“We have found that although there is a strong market for good businesses in Australia and plenty of buyers ready and willing to pay a fair price, a lack of owner confidence in the buy/sell process means many valuable businesses are failing to sell to the right buyers for the right price,” he said.

Mr Karathanassis said many successful companies, including those operating in the mining and engineering space, have been built from the ground up. “They have been founded by extremely astute entrepreneurs,” he said, “however, these people often have very little experience buying or selling businesses. They frequently do not know how to value their business or where to find a buyer. They also do not yet understand just how complex the process can get and how long it can take.”

He said the problem was further compounded by the fact that business owners feel intimidated and out of their depth when dealing with trade buyers who are often the likely purchasers in this marketplace.

“Many of the companies we speak to have either been approached by trade buyers or have considered approaching one to help them sell the business into,” he said. “However, the process was so foreign and so daunting for the owners. Often after lengthy delays, nothing of substance materialised.”

Mr Karathanassis said this lack of confidence, and the absence of an effective campaign to extract the correct worth, sometimes means that strong Australian businesses are being sold at less than their value and/or to inappropriate buyers.

“It’s a concern because we know from our own experiences that good marriages can be made,” he said. “In the past few months, we have negotiated several successful deals, including one which involved a mining and industrial company. Ultimately, the deal saw an aggregate of two businesses consolidated by a private equity firm looking to enter a niche area in the mining services market.”

Linkara has also helped sell an $18million electrical contracting business which was acquired by a private equity firm looking for an entry point into the electrical services market, in particular for mining clients. Another successful deal involved facilitating a land deal for a major Australian company for a technology centre with commercial sheds.

“The deals are there to be optimised,” Mr Karathanassis said. “But it is very evident to us that companies operating in the small to medium space need expert help to achieve their goals.”

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And, very often, these principals operate in relative isolation to their profession. Outside of PD days and industry conferences, they generally have few opportunities to come together to learn from others who are running businesses similar to theirs – to share experiences and discuss pertinent issues with their peers and colleagues.

Consequently, it is difficult for most to know what is loosely termed (and for want of a better description) “best practice”. For example, in a business similar to mine:-

• What is the standard ratio of support staff to advisers?
• What is the average level of practice profitability?
• Is my practice performing better or worse than others in terms of growth/attrition rates over the past 12 months?
• How does my client satisfaction level compare to my peers, not only from within my own dealer but also to “external” firms?
• How often should staff meetings be held?

And so it goes on.

But as agents Mulder and Scully reminded us each week in the X Files – the truth is out there. It’s only a matter of taking time and making the effort to find out. So why don’t more seek out the truth and benchmark their practice?

Stats & Facts

• Those practices which proactively seek regular feedback from their clients in a structured manner are achieving a 74% uplift in profit (compared to those which don’t).
• Practices utilizing an external business adviser are achieving a 94% uplift in profit.

The post So what really is ‘Best Practice’? appeared first on AdviserVoice.