Trio Business Intermediaries Blog

Soon to be taking on a new business or an active part in an existing operation?

Some of the issues you may want to consider to make the new regime flow well:

• Talk, communicate, chat, email, liaise, - keep everyone feeling as though they’re informed and part of things

• Ensure everyone knows the basics – where the offices will be, where to park and how to get there, who’s moving where and when

• How any surplus team members will be deployed

• Clear responsibility for maintaining client contacts and ensuring they don’t even notice things have changed

• Another group need to be responsible for ensuring suppliers are on top of the changes and ready to integrate new locations or systems

• Who is mission-critical and what is being done to retain them?

• Any disparities between terms of employment, bonuses or perks

We’d like a $ for every time we’ve mentioned that the banks still aren’t lending and the sentence is barely complete when the response comes back something like “I know ! followed by a long story of the short shrift from what’s historically been a friendly banker.

Well we can whinge or we can work around it.

Some ways to address the funding issue might include:

• Sellers offering vendor finance – Ok so not an original thought but has the huge benefit of backing the business to be sold.

•  Buyers asking for vendor finance – you don’t ask you don’t get and the appetite for this possibility is being driven by necessity

• Package the business professionally – it is now even more important to present the business, projections and upside in a way that the financiers can easily understand.  The business case needs to hit their cash-generating hot buttons

• Consider other funding sources – angel investors want equity and a say but a smaller bit of a bigger pie has to be a consideration

• Staged Acquisition – consider an acquisition over time with a pre-agreed timeframe and terms to provide certainty for both parties

There’s risk everywhere you look when buying or investing in a business.

If you’re looking to sell or attract an investor you need to be on the front foot addressing those risks for the prospective purchaser / investor before they even think of them.

Just some risks you might want to consider:

     With the outgoing owner goes all the customers

     The GFC isn’t over

     Potential regulation changes

     Key staff won’t stay

     Interest rates are likely to be going up

     The outgoing owner will start up elsewhere and take all our business

     New technologies in the industry

 We know for sure there are ways to mitigate all of these risks for a prospective purchaser / investor.  Contact us if you need a hand addressing any of these issues.

We are often asked to do business valuations as a precursor to new investors coming into a business.

If the business needs a cash injection the potential investor, coming in on their white charger, saving the day is difficult to look past.  The realities though are that there are a number of potential scenarios that need to be considered before we’re all sitting around the table at the celebration lunch:

Will the investment be made in tranches and what will the hurdles for further contributions be?

What impact will there be on Management and Board structure?

Assets that might sit on the periphery of the business like non-core assets or Director’s assets – how will they be treated?

What happens to the debts / borrowings – will they be taken on by the new regime?  What about owner advances to the business – repaid or forgiven?

Then of course there are Director’s guarantees currently in place.

If new investors are being brought in for their expertise or contacts – how will the success of that strategy be measured?  Is there a fall-back position if the strategy or relationship fails?

Would it be better to sell the existing business to a completely new entity?

What are the tax implications for existing owners?

What happens to the Management team and who decides that?