Recently I was asked by the Business Franchise Australia magazine to talk about the financing options when purchasing a new franchise.
My article appeared in the magazine in July 2011. You can read the entire article here
True Value
May 10, 2011 By Leave a Comment
I watched my first movie in a long time on Saturday. It was The Social Network which tells the story of the creators of Facebook.
The movie itself was pretty good but there were a couple of things that hit home whilst watching and reinforced a few that I had been involved in during the past few weeks.
The story basically is that Mark Zuckerberg deceived many of the original co-developers of Facebook. Mark took an idea that was provided to him and ran with it, expanded it and developed the original concept into what it is today. During the process he hid what he was doing from the original idea men and then surreptitiously diluted the investment of the original funder of the project – who was also his friend.
So what did this tell me.
1. It is NOT alright to try to take advantage of your business associates/partners.
2. It is NOT acceptable to engage advisors and instruct them to work against another equity partner.
3. It is not alright to step on everyone with a view that the “end justifies the means”
Recently I was engaged by a company with the sole purpose of exiting a silent partner. However this was not the original brief. My engagement was signed off by a Director and was to provide a valuation for a Victorian real estate business as a means of raising additional equity to acquire an additional business. Once the hard work was completed the idea of now exiting the silent partner was tabled.
During the discussion it became obvious that my client did not value the contribution of the silent partner. He felt, and a little justified, that the agency was successful solely off his personal efforts and that the silent partner was being rewarded without contributing and he wanted him out as cheaply as possible and that to aid this I should amend my valuation down to a more friendly level.
At this point I highlighted that the engagement was with the company and that I worked for all of the Directors and my report would be provided to both of them at the same time and would be a true position of the value as I had determined. After much heated debate between us (over 3 weeks) my client came to see the error of his ways and we began negotiations with the silent partner who felt happy with the valuation and the deal has been accepted pending final review.
Trust is a very important factor in business and importantly in partnerships. The minute that you break it is the minute that the demise of you as a person, leader and business professional begins. More importantly though you should never deal with advisors that see it as acceptable to work with once side versus the other in business when they have been engaged to work for all. Yes an advisor will sometimes have to take a position that is best suited to the right outcome, but be careful of ones that want to assist you to work against people that you should treat well.
A final word on the use of silent partners. Never underestimate the value and worth that a silent partner has brought to your business. In most cases that silent partner has allowed your business to actually exist as without them you did not have the funds to operate. That support requires that when it is time for them to exit that you do it properly, respectfully and remain associates. You never know when someone in business may come back to be very valuable.
Rent Rolls for Sale
February 25, 2011 By 2 Comments
I have a couple of clients currently looking to sell their rent rolls.
Client 1 is a north western suburbs office established more than 20 years looking to sell 102 properties netting 100k in management fees. They are looking for a 3.5 times multiple and this also provides a very prominent office, fixtures and for an extra 10k they will provide a database of 1200 active residents and buyers. In effect it is a walk in walk out solution.
Client 2, an inner city established office, has 150 properties and 160k of annual management fees for sale. This a portfolio that he no longer wants to operate due to space limitations within his office and the expansion of his 3 other portfolios that are closer to his designated sales patch. He is looking at a 3.65 multiple and will happly provide a long retention period and a restarint against those properties for an extended period.
If you have any interest then please contact me directly on 0409 421 402 – Colin Linke.
2011 – The Road Froward
February 25, 2011 By Leave a Comment
2011 – what next.
For what they are worth here is what my clients and I see as the 2011 landscape.
1. Property prices will come back in Melbourne. My real estate clients are already talking about a lack of real buyers and this will drive down the market – particularly at the mid to higher end.
2. Interest rates will move through the early part of the year. I personally believe that the RBA has ben too dramatic too quickly but they have preempted a course and I believe that this will continue. Undoubtedly the floods through Queensland and Victoria will have an inflationary effect and this will result in the RBA responding with rate moves.
3. Small business will suffer through tightening margins and unpredictable sales and cash flow cycles. Be conservative in your 2011 forecasts and you will reap the rewards as good planning gives you an edge over your opposition.
4. The ATO will come down hard on small business this year. We have seen a real focus come back on small business and our ability to negotiate with the ATO is far more difficult. If you are behind in BAS or your income tax returns then get them together and get them lodged. The ATO is showing a real dislike to small business behind in lodgements as this is the method that they use to collect the funds that they require. Non lodging taxpayers are in for a real roller coaster through 2011.
Tougher conditions do bring opportunity. Your competitors will not be performing as well as they had previously and if they do not have the funding behind them or the planning in place then their clients could easily become yours. Plan your strategy well and you could reap some very strong rewards throughout the year.
Let me know your thoughts on what 2011 may bring you and your business.
Key Dates
January 26, 2011 By Leave a Comment
As part of our new Tax Agent services we are going to provide a series of resources that you can use to help manage your affairs.
Here is a calendar that you can use to keep track of the key lodgement dates for the rest of the financial year. If you have any queries then Craig Ball cball@bentleypartners.com.au 03 9681 3099 – would be more than happy to assist.
Some key things that you should consider in your dealings with the ATO.
- The ATO fines you very heavily for non lodgement. We have seen a real spike in the number of penalty notices that they are issuing. If you have outstanding lodgements then get them up to date asap and then negotiate with them regarding the payments of those items. they will be more favorable if you are fully lodgement compliant.
- The ATO benchmarks your results against that of the industry that you are part of. So basically if you are a plumber they compare key numbers against businesses that they believe are similar. Trying to hide things will catch you out so be honest and you will always have a defensible position.
- The ATO is still offering small business payment plans. They are harder to get, but as long as you meet your requirements you will be able to get a plan that will allow payments over the next 12 months. I do suggest that you use a tax agent for this as we perform these negotiations regularly and know what we can get through. They are being pretty demanding on requirements from small business at the moment and we are seeing a lot of clients getting into arrangements that they cannot meet.
The ATO is like any other creditor. if you are struggling with cash flow then address the issue head on and you will be more likely to get an outcome that you can work with. Put your head in the sand and you will suffer.
You can get your free ATO Key Dates Calendar …..HERE…..
Bentley Partners 2010 – Lessons Learned
January 6, 2011 By Leave a Comment
Well 2011 promises to be a roller coaster ride for us all and hopefully we all come out significantly stronger than we finished 2010.
Lessons from 2010
1.. Our clients learned during 2010 that it is difficult to get quality staff again.
If you get good staff then reward them accordingly. This does not mean just paying them more, think outside the box. Buy them 2 gold class tickets to the movies – costs you very little and most people love it. Get a massage therapist in to give everyone a break. Maybe give half of them a Friday afternoon off one week and the other half next week. Or maybe just thank them for their work. The point is that getting good staff means that you need work to keep them. Employees now feel that it is a privilege for you to have them – and you need to be aware of this and act accordingly.
2.. Retail has slowed dramatically and not all will survive 2011.
If you are in retail then you really need to be sure of your market position and how easily that it is attacked. If you are trading in commodity products then online trading is your biggest threat. They simply do not have the overheads that you do and your prices are easily compared. You need to develop a strategy that allows you to meet the challenges that this will bring. Come and speak to Roger or myself and we can get the right people involved in your process to try and counteract these issues.
3.. Expansion is not always the right strategy.
A client engaged myself to assist with the establishment of a number of retail outlets. We investigated the pros and cons and the financial effects of duplicating the original location. One concern that we raised was that the business was very niche in its industry. Consequently there is a limited market of potential customers. Should these customers already be captured by their current marketing then there is a real possibility that the new locations will cannibalize the existing location. The client went and progressed after assessing and deciding that the concern was not significant enough to retreat and unfortunately the concern proved correct. Turnover has risen in total by around 45% but existing clients who were already traveling are simply changing their purchase location to the new shop. Now it is necessary to review the strategy and work out how to make each location independent of the other – no mean feat.
Growth is not always the answer and your strategic plan must look at all options before deciding on a direction to undertake. In fact sometimes contraction is the best strategy – but we will leave that discussion for another day.
2010 was tough for many people and 2011 could be tougher. In business you must ensure that you have done everything possible to give yourself the best opportunity to ride out the storm. However in tough times opportunities abound. Your competitors are doing it just as tough as you, quality staff are easier to find and suppliers are champing at the bit to give you discounts.
Next time we will look at opportunities for 2011.
Happy New Year
January 4, 2011 By 1 Comment
Good morning everyone and HNY to you all.
The year has started off with a bang for us already and I wanted to share some changes that have happened at Bentley Partners during the latter part of 2010.
Craig Ball joined our practice as our Tax and Compliance manager. He joins us with a wealth of experience in the area and provides all of our clients with access to some vital tax planning skills. A new profile will be updated on the Who is Bentley Partners page and Craig can be contacted directly on 9681 3099 or cball@bentleypartners.com.au
Weng Chong also joined us in December. Weng is a former senior manager with experience gained in Australia, Malaysia and Singapore and with various different sized companies and will provide an extra level of supervisory skills that our junior consultants require.
As mentioned our Taxation operations have begun and Craig would be very interested to assist any of you who have any outstanding income tax returns, BAS statements or just want to discuss their taxation positions.
I hope that 2011 is a very prosperous year for you all and to all of our clients, particularly our Melbourne Real Estate agents, lets hope that the RBA looks after everyone and that the good trading conditions continue to abound throughout the next 12 months.
Medical Practices as a Business
October 12, 2010 By Leave a Comment
Recently I have been doing some work with a couple of clients who operate medical practices, to determine the value that nursing staff bring to their practice.
There is an industry belief that a competent nurse adds value to the practice as the theory suggests that the nurses will be performing the many minor procedures that doctors shouldn’t, thereby allowing them to operate more efficiently and thus see more patients. Obviously the plus is that this brings in more revenue.
Well the good news is that it does, the bad news is that the nurse is a very highly paid administrator!
Like many professionals, it appears from our work that the “run-of-the-mill” GP (please this is not meant to be insulting in any way as you are all of course unique 
) has a difficulty in actually handing the patient to the nurse. In reality many of the GP’s that we worked with had little management training and therefore understanding about how they could possibly pass the patient over. Delegation is a process that takes some time to develop and with no formal training in how to actually do this, most GP’s spend all of their time working out how to better manage their own time and as such have no time to manage someone else.
So the result is that the practice nurse tends to work very closely with one or two doctors – by doing their ADMIN.
With the practices that we have looked after in Melbourne, we have started to assist them by providing some key metrics, by providing basic training in delegation and by simply informing each doctor each week that the nurse is there to assist with routine medical procedures.
These basic steps have started to filter through and we are now starting to see the upturn in patient through put and nurse and doctor efficiency. There is still someway to go, but the initial stages have been meaningful and have provided the practice managers with a real process to get their doctor efficiency at better levels.
If you are a medical practice owner and would like to get some information regarding the work we have done – name removed to protect the guilty of course – then drop me an email and I will send you out a complimentary report.
Rent Roll Multiples
September 27, 2010 By Leave a Comment
There seems to be a great deal of activity in the rent roll market in Melbourne at the moment.
I have been seeing the multiples creeping back up at the moment and stabilizing just above 3 times the annual management fees. Obviously the normal factors are still in play – good landlords, well managed, quality properties etc. but is is heartening for the real estate industry in Melbourne to see these getting back to the right levels.
The limiting factor as always is the ability of the bank to fund the acquisition and I am seeing some new players entering this area.
If you need any assistance whatsoever with your rent roll – either selling r buying then drop me a line and I will see what I can do.
Current rent roll valuations
July 2, 2010 By Leave a Comment
There seems to be a growing requirement for rent rolls in the Melbourne real estate market. Many rent rolls are being enquirer about by brokers and associates of my clients.
So what is the current range of multiples, what is the retention requirement and what are the factors that effect rent roll values.
What are the factors that effect rent roll values?
In no particular order these things effect the market value of your rent roll:
- the quality of the management.
- the locality of the rent roll. The closer to the CBD the better.
- the current management fees.
- whether the agent or agency is going to continue to operate post the sale.
- the number of multiple landlords on the rent roll. Rent rolls with owners who have a number of properties increases the risk of losses as a numbers of properties could be lost by the decision of one person..
- the timing of the last rent reviews.
The current retention period appears to be 3 months and 10% of the sale price. That would give me comfort that I should be able to retain the majority of properties if I was buying.
So what are the current multiples?
The range is 2.75 to 3.5 times the annual management fees received. I have personally been involved in 2 very recent transactions – one at 2.85 times and one at 3.5.
The differences in each were immense. In my opinion we got to 2.85 very cheaply and sold the 3.5 over the odds. And this is the point I suppose. The value is really only whatever the purchaser is willing to pay. You can pay me or whoever whatever you like to value the rent roll but if there is no deal then the is no deal.
So as I discuss with all of my clients that are looking to sell something do as much as you can to minimise the opportunities to reduce the value. So work on each of the factors listed above and change the ones that you can effect and ignore what you can’t and you will achieve a great result – assuming there is a buyer!
