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Preparing to Sell

Whether you’re just starting off, in a growth phase or winding down towards retirement, it’s important that you consider the following areas to ensure your business is in its best possible shape when the time comes to sell. In July 2016 we sold 50% of our brokerage group, and as a business we were certainly not ‘sale ready’ when we were approached by our purchaser. We learnt many lessons along the way and if we had our time over, would definitely have been better prepared. The whole process was completely foreign to us at the time and upon reflection almost 2 years post sale, there are 2 main areas I believe all businesses should devote some time to, even if an ultimate sale / exit is many years away. 1. Structuring advice: My business, like many current brokerage firms was set up a long time ago and whilst the Pty Ltd structure of our main trading entity was ok, some of our individual shareholders held shares in companies rather than trusts. This had CGT impacts for some of our shareholders and the potential to lead to higher than expected CGT costs. The correct advice years ago would have made things a lot easier but often at the time you’re not thinking about the ultimate sale of your business. We were referred to an excellent specialist tax lawyer who was able to advise us on restructuring options prior to committing to the sale. These same specialists were also able to advise the best way of dealing with all of the costs associated with the sale (accounting, legal, consultants etc) to...

Knowing our Customers

Living in the CBD for the past few years I enjoy a cosmopolitan life style. Six years ago a young husband and wife couple opened a coffee shop just down the road from our home. This was their first business they had owned and operated – all though the family had a history in the food industry”. Basically to establish this business they had to put all they had on the line. As a Finance Broker we all know how difficult it can be to raise funds for such people. Over the next four to five years they developed the business to where on some days they would serve over 2000 cups of coffee along with light meals etc. They also through this venture provided employment for up to eight staff per shift /two shifts a day seven days a week. Not an insignificant contribution to the local economy. After five years of seven days a week 15 hours a day they made the decision to sell the business. The new owners take over with the same staff, same coffee and food within a month the business had slowed substantially. The question is why? The original owners possessed that unqualified quantity that built a thriving business . The new owners took on a proven formula – did nothing particularly wrong but never the less the business slowed significantly. Whilst this article is talking about a coffee shop over the years we have seen many examples over many industries where a change of ownership (including generational change) has had a dramatic effect (both positive and negative) on the business. From...

The More Things Change The More Things Stay The Same

I banked my first cheque as a broker February 1978; that’s right it was 40 years ago. The very word cheque, conjures up a bygone age, let alone the 40 years. Back then I was known as a Leasing Broker because the dominant product was leasing, due to its tax advantages. As the Tax Commissioner cracked down on residual value settings, forcing them in line with depreciation rates, hire purchase came into vogue.  The popularity of chattel mortgages didn’t take place until the introduction of the Goods and Services Tax. The speed of technological development over the years has been exponential. I recall well, our first facsimile machine. We were early adopters so in the first couple of years it was useless because not a lot of other companies had them. Prior to the fax machine, applications were typed, some hand written, and hand delivered to the lender. Signed documents were also hand delivered. Over time the fax machine became almost universal with the vast majority of small businesses having one. How prophetic that it is now almost obsolete. The introduction of the internet ushered in a new age in banking. No longer would settlement cheques be collected from the lender and hand delivered to the supplier. The fax machine then the internet bought the biggest changes. Documents and written information could be transferred instantly. The final trip down memory lane relates to the mobile phone. I recall prior to having one; again, we were early adopters; my day would be challenged driving around trying to find a public phone that hadn’t been vandalised. Some of you will well...

A Strategy Moving Forward.

Most of us will be back from a well-earned break and as we know it isn’t long before we are caught up in the “day to day activities” of our broking business. Whilst we have to do the operational stuff to make money I thought it worthwhile to share some of what CAFBA has undertaken “strategically” with some of the learnings from this process that can be applied to any business. Last year (as previously advised in CAFBA communications) a strategic review of CAFBA was undertaken by the CAFBA board (outside of our usual monthly board meetings). The purpose of this review was to put in place a formal strategy plan for the association into the future. Whilst CAFBA had grown strongly over recent years we hadn’t as a board taken time out of our monthly meetings to take a helicopter view of the association. So what were the keys to success in coming up with the CAFBA strategic plan for the period 2017 to 2020? From my view it was: Determining early in the process who should be involved. In this regard this included both internal and external parties to the association, Preparation – Before the strategy session, feedback was obtained from a group of members (our customers) and external parties (our suppliers - for example Banks/Financiers) with key questions on their impression of CAFBA and what they saw “looking in” from the outside. This provided valuable feedback that was presented at the strategy session.. A SWOT (Strengths/Weaknesses/Opportunities and Treats) was completed and a PEST – (Political, Economic, Social, and Technological) that identified factors of the external environment...

The benefits of having a mentor

When we started our business we were not sure what the future would hold. Our business started with 4 partners, all friends, but having never had to make decisions together it took us a while to learn how to do it. Right from the start we decided to have monthly meetings for operational discussions and quarterly meetings for strategic ones. I believe this constant discussion around the different elements of our business has been the cornerstone to it’s success to date, however, it was also responsible for slowing our growth in the first 3 years. When we started we hadn’t worked out what our respective strengths and weaknesses were as business owners. We would discuss points and go around and around in circles when trying to make decisions or do anything. Management by committee on all decisions is very hard and we recognized that this was hampering our business, so we decided to get help. Help came in the form of an experienced, considered and successful business person who had no experience in equipment finance or broking generally. The lack of industry experience was what we sought as we wanted a fresh set of eyes to help us create our own identity. We recognized we needed someone to help structure our business, teach us to make decisions, and most important of all to believe in ourselves and the direction we wanted to take. That is not to say we don’t continue to make mistakes, we do. The difference is we don’t get caught up in the fear of making a decision and getting it wrong. Having an experienced mentor...

Six Forces Changing the Global Economy

We all know the global economy is changing at a rapid rate, and as business owners we need not only stay abreast of changes, but be open to them.  At a recent event I attended, Westpac Commercial Bank Head David Lindberg spoke of these changes and their implications. Afterward I felt so compelled I went on to do some more research and discovered some interesting stats I share in this article.   SERVICES AND AGRICULTURE The industries driving the Australian economy over the coming 10-20 years will be Services and Agriculture. Services Services contribute about 75% of Australia’s Gross Domestic Product (GDP*), employing about 85% of the Australian workforce. Services include such things as education and tourism, financial services, energy and mining-related services, environmental services and financial technology (Fintech). The services sector contributes more to total productivity growth in the economy than does the goods sector. How? While productivity grows more slowly in the services sector, as the services sector is so much larger than the goods sector, the services sector contributes more. An efficient services sector is critical to trade and economic growth. *(GDP– the total amount of goods and services we produce as a nation) Agriculture Australian farmers produce food for more than 80 million people per annum and with the emerging Middle Class in Asia, agriculture stands as one of Australia’s major exports. The value of Australia’s agricultural sector is tipped to peak at $63.8 billion this financial year. The total value of Australia’s farm exports is expected to reach a new record of $48.7 billion, $1 billion higher than in 2016. This growth was driven...