Case Study C — Bill Smith and John Jones
Only complete Tasks 1–3 for one (1) of the case studies in Section 1
Background
You are meeting with prospective clients, Bill Smith and John Jones. They have been referred to you by their accounting firm, Buckland Accountants.
The prospective clients need assistance with the acquisition of owner-occupied premises to replace their current business premises which is rented and becoming too small for their growing business.
True Blue Pty Ltd trades as True Blue Real Estate and was purchased as an existing real estate business three years ago. Bill Smith and John Jones are the directors.
The shareholders of True Blue Pty Ltd are Bill Smith, John Jones and a private investor, Amanda Williams, who does not work in the business and has no involvement in its day-to-day operation. Each holds an equal one-third share in the company.
Bill and John have each been in real estate for approximately 15 years, focusing on residential sales and leasing. They have gained their work experience in the local area. A wealth of knowledge of the area, coupled with an ever-expanding client base, has resulted in sustained and solid growth for the business.
Details of the property
Sale price of the property is $950,000. (There is no GST requirement as it is being purchased as a going concern.)
A deposit of $95,000 has been paid and is being held in the trust account of the settlement agent/solicitor.
A cash contribution of $233,240 will be made from the general working account of the business.
Property purchase and loan to be in the name of a new entity — True Blue Pty Ltd as trustees for the Smith Jones Unit Trust. There are a total of 99 units in the trust and the unit holdings mirror the shareholding of the trading entity, True Blue Pty Ltd.
The property is situated at 100 Smith St, Yourtown, with contracts exchanged at today’s date and an anticipated settlement date of 90 days.
General observations about the property
The property is in good condition and is well located in the same street as the current rental premises.
It is anticipated that the premises will meet the needs of the business for the next 10 years.
Summary of initial client fact find
Bill and John have provided the last two years’ financial accounts for the trading business, as well as interim accounts for 10 months of the current financial year.
True Blue Real Estate’s financial accounts
Year 1 Year 2
Net profit after tax $92,000 $140,060
Current year projected - $175,000
Add back (rent) $47,000 $49,142
Additional superannuation to director $31,400 $34,539
Wages to partner one $70,640 $70,640
Wages to partner two $70,640 $70,640
Payment to private investor (fixed flat profit fee) $45,000 $45,000
Applicant information — Bill Smith
Personal details
Address 26 Nowry Road, Yourtown, 1234
Date of birth 17 February 1958
Phone 7890 1234
Financial details
Gross income $70,640
Owner occupied property valued at $550,000
Outstanding debt on owner-occupied property $210,000 @ 6.2% p.a. on a principal and interest basis
Credit card with limit $15,000 Outstanding debt — $5,000
Superannuation $250,000
Motor vehicle valued at $30,000 (nil debt)
Applicant information — John Jones
Personal details
Address 14 Mary Street, Yourtown, 1234
Date of birth 14 October 1970
Phone 0146 234 577
Financial details
Gross income $70,640
Owner occupied property valued at $750,000
Outstanding debt on owner occupied property $300,000 @ 7.2% p.a. on a principal and interest basis
Credit card with limit $5,000 Outstanding debt — $1,000 cleared monthly, monthly
Superannuation $200,000
Motor vehicle valued at $45,000
Outstanding debt on motor vehicle $15,000 (Assume five year term at 9% p.a. interest)
Business details
Cash in business account $400,000
Other information
Applicants’ solicitor Moffat and Co (contact is Maree Moffat)
16 Tatlor Street, Yourtown, 1234
Phone 7890 5678
Applicants’ accountant and registered office Buckland Accountants (contact is Simon Williams)
28 Mary Street, Yourtown, 1234
Phone 2982 0987
Applicants’ banker Westcoal Building Society, Yourtown, 1234
Notes:
• Assume for credit card debts, the minimum monthly commitment should be calculated at 3% of the credit limit.
• Each of the working directors has appropriate death, income and disability insurance in place.
• A sensitisation factor of 2% should be used when calculating financial commitments.
Assignment tasks (student to complete)
Task 1c — Identify the clients’ complex broking needs
Prepare a list of questions that you would need to ask Bill and John about their history, experience, business performance and the property purchase.
In preparing your list of questions you should ensure that you cover the following:
• The complex features of Bill’s and John’s situation and objectives.
• Potential risks and Bill’s and John’s tolerance of risk. In considering risk you should consider:
– How you would identify the risks and the criteria you used to evaluate these risks
– How you would assess their current exposure, the tools you would use in terms of probability, impact and the consequences.
(800 words)
Student response to Task 1c
Answer here
Assessor feedback: Resubmission required?
No
Task 2c — Prepare complex broking options
You are required to prepare a full report for Bill and John by outlining the process and the risks (potential and real) of which Bill and John should be aware.
In a suitable format, document the process that is required for them purchase the new property and establishing the loan.
In developing your report you should cover the following:
1. The parties to the loan
2. The best physical set up with the lender — are they using their own property as cross security or the investment property?
3. What name should the title be registered in given there is a Trust involved and advise what state you are basing your answer in
4. The procedure to commence a loan for a property like this
5. The steps that will need to be in place
6. The client responsibilities (Bill and John should fully understand the loan that is proposed)
7. An outline as to the lending process and what the client needs to arrange
8. The documentation needed to commence the borrowing
9. The name in which the client will sign the contract to purchase
10. The state revenue requirements
11. A statement as to whether guarantees from spouse’s or any other security will be required and why this is/is not the case
12. The maximum LVR
13. Suggest three (3) lenders to client’s that would be likely to consider this request
14. A summary of fees and charges — including those for setup and those of the lender.
Note: You may make any reasonable assumptions necessary in order to complete the proposal.
(800 words)
Student response to Task 2c
Answer here
Assessor feedback: Resubmission required?
No
Task 3c — Implement complex loan structures
Bill and John have accepted your recommendations and have given you authority to proceed with their application.
As part of implementing their loan application you are required to prepare a formal written loan submission to the lender for pre-approval. Your loan submission must include the following:
• serviceability calculations
• the proposed structure of the loan given the purchases is in the name of a new Unit Trust entity
• the loan amount
• the property style, size, use
• proposed security
• any other information that is relevant to the lenders requirements.
In additional to these requirements you should also include:
• your obligations under the NCCP (if any)
• maximum loan amount
• maximum loan terms
• any ATO consideration to be made
• your state legislation and OSR requirements
• restrictions on overseas purchase, if any
• your general advice restrictions
• property purchase requirements.
Notes:
• Any assumptions you make should be listed, and not be in conflict with the case study information already provided.
• You will need to calculate and include your workings of the required servicing and debt service cover ratio for the new debt and existing borrowings of Directors. Comment on the DSCR comfort level for lender.
• You may make any reasonable assumptions necessary in order to complete the proposal.
Student response to Task 3c
Answer here
Assessor feedback: Resubmission required?
No
Section 2: Business management skills
Task 4 — Developing and nurturing relationships with clients, other professionals and third party referrers
George and Mildred now require you to write a plan to assist in developing and nurturing relationships with clients, other professionals and third party referrers.
Your plan should address the following:
1. How CCF & MB’s policies and procedures and legislative, regulatory and professional codes of practice impact on developing and nurturing relationships
2. How you would use CCF & MB’s social, business and ethical standards to develop and maintain positive relationships
3. The importance of confidentiality and how you would maintain it in your dealings with colleagues, clients and other parties
4. How you would adjust your Interpersonal style to the needs and situation of other parties
5. How you would go about developing and maintaining business and professional networks and other relationships to benefit the organisation, and how you would use them to identify and cultivate relationships in order to promote and market the organisation
6. How you could use and cooperate with other professionals and third parties to expand and enhance the reputation of the organisation, and to identify new and improved business practices
7. How you would build referral business through appropriate communication channels to find and secure new business relationships
8. How you would identify referral needs and provide information p about CCF & MB’s relevant products and services
9. How you would secure interviews with referral business so that then needs of clients can be met.
(1,000 words)
You may use any format for your plan but it must address each of the points above. If you are unsure as to how to write a plan, you can refer to the Business Growth and Marketing topic and use the suggested SMEAC format outlined in Part 5, Section 12.
When completing this task, assumptions are permitted although they must not be in conflict with the information provided in the background information.
Student response to Task 4
Answer here
Assessor feedback: Resubmission required?
No
Task 5 — Growing the business
Having considered how you would go about building and nurturing relationships, George and Mildred now require you to turn your attention to marketing and promoting CCF & MB’s business. This requires you to develop a marketing plan for the business.
In developing your marketing plan you should consider the following:
1. Your plan should be developed in line with CCF & MB’s vision statement
2. The identification of target markets using a combination of research and your own personal experience
3. The identification of your major competitors (at least two) with a competitor analysis developed for each competitor
4. The identification of CCF & MB’s market position based on your research findings and analysis
5. How you would promote CCF & MB’s brand and the tools you would use to achieve this
6. The provision of options for increasing yield per existing client
7. How you would implement your plan and monitor it to ensure objectives/goals/performance indicators are being met
8. How you would adjust your plan if required.
(1,000 words)
You may use any format for your plan but it must address each of the points above. If you are unsure as to how to write a plan, you can refer to the Business Growth and Marketing topic and use the suggested SMEAC format outlined in Part 5, Section 12.
When completing this task, assumptions are permitted although they must not be in conflict with the information provided in the background information.
Student response to Task 5
Answer here
Assessor feedback: Resubmission required?
No
Task 6 — Identifying risk and applying risk management processes
George and Mildred have become very concerned about the potential risks that could jeopardise CCF & MB’s business operations. They were very impressed with your growth and marketing plans for CCF & MB so they have now moved you into more of a general manager’s role with expanded responsibilities, including managing CCF & MB’s risk. As part of your new responsibilities you are required to develop a risk management plan.
In producing this plan you are required to:
1. Establish the context for CCF & MB’s risk management plan
2. List and explain the tools you will use in assessing the risks you identify
3. Identify the stakeholders you would consult in establishing context and the tools you would use in identifying CCF & MB’s risks
4. Identify at least two risks that CCF & MB could face for each of the six categories of business risk including strategic risks, compliance risks, financial risk, operational risks, market and environmental risks and reputational risks with an appropriate risk statement for each identified risk
5. Conduct a risk analysis and risk evaluation for the risks you have identified
6. Identify treatments for them
7. How you will monitor and review them in your risk management plan.
When you are defining the risk criteria you intend to use you are required to create your own risk matrix to address likelihood and consequence.
Document your risk treatment plan using a risk register.
You may make any assumptions in producing your plan but these should be documented either in the body of your plan or separately before you produce it.
(1,000 words)
Student response to Task 6
Answer here
Assessor feedback: Resubmission required?
No
Task 7— Improving the business
Over the last few months business for CCF & MB has been very good with a number of new clients coming on board as a result of implementing your business growth and marketing plans. However neither you or the business owners are satisfied with maintaining the status quo; as you and they are committed to a program of continuous improvement.
You all feel that CCF & MB’s competitive advantage needs to be strengthened and a SWOT should be undertaken to establish CCF & MB’s strengths and weaknesses including benchmarking the business against the industry. You now decide that you will carry out a diagnosis of the business including a SWOT analysis and a benchmarking exercise to improve CCF &MB’s competitive advantage and its business. You are to produce a document covering your diagnosis which will be distributed amongst CCF & MB’s key personnel.
As a minimum your document should cover the following:
1. The data you have used as part of your diagnosis to identify CCF & MB’s competitive advantage
2. A SWOT analysis to identify CCF & MB’s strengths and weaknesses, its threats and opportunities
3. How you identified and sourced relevant benchmarking data
4. How you selected the key indicators (and who you consulted with) for your benchmarking exercise
5. A consolidated list of the areas for improvement you have identified with a cost-benefit ratio established for each of them
6. Recommendations on the changes that may be required that will affect existing workflows or CCF & MB’s organisational structure
7. A high-level action plan that will implement and monitor the recommended changes to be made.
(1,000 words)
In addition to the material on your Subject 2 learning guides the following links give you access to a step-by-step guide to benchmarking and determining competitive advantage:
• http://www.business.vic.gov.au/marketing-sales-and-online/increasing-sales-through-marketing/benchmark-your-business
• http://www.researchbydesign.com.au/media/RBD-WhitePaper-Competitive-Advantage.pdf .
Student response to Task 7
Answer here
Assessor feedback: Resubmission required?
No
Task 8 —Managing people performance
One of your key responsibilities as general manager is to develop and implement ways to improve the performance of CCF & MB’s consultants and other staff members.
Answer the following questions:
1. Why is it important to consult with stakeholders when allocating work? What are the possible consequences of allocating work without consultation?
2. Describe the process you might follow when developing quantitative and qualitative performance criteria. You should explain how you ensure that the criteria relate to CCF & MB’s objectives and how to motivate staff members to achieve these objectives.
3. Describe the different ways you might gather information about a staff member’s workplace performance.
4. What are the benefits of evaluating and monitoring staff members on a continuous basis?
5. Describe how you might do this in CCF & MB.
6. Why is it important to document the performance management process? Explain the possible consequences of not retaining appropriate records of this process.
7. How can reward and recognition influence the work output of employees? Describe non-financial ways of motivating employees.
Your answers should be 250 words for each numbered question above.
8. Design a high-level performance management process for CCF & MB to be rolled out to all staff members.
9. Who should you consult when designing the performance management process? List who you would consult and the reasons why.
10. Develop a checklist for delivering regular performance appraisals, including a section for team leaders and supervisors to complete a section for team members participating in the performance appraisal process.
(800 words)
Martin and Luis are working together on project involving the preparation for a loan application for one of CCF & MB’s most influential clients, a property developer. Martin missed a deadline and the whole project is now behind schedule by a week. This is the third time in a month that he has missed a deadline. Martin has had problems with meeting deadlines in the past and has already had a written warning.
As the general manager you have been monitoring Martin’s performance over the past month, providing informal feedback about his role in the project. Although he has made several improvements regarding his performance, his inability to meet deadlines has forced the delay of the client’s development a further month. CCF & MB made a commitment to the client that the loan application would be with prospective lender two weeks ago.
The client is not happy that his he does not yet have an approval and is considering cancelling the agreement he has with CCF & MB and going elsewhere.
11. You have arranged to meet with Martin to talk about the project and his input. How would you go about providing constructive feedback to Martin?
(500 words)
Student response to Task 8
Answer here
Assessor feedback: Resubmission required?
No
Task 9 — Showing leadership in the workplace
Leadership is defined as the ability to influence others. This assessment task requires you to reflect on your own ability to positively influence others in the workplace and the negative aspects of poor leadership.
1. Reflect on a situation where you have had a positive impact in the workplace. Please include in the reflective writing the skills, decisions and or behaviours you demonstrated that contributed to this positive change and what the impact was for the team, clients and the organisation. (400 words)
2. Reflect on a situation which was or could have been damaging to the organisation. Please include the behaviours, standards or values that were demonstrated and explain why they were detrimental. (400 words)
3. In your role as the general manager of CCF & MB create your own personal performance plan.
You may use your own personal performance plan or alternatively you can use the example below. In developing your personal performance plan you should ensure that your personal KPIs reflect CCF & MB’s goals and objectives and how you can help in building CCF & MB’s integrity and credibility.
What are my development objectives? Priority What activities do I need to undertake to achieve my objectives? What support/resources do I need to achieve my objectives Target date for achieving my objectives Actual date of achieving my objectives

Review date:
4. Feedback from colleagues, staff and management may be gathered informally and formally including performance review feedback. Why is it important to analyse and interpret all feedback? (400 words)
Student response to Task 9
Answer here
Assessor feedback: Resubmission required?
No