Buying Businesses

Discussion in 'Other Asset Classes' started by albanga, 7th Apr, 2017.

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  1. albanga

    albanga Well-Known Member

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    @kierank thanks so much for sharing.
    What I be pushing it if I asked what line of business you were in?
     
    albanga, 7th Apr, 2017
    #21
  2. kierank

    kierank Well-Known Member

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    Over the last 30+ years, we have owned four businesses - two were in food and two in IT.

    By some coincidence, two of these business were existing businesses (one in food, one in IT) and two we started ourselves (one in food, one in IT).
     
    kierank, 7th Apr, 2017
    #22
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  3. sanj

    sanj Well-Known Member Premium Member

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    There needs to be a captain of the ship and at absolute max 3 people whose voice has any say in operational or day to day basis.

    Are the rest willing to be silent apart from shareholder updates? Are the silent ones willing to pay the 1 or 3 tasked with the responsibility of handling this?

    Who is going to get the shareholder agreement done? Which few to at least get it to a stage where everyone can have something close to finalised? There's no way 10 can do that together, waste of time, resources and likely to produce a crap result if at all, certainly not worth the 25k investment in that regard.

    If the above can be navigated then sure it's worth considering but clear and distinct rules and boundaries need to be set and agreed upfront, along with responsibilities and targets
     
    sanj, 7th Apr, 2017
    #23
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  4. sanj

    sanj Well-Known Member Premium Member

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    Also if it's strongly profit and cash flow generating and the owner wants to continue I'd want a pretty credible reason why he's selling because it doesn't sound like it's for financial reasons (unless it's well and truly his only asset) and doesn't sound like it's for personal reasons if he wants to stay on.

    I'd want him to get paid an adjustable figure , maybe based on a 3 yr average of last year, upcoming year with him running it and following year, maybe he'd get paid 150k now, balance held in trust and distributed once milestones are met.

    Otherwise there's no incentive for him to protect your investment
     
    sanj, 7th Apr, 2017
    #24
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  5. sanj

    sanj Well-Known Member Premium Member

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    imo needing consensus of 10 people re how to run a 250k paint shop is like bringing a physio, bowling and batting coach and your favourite tea lady to a one hand one bounce game on Australia day.

    massive overkill and if that's perceived to be needed then there are far bigger problems that need addressing first, in this case possibly the need to confirming sufficient experience/competency for such a venture
     
    sanj, 8th Apr, 2017
    #25
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  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Like bringing a butler to a picnic!
     
    Terry_w, 8th Apr, 2017
    #26
  7. sanj

    sanj Well-Known Member Premium Member

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    one must maintain one's sartorial elegance at all times, even when feasting in public
     
    sanj, 8th Apr, 2017
    #27
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  8. The Falcon

    The Falcon Well-Known Member

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    @sanj has well covered it. Besides from the very many reasons listed as to why this doesn't look great is that the accountant in the group thinks paying 5x earnings for a pissy paint shop is a good idea. He/she must be with H&R Block at the local shopping center!
     
    The Falcon, 9th Apr, 2017
    #28
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  9. The Y-man

    The Y-man Moderator Staff Member

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    Hey @albanga

    Probably not want you want to hear, but how about a shared ownership with a much larger group of people in a much bigger established biz like woolies or westfarmers or some other biz you have seen or made use of? You still get to vote etc and their finances are public.

    We are in a similar boat - sidelined out of resi IP - so we are going into the commercial prop trust area. I argue for many resi IP people, they can understand what the investment is about (basically land with building with tenants, loan and PM). You get a share of the rent based on the proportion of ownership net of PM fees, property works and interest. Unlike your original post, you can buy in/sell out much more easily.

    The Y-man
     
    The Y-man, 9th Apr, 2017
    #29
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  10. Ross Forrester

    Ross Forrester Well-Known Member

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    Exactly. If you had 10 investors you would have one director (maybe 2 - if both worked in the business).

    The investors can turn upto the AGM once a year and that is it. Any investor who walks up to the business is one day is sued for trespass - they do not get access rights to the business.
     
    Ross Forrester, 9th Apr, 2017
    #30
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