out this niche and dominate it. Our business became a haven for fish nerds to be able to see the most exotic fish in Scotland. We regularly have clients from as far afield as Fort William who come and shop with us once a month.”

    This approach has clearly reaped dividends for Darryle. After the success of his new marine fish rooms, Darryle is now targeting another niche market which is live coral. Some of the coral he plans to stock in his new setup come in at a whopping £300 for what is essentially a piece of live rock that lives in the sea.

     

    Tip from Shaf: Without realising it, Darryle has followed a tried and tested path. The business’ initial focus was on a very narrow niche of specialist tropical fish, but once he worked out how to dominate this niche, he expanded from a position of strength into marine fish and now plans to move into live coral. This comparison may strike you as a jump too far, but let’s compare Darryle’s business to Facebook which started off as a platform for students at Harvard. Mark Zuckerberg dominated the Harvard online social media market, then moved on to other colleges, before expanding that vision to his current market - the entire world!

    Differentiate

     Darryle says: “In our marketing, we make great play of the fact that we are totally different to other aquatic stores. The product we sell and the level of service we offer is unlike anything else available in this country. All of our staff are fish gurus, first and foremost; we have an expert knowledge of specialist fishkeeping which is second to none.

    “One of the biggest gripes about big businesses is when something goes wrong and a client needs help, you end up being passed from pillar to post. When you eventually speak to someone, they are indifferent to the problem. Recently we were asked by the restaurant Chaophraya to come and have a look at their fish tank when they were let down by a national service provider and all their fish kept dying - not good for a restaurant whose aquarium is the centrepiece of the restaurant!

    “We ended up working through the night to do a major overhaul of the whole system, fixing the problem. As a result of this, we have been asked by the chain to change the current tropical fish tank in the Edinburgh restaurant to a marine tank and maintain all of their fish tanks in every one of their restaurants in the UK.”

    Tip from Shaf: As a small business, you have one inherent advantage that you need to immediately leverage - that is the level of customer service and engagement you can provide. Unlike big organisations which rely on call centres and automated email support, the human touch a small retailer can offer will always make customers feel special. Remember that giving customers your undivided attention, and exceeding expectations, results in a cascade of word-of-mouth referrals.

     

     

     

     

  • Ecommerce Start-ups and Covenant Strength when letting Commercial Property.

    Sunday 2nd October 2016

    Before letting commercial property, a landlord or their agent will have a look at a potential tenant’s covenant strength. Effectively the landlord is assessing the financial stability and profitability of the business to ensure the prospective tenants can pay the rent. Traditionally this is done by looking at accounts and doing a reference check. This process is called a covenant strength check.

     

     

    As far as a landlord is concerned covenant strength is important for two reasons

    1.     A good covenant will reassure a landlord that the tenant can pay the bills and is likely to be there for the duration of the lease.

    2.     More importantly if the landlord ever wants to sell the business with the tenant in situ the better the covenant the more the landlord will achieve for the property as the potential purchaser can be assured of a steady and timeous income stream

     

    Tip from Shaf:  A good covenant strength can be more powerful, or valuable to the landlord, than a higher rent, as the value of the property will be higher and the landlord will be able sell the asset for a higher price

     

    This is all fine and well when it comes to blue chip investments and traditional retailers, however it will not work in the nimble worlds of ecommerce start-ups. When I started my company E-Net computers we were looking for warehousing and no one wanted to rent space to us as we were a start-up. The business had been incorporated for just over a year and had been trading for a few months. No-one wanted to listen to us when we said our products would dominate the internet sales channel and our turnover  would be  tens of millions of pounds over the next few years, which incidentally it did go on to do! Imagine what a great covenant it would have been for a landlord to sign up E-Net for 15 years! Finally, we ended up buying the building off the landlord for over £1m with surplus cash flow that our trading business threw off.

     

    A decade and a half later, my Commercial Property investment company owns a substantial portfolio throughout Scotland. A large percentage of our portfolio is small industrial units such as the ones we own at  e-netpark, not surprisingly most of the enquiries come from start-up online retailers, an area of the market we actively target. Unfortunately, not all start-ups are successful. As a result of this we really needed to develop a system that could determine which online tenants were going to be successful. After all, online trade accounts for around 15pc of total retail sales in Britain and is growing fast. The £10bn generated by online sellers is expected to double to £20bn in the next five years as more entrepreneurs set up shop.

     

    Due to my background in e-commerce, I was invited to speak at an e-commerce event organised by Iwoca founder Christoph Reich. Iwoca, the darling of the FinTech world, lend money to internet retailers, who are predominantly eBay and Amazon traders.  I used the opportunity to have several discussions with Christoph over how Iwoca makes lending decisions. The jist of it is that Iwoca has built a model which assesses the risk of lending to internet retailers based on much more than accounts.  They look at the quality of the potential borrowers; customer feedback; how successful they are at attracting business through social media; their product ranking in a search query and the quality of reviews left by customers. Public feedback is the only way to build trust when you’re an online seller. If you lose your reputation, then you have to start offering your merchandise at a lower price to win sales. The better the feedback, the better a business is run and the higher the margin is going to be from that business.

     

    Over the last few years, we have developed our own algorithm to vet potential tenants so we check which internet retailers are going to be successful, and touch wood, our system has got it right in every instance so far. Much the same as Iwoca, we look at a customer’s performance on marketplaces such as Etsy Amazon and eBay as well as their own website.

     

    Now clearly, I’m not going to share my algorithm with you - unless of course you pay me a lot of money - but I can give you general pointers to assess how a tenant runs their business and from there you can make a calculated decision as to the long-term viability of a potential online tenant.

     

    A good tool for performing a basic search of an eBay seller’s business is Terapeak. Terapeak will provide a whole host of information about an eBay seller. Simply type in the name of a seller and it will provide you with information such as the retailer turnover, their best selling products, how they compare to other retailers who sell the same products, etc.  Click  this link to see the depth of information available.

     

    Other due diligence that a landlord can do for Amazon sellers is to see their traction on Amazon Seller Central – again, that offers a wealth of information. Unlike Terapeak, Seller

    Central is not available except to the seller, so you will need your potential tenant’s permission to access it.

     

    Furthermore, you can check out the client’s online presence by looking at their social media presence and read the review left on sites such as trust pilot. The more proactive they are in dealing with customer enquiries, the more they are passionate about selling on the net.

     

    Finally, remember to check their feedback on eBay - simply log onto eBay and click on the feedback link. Again, check their feedback on Amazon.

     

     

     

     

    Tip from Shaf: E-commerce is going to continue to take market share from traditional bricks and mortar shops. It is vitally important that if you are renting industrial space that you target this market and develop procedures such as the ones I have identified above in order to pick the future winners.

  • Trading Company or Property Investment Company?

    Monday 26th September 2016

    SRA Ventures Limited is a very successful commercial property investment company. I attribute that success to the fact that we don’t run it as a commercial property investment company; instead, we run it as an entrepreneur-driven trading company.

    A trading company is a business that works with different kinds of products which are then sold to consumers or businesses. Trading companies buy a specialised range of products, maintain a stock, and deliver products to customers.

    So how on earth can we run a property company in that way? Property doesn’t appear to obviously fall into that kind of category, so let me explain.

     

    Dominating a niche:  What do ties.com, Volvo Trucks and Apple - credited as the world’s most profitable company just a few months ago - have in common? They are trading companies that locate and then dominate a niche. Rather than having a shotgun approach to business, their companies have a laser-guided focus on a certain segment of the market. In other words, they all extract extraordinary profits from the very specific areas in which they operate.

    SRA Ventures started off as a plain vanilla property management company but very quickly it found its own niche. It focuses on under-performing commercial assets, including properties with recent voids, poor management teams, or problematic tenants.  Essentially, we purchase Scottish assets that traditional investment companies turn their nose up at, and then prosper where others assume they cannot.

    Tip from Shaf: The messier an asset is, the cheaper it will be priced – and therefore the higher your potential return is once you have managed the asset effectively.

     

    Cash is king: For a trading company, cash is king. By paying cash for stock, you are guaranteed the best prices – and in times of shortage of stock, you will be given first bite at the cherry. As a result of this, we have managed to run some of the most successful and profitable trading business in the UK. We have taken this philosophy and firmly transplanted it into property investment.

    Naturally, we don’t have millions of pounds sitting in a deposit account, and we use all spare cash flow to aggressively amortise debt. What we do have, however, is pre-arranged funding for asset purchase deals from £100k up to £10M, and we can provide a potential vendor of a transaction with a proof of funding letter from our bankers within a matter of hours.

    Tip from Shaf: A vendor of a property will almost certainly settle for a lower price from a purchaser who is able to demonstrate that they have the funds and can pay for the asset in a timeous manner.

     

    Lock in the purchasing profits: Any wise trader will tell you that the amount of profit you make on a transaction is determined more by the purchasing price and not the selling price of the product. In a trading business, this is easy. You have a team of purchasers who are experts in their product categories and they will source the product.

    How can you possibly replicate this in a property investment company? The answer is quite simple - as well as having our retained agents Graham and Sibbald looking for deals for us, we have opened up the market to any agent that can offer us potential opportunities.

    So, for commercial property acquisition, we offer a minimum fee of £10,000. We pay anyone who introduces a deal to us. Indeed, our typical fee to brokers or introducers is between one and three per cent.

    We paid out a significant sum only recently in fact. In a deal that we are currently negotiating, an agent called to tell us about a former client who might be looking to sell his portfolio as he was ready to retire. For that snippet of information and a telephone number, the agent earned a fee of £30,000 - not bad work if you can get it!

    Tip from Shaf: Do you know of an asset which may fall within our purchasing criteria? If you do, drop us a line and earn yourself a substantial fee – more information can be found here

     

    The best sales team: If you are a trading business, then the better, more hungry and incentivised your sales team are, the more your topline will grow.

    How do you transplant a sales team into a property investment company? Well, to be honest, you can’t really. You can of course ensure you have the best people marketing your properties to let, but we have tried to incentivise our sales pipeline further by opening up certain transactions to all agents.

    In 2012, we had a 67,000 square foot warehouse that we were struggling to shift. As well as paying our current agents, we decided to open it up to anyone to find us a tenant and offered a £25,000 finder’s fee to anyone who recommended a suitable tenant. Interest in the building spiked and we ended up doing a deal with Glasgow-based United Wholesale (Scotland). The accountant who introduced the deal to United ended up with a fee note for £25,000.

    Tip from Shaf: We are currently offering an introducer’s fee of £12,000 for the introduction of a suitable tenant for the warehouse below. If you know someone that might be interested, then give us a call. More information can be found here

     

    Don’t fall in love with the stock

    Napoleon is attributed as describing Britain as a nation of shopkeepers; he wasn’t wrong. Our property investment company is essentially a shop, and like a shopkeeper, we believe in good stock rotation. Every asset we own and manage is for sale on the virtual shelves of our storefront.

    This is quite a statement for a property investment company. Most property investment companies buy assets to produce long-term income. However, our view is that if we can make a reasonable profit, then we are happy to sell the asset and buy another one. We don’t regard any of our assets as trophy assets. In fact, we actively encourage our tenants to purchase the buildings that they rent from us. 

    Tip from Shaf: When pricing an asset for sale, make sure it is priced so that the purchaser can extract a reasonable profit from it.

     

     

  • Negotiate Like a Pro – A few observations

    Monday 19th September 2016

    Negotiate Like a Pro – A few observations by Shaf Rasul.

     

    The process of negotiation is the art of careful discussion with understanding of mutual goals, and sometimes of the necessity of making concessions, in order to facilitate a deal that’s right for everyone – after all, a deal really only works if it is win-win for both parties.

    I have negotiated many purchases of assets and businesses over the years. There are tough negotiators out there, and many tactics that they can use to turn a situation to their advantage.

    I was recently involved in a transaction to acquire a substantial Scottish property company. In the end, I just couldn’t get the deal to work; if I had agreed to all the terms that were gradually introduced into the contract, it would have been a noose around the neck of my company.

    I tried unsuccessfully on several occasions to get it to work, but unfortunately I just couldn’t get it over the line.

    The person on the other side, who I have a lot of respect for, was a wily businessman who had over 50 years of business experience – a real master negotiator, to say the least.

    Nevertheless, when good negotiators like him use effective tactics, there are always counter-tactics, measures and different approaches that can be deployed in order to reverse the situation, or at least get you back on an even keel. I have highlighted a few of these below and provided tips on how to meaningfully engage and put yourself in a position to successfully deal with each scenario.

     

    Good Cop / Bad Cop

    I always try and negotiate with decision-makers on a principal-to-principal basis. In a recent deal where I was discussing head of terms, the seller asked an advisor to sit in on the discussion - and the advisor just happened to be a solicitor. This ‘advisor’ then went on to tell me why the deal wouldn’t work in its current format and suggested alternative ways of framing the contract. Of course, this new spin in the contract resulted in more concessions to the seller. So how did I get over this tricky hurdle?

    Personally I find the best way of approaching this circumstance is to either look to take things back to basics and negotiate with just one person at a time, or alternatively ask someone to join you. Under the circumstances, I called my lawyer, and put him on loud speaker so he could give his input into the matter.

    Tip from Shaf: Always try and negotiate with the decision-maker on a principal-to-principal basis.

     

    The Walkout

    What to do if the other side backs out of a deal or threatens to walk out just before it’s about to be concluded, insisting that concessions must be made in order to make the deal work?

    If the concessions are minor, then you may consider it. However, the downside of giving concessions at such a late stage is that you may yet have another bite at the cherry, so perhaps it’s best to just sit tight.

    The best course of action, which I didn’t do in the above scenario, may be for you to also walk away, but put the ball firmly in their court before you do so. Tell the other side you will do the deal, providing they stick to the agreed terms.

    Of course, it’s a risky strategy, but you shouldn’t bother contacting the other party and be seen to be doing the running. If they are serious about doing a deal, then they will contact you, and the boot will be on the other foot when you sit down at the negotiating table. If you do get tempted to call them, leave it for at least a month. The longer you leave it, the stronger your position.

    Tip from Shaf:  In most instances, the threat of a last minute walk out just before the contract is concluded is usually a bluff.

     

    Introducing a new decision-maker

    On the tricky deal I mentioned earlier, I was negotiating with the owner of a company. We agreed a deal, shook hands on it, and passed it to our respective lawyers several days before we were due to pay up on each side.

    He then shifted the goalposts, calling me to say that his wife wasn’t happy with the deal, and asked for more concessions. In fairness, his wife was a shareholder, and my response was to get her involved in the negotiation.

    Therefore, a simple rule of thumb is to avoid negotiating until the ultimate decision maker is present. You may think that you’re talking to them, but that may not actually be the case.  

    In some other instances, I have found that people will suddenly say that they need to check with the bank before agreeing a deal. In other words, the bank may be the ultimate decision-maker. If that’s the case, always find out what the bank’s criteria is at the outset of the negotiations.

    Tip from Shaf: Always negotiate with the organ grinder

     

     

    Keep checking here for more smart business tactics from Shaf Rasul that can help to put you in the driving seat for enduring success

  • Adding Value Is The Key Where Supply Exceeds Demand

    Sunday 6th March 2011

     

    No landlord wants to find themselves in a market where the number of units available to let is larger than the number of tenants out there looking to take on a lease. This means empty units, costs that can’t be recouped, properties not being adequately cared for and, generally, just extra management hassle for landlords.

     

    This is the situation I found myself in earlier this year at my industrial estate out at E-Net Park, Linlithgow. A number of empty units had been on my agents’ books for months but they just weren’t shifting. Nothing ‘bad’ was being done – we were asking a fair market rent and the units were brand new and offered great accommodation. BUT, nothing ‘exceptional’ was being done to market these units either and that’s exactly what I came to realise was required in this current market. Tenants over the last few years have had the pick of the crop when it comes to choosing premises to match their requirements perfectly. My units, as good as they were, just sat amongst the rest of the selection of other good properties out there and the tenants weren’t biting (not even nibbling!).

     

    In business, you’ve got to be able to think outside the box and try to see things that other people can’t see – that is your opportunity to exploit and make money. In this case, we thought outside the usual landlord / tenant letting box and considered the types of businesses which were doing well during the credit crunch. The answer came to us – Ebay businesses. With their next to nothing overheads, discount priced goods attractive to the cash strapped public and latching onto the reputable and trusted Ebay name, it is not hard to see how Ebay retailers have been making big profits at a time when other businesses have been struggling. But how could I attract such businesses into my units, after all, the lack of rental overheads was one of the main attractions to them and reasons for their success. For start up businesses the rental outlay is such a big commitment that it puts off many.

     

    Again, thinking outside the box, we came up with the next part of the answer; and this is where the added value element comes in. As an Ebay business grows and becomes more and more successful, it faces a ‘catch 22’ situation – no, make that 2 catch ‘22 situations’. Firstly, the lack of retail premises means that the Ebayer’s house gets taken over by mountains of boxes of goods which they’ve bought and await purchase orders. Secondly, the Post Office becomes the Ebayer’s home from home as they struggle there daily with stacks of boxes, spend hours queuing and a fortune on stamps. The Ebay Village concept strikes out both of these problems in a oner and gets my units let, whilst still enabling the Ebayer to enjoy the advantages of running an online business.

     

    So, here it is: I have come up with a USP which I can offer to tenants and give them added value when they rent a unit from me. This is a Unique Selling Point which makes my product stand out from all the rest and is therefore more attractive to potential tenants. As there are a number of units in my industrial estate, I have been able to do a deal with a courier company for reduced carrier charges, and the more carriage I give them the lower the rates become. By focussing on the Ebay business which depends so much on carriage, I allow my tenants to take advantage of these reduced carriage costs and the more Ebay tenants there are, the lower their carriage costs are. Suddenly their rent is off-set by their carriage savings and essentially they are getting a retail unit in which to store their goods for FREE. Also they now have hours of spare time not having to go to the Post Office but instead can focus on building their business. And the best part from my point of view as a landlord is that my units are let which was the whole point of the exercise in the first place. Having started 2010 with 20% vacant units at E-Net Park, Ebay Village is now 80% occupied and offering its tenants a great deal.

     

     

    Tip from Shaf – Keep on your toes

    It’s always difficult to admit that a winning strategy is starting to fail because circumstances have changed.  That’s why people let their businesses drift and then diminish when the economic cycle changes.  Don’t let it happen to you.  Take a hard look at all the markets you address.  Look for those that are showing signs of a downturn due to economic conditions.  Think outside the box to find another market that is growing and that could replace the one you are in.

     

     

    The old cliché is true, I’m afraid.  You can’t stand still.  If you are not making progress you’re about to take a step back

    Further reading : Click Here

     

  • Hatching the retail egg

    Sunday 19th December 2010

     

    So, the result of my conversations with Duncan Sutherland on whether you could piggyback a successful bricks and mortar retail outlet on to a successful e-tailer like Bigoffers.co.uk was that Duncan persuaded me to have a go.  Bigoffers opened its doors in the Dalry area  of Edinburgh last week.  The retail  shop carries a wide range of consumer products all at attractive discounted prices.  Looking around, you’ve got to be amazed at some of the terrific value for money offers in there.  The opening day was quite busy and of course Duncan and I were there to get instant feedback from the most important and knowledgeable critics of a new business – its customers.

    So, how do you plan such an opening?  You need:

    ·         The right geographic location

    ·         A location with a good ‘footfall’ - footfall is the number of potential customers that walk past a retail location and might be tempted into an unplanned visit.  Remember that one of the main reasons for having bricks and mortar in which to display your products is to encourage impulse buying.  So the number of possible impulse buyers passing close to the  shop is key

    ·         A first class supply chain to maintain a healthy stock of products for customers to buy.  As they say in retailing, “If they can’t see it they can’t buy it”

    ·         Premises at a sensible cost - the riskiest part of a retail start up is probably the contract you have to sign for the premises you rent.  After all if you sell nothing and shut up shop after two months, you still have to pay the agreed rent to the landlord for the length of the terms on the contract

    ·         The right people to manage and operate the outlet

    Now I thought we had got a good solution to all of these essential ingredients.  It turns out that one of them will remain unproven for a while.

    After all we know that the Dalry area holds a lot of people looking for excellent value for money in discount outlets. 

    The supply chain is already in place with other companies, either in my hands or associated with me in some way, well-placed to provide stock from well-developed relationships with existing suppliers.  (Remember we have the advantage of taking established products into a new market.)

    Premises at this time in the business cycle and given the credit crunch are, frankly, going for a song.  Landlords are willing to negotiate rents low enough to reduce risk for the tenant even if they only cover the cost of keeping the property wind and watertight.

    As for people, well first and foremost we’ve got Duncan to cast his beady eye over the venture.  In the marketplace right now, again because of economic circumstances, there is a huge pool of talent looking for work.  There are new graduates and people let go by companies that are tightening their belts and down sizing.  They are all keen to find exciting and interesting work. So we can definitely get the quality of person we need.

    You can now see the one crucial matter we haven’t tested properly yet – footfall.  We were not to know that our opening of the outlet would coincide with snow that made Edinburgh more or less grind to a halt for a couple of weeks. So we shall see how things go when the thaw comes; but I feel confident that we have got the risk as low as possible and I think the idea will fly.

     

    Tip from Shaf -

    Be prepared if you are going to set up a new retail outlet whether it’s a barber shop or a department store to work harder than you have ever worked before.  Entrepreneurship is nine parts perspiration to one part inspiration.  

     

    If you have confidence in the people you need to make a venture work you are in the best shape possible.

     

     

     

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