Picture this. A beach in the tropics. Cocktail in hand. No phone reception – and no client calls. Nothing to do but sit back in the sun, look forward to the massage you have booked later that afternoon, and think about all that money you’ve just been paid for your business.
Stop. That could be you post- mortgage broking – but only if you manage your exit well.
So how can you make a smooth transition into your next step in life? Two brokers who have recently sold their businesses – Mario Borg of Mortgage Achievers and Scott Beattie of Cube Central and Cube Home Loans – answer your questions on maximising business sales.
Q: What should you prepare or beware before selling?
MB: Start with the end in mind and the rest will fall in place. Regularly ask yourself this question: “Would I buy this business and what am I prepared to pay for it to achieve a satisfactory ROI?” You’ll very quickly ascertain what issues you need to work on. Whether you are planning to sell your business or not, I would recommend thinking in this way to ensure your business is not just a trail book (as our industry tends to think), but a true business with the right fundamentals that delivers the right financial result for you.
SB: Legal complications; privacy issues, ASIC issues and the like. Connective were helpful, but in some cases, their hands were tied (by legislation) in what they could and couldn’t do. I would suggest to allow a minimum of three months for a transition to occur.
Q: How did you find the right buyer?
MB: I wasn’t looking for a buyer per se. It was through contacts I established within the industry and the right knock on the door came around. A key consideration for me was that the buyer (or buyers in my case) were the right fit for my clients, in relation to approach and culture. You only get one name in this industry, and I wanted to protect my reputation with all stakeholders.
SB: One of our contractors who managed Cube Plan & Protect was paying for me to go to a conference in Cairns – I suggested that he not do that as we would be out by the end of 2012 due to our sale. He asked what we were looking for, he said he was interested, and within two weeks, we agreed on the T&C’s and they are the new owners!
We are very positive and I am actively involved with the new owners in the transition. I think that we (as the previous owners), the staff, clients and business partners (i.e. lenders, referrers etc) have been very lucky that our team works well together and have been extremely supportive of the entire process the whole way through. As we had started the brand from scratch, we were keen to sell to someone who was likely to keep the brand in place, which was a massive appeal when one of our team said they were interested in the purchase.
Q: What influenced the eventual purchase price?
MB: Key measures included the size of mortgage funds under advice (trail book), annual trail income, EBIT, consistency of growth (i.e. settlement volumes, trail book, and profit), established systems and processes (including ongoing management of clients), the quality of CRM in relation to client details and accuracy thereof, as well as perceived trust in the brand.
Keeping a scorecard to monitor our progress was key, from an ongoing management perspective as well as providing any required information for the buyers. As they say, you can’t manage what you don’t know!
SB: What are you selling? A brand, a trail book and or both? Is it reliant on you or not? A ‘me’ business (in my opinion), will not attract the same price as a systemised business.
In the event of a sale, everything should be documented so that there is a procedure – legislation was helpful in reviewing and implementing these.
In our case, we agreed on a price that included an ongoing payment based on turnover. We feel that we had a well-established multi-award winning brand with an active database that wasn’t solely reliant on mortgages.
Q: Looking back, would you have handled anything differently?
MB: The sale went very smoothly so no real issues. The main hold up at one stage was the bank (funder), as they took a very long time to cut through the red tape and approve the finance for the purchaser. Banks unfortunately tend to pigeon hole mortgage broking businesses based on industry averages, so if someone is paying a much higher multiple based on the purchase of a business and not just a trail book, the blinkers blur the bank’s decision on funding. In the end the numbers told the real story!
SB: Although there was some ‘transitional’ pain (i.e. Telstra!), we are extremely pleased and proud to have built a business and brand to a level that our buyers (Steve and Janet) can take to greater heights.
Where are they now?
Scott Beattie: For Scott and his wife Jo, the plan is all about spending more time with their kids over the next few years – time Scott did not have as a broker. “We have another project that we are working on where we show people how to turn their expenses into an asset, but that’s only around 20 hours per week (on a bad week!),” he said.
Mario Borg: After a trip to Hollywood following the business sale, Mario is now in the process of constructing a 4 townhouse development in Brunswick West, Melbourne, to add to his portfolio. “This will be my first challenge since mortgage broking. I plan to continue to grow my wealth and financial security through residential property, and who knows perhaps I may even package my knowledge and experience up, and educate others about it,” he said.