Sally Stewart

CHOOSE YOUR BROKER WISELY

Sally Stuart

Business Sales Specialist

M. 0437 082 045 E. sally.stuart@linkbusiness.com.au

linkbusiness.com.au

1. WHY YOU SHOULD TALK TO A BROKER – EVEN IF YOU’RE NOT READY TO SELL

Renewed focus on your Real Business Profit

Talking to a broker will give you a renewed focus on your business profitability. When you understand that each $1 of your real profit will become $3 or $3.50 at settlement time, it will highlight in your mind why you need to be focused on maximising your bottom-line profit! From this initial conversation, you might take advantage of the next three years and engage in a business development consultant, to ensure that you are really doing everything possible to maximise the profitability of the business. These are the years that the financiers and accountants will refer to when they are giving advice to their clients and approving, or declining, their finance applications.

Finding the best broker for you and for your business

If you talk to a number of brokers, you’ll get an understanding of ‘who’s who in the zoo’, which will allow you to make the best choice when the time comes to engage with a broker who you feel you’ll be able to have an ongoing relationship with and is best suited to the sale of your business.

Initially, a business owner may not realise that there are specialist brokers who can better support the sale of their business. Many brokers are in knowledge of each other, through industry bodies such as the Australian Institute of Business Brokers, and will be able to refer to one of their colleagues who they know is a specialist in your field if they feel that they are perhaps not the best broker for your industry/business.

Selling a business is like running a marathon, it’s not a sprint, so you need to find someone you have confidence and trust in to do the right things by you at every step of the sales process.

2. CREATING AN EXIT STRATEGY THAT WORKS.

Life doesn’t always go to plan and we never know what’s around the corner. As a business owner, it is so important to ‘Expect the best, plan for the worst, and prepare to be surprised’. To that end, it is important for business owners to have a range of strategies up their sleeve to tackle all that life throws up.

Exit strategies might include a sale to someone that is already

within the business such as a management acquisition. It might be that the vendor starts consciously reducing their commitment to the day-to-day running of the clinic with a view to reducing any perceived risk by a buyer and the reliance on the vendor.

Keeping a business ‘sales ready’ is a great position to operate in, with the BAS up to date, the financial statements prepared by a registered accountant and all staff superannuation paid will allow a sale to take place with relative ease should anything unexpected happen to the business owner by the remaining family members, in the event of an unexpected death or total and permanent disability.

Having a will that is current; a partnership agreement in place and any legal issues sorted is a good position to be in too!

3. KIDS WON’T ALWAYS TAKE OVER THE FAMILY BUSINESS. WHY YOU NEED A BACKUP PLAN.

Traditionally, we have seen the business owner’s children coming up and following in their footsteps… this is happening less and less these days as children follow their own interests and passions more than ever.

Even in medicine, I see GPs children becoming hospital-based specialists who are not able to take over an existing GP patient base. If we can’t rely on family, can we rely on colleagues? Not always. Many people that work for someone don’t want to be the boss…they have no interest in being in charge of a business and are happy to be employees all their lives.

So, if the family is not interested and the staff are not interested, then we have to look at a wider range of options. One of these is to engage a business broker to assist 4. YOU RISK LOSING MONEY IF YOU DON’T SELL CORRECTLY

In the past, I have supported practice owners who have waited too long to sell. They have become blind and could no longer see a computer screen as a result of high blood pressure issues. I have had Drs become very unwell, partnership breakdown both professional and personal, I have had untimely deaths…..not one of these people was able to get the real value of the clinic at sale time.

Getting the best price comes down to having a business prepared with maximised profit, having risk removed with the business owner not being highly involved in the operations of the business plus having a great deal team. Your broker, your accountant and your COMMERCIAL lawyer (not family lawyer or criminal lawyer) will need to be the very best at their roles within your deal team to ensure you get the very best sale. Ensuring your deal team is ‘en pointe’ … that your marketing is professional and that your Commercial lawyer is competent in working in your industry will also assist you in selling correctly.

5. A SPECIALIST BROKER KNOWS YOUR INDUSTRY

Some brokers are generalists, while others are specialists. A broker might have so much knowledge in the areas of medical or automotive or restaurants/cafes or perhaps dental centres.

These are the brokers that will talk in acronyms with you as they are across your industry, a generalist broker sells anything, they are skilled in quickly understanding businesses, marketing them appropriately and selling them. It’s a process, once you know the process you can sell a business. A specialist broker will sell a business almost with a sixth sense, they know what to look out for, the ‘trip hazards’ and the perks!

Ask your chosen broker how many businesses they have sold in your sector/industry before engaging with them; ask them what trends they are seeing and what they think the impact of current trends with have on your specific business.

6. WHY A BUSINESS BROKERS EXPERIENCE MATTERS

I have been working as a specialist health broker in the medical sector now for about 8 years. I have sold maybe 100 clinics in that time in my sector. I have experience in selling in the following sectors:

1. Medical

2. Dental

3. Ages Care

4. Allied Health

5. NDIS

Without rungs on the board, your broker is working from the training manual, you need to find someone who knows how to sell in your industry and can show you their ‘sold’ signs of businesses in your sector.

Seek testimonials, check out google ratings, look at their LINKEDIN profile, and see how other brokers perceive them. Look for green flags and red. Ask questions, probe, and don’t just list with the first broker you chat with.

I always suggest that for a big transaction, maybe get 3 quotes. Same when listing a business for sale.

This might be the biggest transaction of your life; please take time to make sure that you are getting the very best broker possible to lead your deal team to a successful conclusion!

RBA CASH RATE: WHAT WILL THIS MEAN FOR MORTGAGE LOANS?

Author:

Mary Grant

Principal Broker | Clear Options Finance

M. 0478 732 343 E. mary@clearoptionsfinance.com.au

clearoptionsfinance.com.au

The last time interest rates were a hot topic was 3 years ago in the weeks & months before the last federal election in May 2019 (it would seem that some things never change!). The RBA cash rate was at an historic low (at the time) of 1.5%. Depending on the lender, variable rates were around 3.7% climbing to over 4% by the end of the year. The general consensus at the time was that rates were going to rise after the election. But wages remained flat & inflation was still too low, stifling economic growth. Then the Covid pandemic hit Australian shores in early 2020 & the RBA along with central banks around the world reduced interest rates to record lows & governments injected 100’s of billions of dollars to buoy their economies. For the most part it worked, certainly for Australia. Covid to minimise pressure on home owners & small business. These levels can’t last in a healthy economy as interest rates need a natural balance so that savers, borrowers & investors can all benefit. As a visual, balanced interest rates keep the economy turning rather than flat-lining in a single direction to oblivion.

One of the reasons for increasing the RBA cash rate is to put downward pressure on inflation, which has remained stubbornly low for years but has just flown right through the target band of (2-3%) to 5.1%. The drivers of this surge are not the usual suspects. Disruptions to supply chains, particularly building materials (Covid related) is one reason & the impact of increased energy & fuel prices as a result of the Russian invasion of Ukraine is another (though these were increasing

already) which follows through to a multitude of consumer products where cost to manufacture & transport products increase.

The RBA is of course conscious of the impact that increased interest rates will have on mortgage holders. With this in mind, I believe that rate increases will be steady & monitored. With this first 0.25% increase (from 0.10% to 0.35%) in interest rates since November 2010 being announced today (3May22) it is likely there will be another ~0.50% increase before the end of 2022, a further 1% of increases throughout 2023 plateauing out in 2024 to level around 2.50%. Having said this, if inflation comes back into the target band & wages increase to a level that these economic contributors can live in tandem, then rates may level out sooner. A lot of people think that if their interest rate doubles so will their loan repayments. You’ll be happy to know that this isn’t true!

A home loan comprises the repayment of two components:

• Principle: which is paid down over the (usually) 30 year term

• Interest: which will vary depending on the balance & the interest rate

Banks generally increase their variable rates in-line with & soon after the RBA cash rate announcements (1st Tuesday of each month) so it’s time to get ready. Expect an increase of 1% to your variable rate loan before the end of this year & another 1% - 1.5% by the end of 2024. This table shows how it may affect repayments for your variable home loan. For those of you with a fixed rate loan . . . you can relax for a while.

Loan over 30 years with monthly repayments

Loan Amount $500,000 $750,000 $1,000,000

(Assumed) Current Variable Rate Principal & Interest per month 2.25%

$1,911 2.25%

$2.867 2.25%

$3,822

Variable Rate Increases by 1% Principal & Interest per month

Variable Rate Doubles

Principal & Interest per month 3.25%

$2,176

4.50%

$2,533 3.25%

$3,264

4.50%

$3,800 3.25%

$4,352

4.50%

$5,067

WHAT SHOULD YOU DO?

My thoughts are that it’s too late to fix a variable rate now as the increase has already been factored into the fixed rates & you’ll just be paying an unnecessary premium upfront.

To manage the forecast increases & as a general rule you should always try to make extra repayments into your offset account to prepare for future rate increases . . . & be prepared for any unexpected event! Even if you have a low fixed rate loan, start making extra repayments now to get used to a new era in interest rates & to give yourself a buffer if needed.

Of course you know that if you would like to discuss your individual situation, you can always call or email me directly. I’ll be happy to review your loan & give you an idea of what your future repayments may be.

Mary Grant M. 0478 732 343 E. mary@clearoptionsfinance.com.au clearoptionsfinance.com.au

Performance Business Sales is a ‘boutique’ business broking company offering a genuinely personal service.

We work with a limited number of clients at any one time, ensuring we provide a high-quality service designed to achieve the best outcomes for our clients. Your business must meet our strict selection criteria to make listing status.