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International Online Business: How Local Business Owners Are Going Global

Visions of Going Global

Whenever I look at a local business I do so with international vision because online business isn’t tied down the same way a typical brick and mortar business would be.

The Internet continues to amaze me almost as much as the imagination of local business owners who continually discover untapped potential within the online business world. Online business enables local business owners to expand into the international market regardless of what they do locally.

Most business owners are already equipped with more than enough potential to expand into the international marketplace. When they enter the online business world they begin to experience the vehicle that makes global business within anyone’s reach.

Grass Roots

If e-commerce has taught us anything over the last few years it’s that anyone with or without business experience can prosper thanks to internet marketing. Whether a business owner chooses to tackle the marketing themselves or hire someone the returns are far higher online than anywhere else.

This is definitely the season of the entrepreneur because with a little imagination people are effectively turning hobbies and interests into cash. Those with a little business experience manage to accomplish their goals quicker but the online business professional is in the most lucrative position.

Marketing to the World

In some cases local and small business owners will need to work with business consultants or coaches to find a comfortable fit in the global market. More business owners find getting comfortable in the ‘online business world’ harder than expanding their market but help is available if you’re just getting started or looking to grow.

Not everyone walks into the same scenario as the local baker who started packaging and selling his famous ‘bread mix in a bag’ but with a little help from an objective outsider multiple options usually emerge for local business owners.

Discovering ‘what’ you’re going to market in most cases is harder than figuring out how.

Recycling Your Internet Presence

The first thing that business owners should look at is whether or not they can adapt their current web properties, i.e. blogs, websites and ad campaigns, to work with their expansion objective.

Experienced online business owners can recognize almost immediately where the crossover can occur so that even if a new site is required, the old site can lend immediately to improving the new site’s rank.

Utilizing an established internet identity or brand works in favor of launching an international campaign almost like having a new housing development build adjacent to your little corner shop. Every customer and client in existence has an innate appreciation for established credibility regardless of where they’re from.

Your Online Business World

If you haven’t established your internet presence in the online business community it’s time to seriously consider doing so.

Every business regardless of their operating expenses or budget can afford to do this. What they cannot afford is neglecting to do so. Local business owners are increasingly aware of the competitive edge the internet brings to the local market but in reality the stakes are much higher.

The good news is that a local business that is just making this decision has the advantage if they know about the international marketing perspective for any online business. From an internet marketer’s viewpoint it is much easier to develop the initial sales funnel that naturally allows for global expansion as opposed to redesigning one or more active funnels.

How Will Your Business Survive

Imagine you died last night. Don’t think about how, just think you’re dead!

Now what happens? What will happen to your family? What will happen to your business? What VALUE will be placed on your business?

In many instances, we treat the value of a business as just a number, which is estimated by the amount of income the business generates. However, we don’t probe into this number to understand the assumptions that are used for its determination.

A key component that needs to be understood is how dependent the business is on the owner. An examination of this will have a direct and significant bearing on the value of the business. We have all heard the term goodwill, however, do we really understand what it means?

Goodwillcan be defined as the difference between the capitalized earnings value of a business and the value of its net assets. There are a number of factors that attribute to a company’s goodwill. The physical location of a business may result in a competitive advantage and, therefore, increased earnings as compared to the same business in a different location. The products or services a business sells may have created a positive reputation or identity in the minds of its customers, which leads them to purchase products and services from this business instead of from your competitors.

Certain contracts or licences held by your business may give it a competitive advantage and greater earnings than a competitor. Employees also add value to the business by the skills they bring to work each day. Most of us would agree that without people a business would not exist. However, not all employees of a business are critical to its success. In many owner-managed businesses, the key individual is the owner-manager. A key question is: “could the business survive the death, permanent disability or retirement of the owner?” Many businesses are inseparable from their owners. If one of the proceeding events occurred without proper planning, then the business would fail.

Possible scenarios

Let’s look at what could happen. You have owned a building materials store for 17 years. You died last night. This morning, your spouse calls one of the employees to inform them what happened. The employees first thought is what about their jobs – this will affect their lives and income they bring to their household. They may lose confidence in the ability of the successor to continue the business and will look for employment elsewhere; customers may lose confidence that the business will be a steady source of supply; suppliers may lose confidence in the company’s ability to pay; and financial institutions may believe that their loans are in jeopardy.

Alternatively, the business may be so well organized that someone else could perform the owner’s duties and responsibilities without any serious loss. However, there are two different aspects to the added value that people can bring to a business: personal goodwill and individual goodwill. It is important to understand the difference -

Personal goodwill has been described as the unique advantage an individual enjoys because of his or her particular abilities, good name and/or reputation. These advantages are not transferable by contract or otherwise. Personal goodwill ends when the individual who provides them is no longer involved in the business. Since personal goodwill is not transferable, no commercial value can be attached.

On the other hand, individual goodwill accrues to a business because of an individual’s abilities, business contacts, good name and reputation. It could, or would, be harmful to the economic well being of the business if you can’t substitute other people to fill the role. In an open market context, it is non-competition agreements that often result in individual goodwill having commercial value.

For example, if the business owner were absent and someone else could step into his or her shoes and maintain the relations with the customers, then the goodwill is individual goodwill and would therefore have value as long as there is some assurance that the current owner will not compete with the new owner.

Goodwill opportunities
The opportunities to be gained by understanding the nature of the goodwill can be identified under different objectives that a business owner may have:

Provide for the family.

Quite often a business owner is asked to provide personal guarantees to the bank or leasing companies. The death or permanent disability may cause a business crisis due to lack of management strength. The crisis could result in a default on loans or leases. This, in turn, could cause the estate or disabled owner to be required to pay the principal amount to the lender under the personal guarantees. Therefore, where evaluating the dependence of the business on the owner, an assessment must be made of the risk that the owner’s estate would be required to meet any personal guarantees. Steps can then be taken to protect against those risks with life or disability insurance. Alternatively, other capital can be set aside to pay the liability. If the business is very dependent on the owner, then insurance policies and investments that are meant to provide for the family should be owned outside the business, which will reduce the risk that these would not be available to the family when the funds are needed.

Maintain the short-term value of the business.

If the plan is for the business to continue, then steps need to be taken to reduce its dependence on the owner. This will maximize the value of the business by minimizing the individual goodwill and maximizing the personal goodwill. As well, it will allow for an orderly succession for family or employees. Until dependence is reduced, there is a risk that the business will fail in the event of a sudden loss of the owner. In that case, insurance can be used to provide cash to the business to allow it to meet the obligations to suppliers and employees as they fall due. If the dependence on the owner is not too great, this may allow the business to continue until new management can be put in place.

Provide for the long-term succession of the business.

Most business owners have plans in place for the event of their death or retirement. The owner may decide that the business should be liquidated on death and wish to ensure that an orderly liquidation takes place. The owner may want customers’ outstanding orders filled, suppliers paid and any long-term employees paid salary due, plus some severance for their years of loyal service. This can be achieved by insuring the owner’s life for an amount that would meet the estimated obligations.

On retirement, however, the owner may want a son or daughter to take over the business. Even if this occurs, the dependence issue still exists. Now, the concern is how dependent the business is on the successor. If the business it very dependent on him or her and the parent has a significant investment remaining in the business by the way of loan or shares, then the parent’s investment is at risk. If the successor were to die or be permanently disabled, the business could fail and the parent would be unable to recover all of the investment. This remaining parental investment may represent the retirement capital and/or equalization payment to other children. Therefore, it may be of value to provide for the buy-out of the parent’s remaining investment through life or disability insurance taken out on the successor it is unlikely that someone who has been retired for many years will want to take over a business in crisis.

Minimize tax.

Recent changes in the insurance industry have limited the ability of life insurance proceeds to flow through the capital dividend account to reduce a tax liability. However, all is not lost. If a surviving spouse inherits the shares on a rollover, these can be redeemed with the resulting taxable dividend reduced to the extent there is a balance in the capital dividend account and an election is made. Also, the tax changes allow for a grandfathering of some current arrangements. Finally, if all else fails, the life insurance proceeds can be used to actually pay the tax liability. Remember, people don’t plan to fail, they fail to plan!