SEPTEMBER MARKET REPORT
This month’s market report: We often have people comment on what they read in this report which makes me think that at least a few of you read it and that makes it worthwhile. The feedback we are getting is that the readers have read between the lines that the past year in business sales had been by and large a difficult one. In the past few months monthly marketing reports have been forecasting a return to better times.
I can report that the sales in both numbers and volume have significantly improved and it across a wide spectrum of businesses in size and industry. Currently under negotiation and sold awaiting settlement are 14 transactions with a combined value $27 million. What this has meant, apart from putting a smile on our faces, is that the next hurdle we face is a shortage of things to sell. This shortage comes about from the businesses we had on the books are slowly selling and settling and no significant number of new businesses are coming to the market. I believe one of the issues facing potential entrants to the business sales market at this time is the fear that they will not achieve the price they want because of lower multiples and poorer then usual results in fiscal year 2009.
This can probably be overcome once the first quarter results are out and these are compared with previous years to see where the business has settled in the current economic cycle. A value can be placed on the business to reflect future maintainable earnings at a fair multiple and offered to the market.
Most businesses take between four months and twelve months to sell so sellers will have this time to demonstrate that the 2009 numbers were an aberration and buyers will also be able to confirm this with extra quarterly data.
Taking this into account now is both a good time to buy and to sell.
Footnote:
We have a number of unsatisfied buyer enquiries looking to purchase good businesses in manufacturing, distribution, wholesale or export in the $2million to $6million range where the ROI is 30% or better.
Also we have an unfilled order for a financial planer looking for a Finance brokerage where the owner may be looking to retire and has a good client base and a trail income.
Interested parties or their advisors should email our office or call 1300 854 655.
Peter Gwynne, Group Managing Director
HOW DO I BECOME A BUSINESS BROKER?
Business Brokerage is a profession where hundreds of million of dollars in transactions handled every year and the standard and professionalism is higher then ever.
Over the years Hallmark Business Sales has trained many of the top and most successful brokers in Australia. Hallmark Business Sales reputation and brand recognition has in many ways been attributed to it processes and staff training. We are now pleased to be able to offer this to the wider community.
We have been regularly asked how do I get into business broking. Until now there has not been any specialised course which a potential entrant could undertake and to fill this void and to provide an entry into business sales Hallmark Business Sales in conjunction with Real Estate registered training organisation Link Learn we have established The Hallmark Business Sales Training Academy.
The course run over 12.5 days with some of Australia’s leading business sales specialist, sales trainers accountants and solicitors delivering a dynamic course on business broking where students upon completion, will be able to start a career in business Sales. Some will be considered for a career in Hallmark Business Sales or offered opportunities within the franchise group.
Courses will start from early next year and any interested attendee may call 1300 854 655 to register interest and get further details.
WORKING ON YOUR BUSINESS VERSUS WORKING IN YOUR BUSINESS
There comes a point in the lifecycle of a business when the proprietor/s know that unless things change the business will start going backwards, or, at the very least it will stop growing.
These moments of realisation often coincide with thoughts that the business controls the life of the proprietors; that personal lifestyle choices are being compromised; and that sometimes, it’s just all too much worry and stress. Some business commentators liken these scenarios to situations where there is too much emphasis on working in the business, while little attention is paid to working on the business; that is, there is little or no heed to strategic planning. In fact, these change points are a regular feature in a growing business. The trick is to identify them and act appropriately. But what constitutes “appropriate action”? The answer to that question is to first identify what type of change is taking place.
Businesses cycle through the process of Birth, Growth, Maturity and Decline. During the first two stages of the business life cycle, the positive, growth forces outweigh negative, eroding forces.
Thus, a young business is often able to operate effectively and profitably, albeit inefficiently. However, during the consolidation phase (maturity) of the life cycle, the positive and negative forces tend to cancel each other out, and during the final stages (decline), the negative forces will outweigh the positive by degrees which vary depending upon the inefficiencies within the business.
Management theory suggests that the business cycle occurs over seven, identifiable stages during the evolution of a business enterprise. The stages, and the relevant features of each stage are:
Stage one: The Ideas Stage. This encompasses the stage of the initial business idea, and the development and nurturing of the idea into a business concept.
Appropriate action: Create and implement a formal Business Plan.
Stage two: The Entrepreneurial Stage. The principals of the business get their idea up and running and enthusiasm ensures products are developed, customers are found and sales are made. The latter part of this stage often sees the organisation experiencing high demand for a product or service, and the need to expand. However, orders possibly cannot be fulfilled due to lack of capacity, capital or appropriate systems. The business can be prone to repeated crisis, and management needs to commit itself to becoming more organised and systems-oriented. Many businesses do not leave this stage of evolution, and may ultimately fail under the weight of repeated crisis.
Appropriate action: Develop a formal strategy that identifies ways and means of addressing every area of weakness.
Stage three: The Systems Stage. This stage is a crucial stage for a business to negotiate if it is to survive and prosper in the longer term. The principals of the business need to “pull back” from the day-to-day operation of the business, and develop systems that ensure products are made and sales happen in an automated process. The systems must ensure quality remains consistent, and that standing orders provide consistent cash flow. The principals concentrate on building the brand, cementing strategic alliances, and increasing profitability through improved operational efficiencies.
Appropriate action: Develop Customer Relationship strategies that formalise all sales processes, including how leads are dealt with, how sales are closed, and how client communication is maintained
Stage four: The Delegation Stage. This is a potentially dangerous stage in the evolution of a business enterprise. The organisation is working well, and the goals and aspirations of the principals are being met. However, the principals can feel they are invincible. They take their eyes off the ball, so to speak, delegating full authority to others, while they embark on another business enterprise (often quite unrelated to their core business), and fail. Delegation is OK if the principals have systems strong enough to provide checks and balances, and if there are articulated long-term goals in place.
Appropriate action: For some, this might be an appropriate time to sell the business. For others, seek out a mentor who can play the devil’s advocate, and provide an opposing view.
Stage five: The Bureaucracy Stage. The business has grown to a stage where the systems are divided into divisions, or operational areas within the organisation. There may be a “manufacturing” division and others for “sales”, “administration”, “R&D” and so on; in other words it has become mature. Whilst the business may be performing well, there is a risk of inefficiencies creeping into the systems, with falling profitability a result. The organisation needs to ensure there is a pervasive culture of innovation throughout all divisions, and maturity doesn’t automatically lead to decline.
Appropriate action: An outsider’s view would be useful. Have a management consultant take an overview of the business, and if required, initiate a plan to re-introduce an innovative culture.
Stage six: The Project Stage. With the organisation operating effectively and efficiently, teams are formed with representation from the various divisions. These teams explore ways in which the core competencies of the organisation can be used to develop new business ventures.
Appropriate action: Again, a formal Business Plan with its associated procedures is applicable here.
Stage seven: The Next Idea Stage. The teams have identified a viable business concept that utilises the support, expertise and experience of the parent organisation. It can now launch a project into Stage One in its own right, and the cycle is thus perpetuated.
Source: www.businesssales.com.au .
TIPS FOR SMEs
SEO - Discover how search engines are beginning to understand the mean and context of our words – and how we’ll need to adjust.
Search engines such as Google constantly battle with tricks that disreputable search engine optimisation practitioners use to boost the ranking of their pages.
To counter these tactics, search engines penalise sites that use them – artificially lowering their rankings. Google’s webmaster guidelines include a set of principles to help website owners avoid dodgy practices that might earn them penalties.
Tips:
Make pages primarily for users, not for search engines. Don’t deceive your users or present different content to search engines than you display to users, which is commonly referred to as “cloaking”.
Avoid tricks intended to improve search engine rankings. A good rule of thumb is to ask yourself whether your users will benefit from your web content.
Don’t participate in link schemes designed to increase your site’s ranking or PageRank. In particular, avoid links to web spammers or “bad neighbourhoods” on the web, as your own ranking maybe affected adversely by these links.
We wish you all the best with your web SEO and email us if you have any successful stories.
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