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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 a Lenders perspective it is difficult to quantify the qualities of a successful small business person . Albeit they do not appear on a balance sheet but in reality are the differences between success and failure of both new and existing small businesses.

From a legislators perspective how are guidelines and law formulated covering small business lending when such a major factor is unquantifiable.
From a Finance Broker perspective how do we discover these underlying significant attributes and how do we present that information in a form that will convince a lender of the worthy nature of a transaction and cover the duties of such things as responsible lending etc.

The success we have had in this area I would suggest has come back to knowing our customers.

Simon Hiller is Managing Director at Capital Contacts Pty Ltd and is a member of the CAFBA board.

March 2018

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