Bob Was Right<\/p>\n
The Stones said time is on our side.\u00a0 Prince said it was a sign of the times. The Foo Fighters said times like these. Bob said it best<\/p>\n
Come gather ’round people
\nWherever you roam
\nAnd admit that the waters
\nAround you have grown
\nAnd accept it that soon
\nYou’ll be drenched to the bone.
\nIf your time to you
\nIs worth savin’
\nThen you better start swimmin’
\nOr you’ll sink like a stone
\nFor the times they are a-changin’.<\/p>\n
Bob Dylan , The Times They Are A Changin\u2019, 1964<\/p>\n
Life moves pretty fast and, as Ferris Bueller wisely noted, if you don\u2019t stop and look around, you could miss it.\u00a0 Too young to remember Ferris? \u00a0May I suggest a run down to your local Blockbuster for an overnight hire, maybe the movie and popcorn package.\u00a0 You could take a cab and if you can\u2019t find the nearest Blockbuster you could search for it on AltaVista.\u00a0 Maybe you could even watch this classic while on holiday.\u00a0 Grab the Yellow Pages, go to Hotels and Resorts and start ringing around. Only a matter of time before you find a great place to stay at a good price.<\/p>\n
Or, you could always stream Ferris on Netflix, get Uber to bring you some takeaway, use Google to find an OTA and book online.<\/p>\n
Things change and, as Mr Bueller noted in 1986, pretty fast.\u00a0 Of course, he had no idea just how fast!\u00a0 If you had invested in taxi licences, dotcom boom search engines, print media advertising and video rental stores back in the day you would now be officially broke.\u00a0 Which, in my usual round about way, leads me to management rights.<\/p>\n
Like the parent who tries to stay cool by quoting Eminem, the wedding guest who reminisces about the bride and not in a tasteful way, the RN columnist who still uses a 10 year old photo, the socially awkward uncle with the comb over,\u00a0 we need to talk about one of our most out of touch and dated friends.\u00a0 Yes, we still love you P and L, but you\u2019re just so 80s.<\/p>\n
And now, the serious (boring) stuff.<\/p>\n
The tried and true sales process for rights has been around for more than 25 years and I would have to say has served us well.\u00a0 However, in recent times I can\u2019t help noticing that in nearly every transaction one part of the process is proving problematic. No prizes for guessing that verification of net profit is causing more headaches than ever before. \u00a0I think it\u2019s time to take a much closer look at how our industry treats this part of the process and I think we need to start making changes to protect the credibility of our industry.<\/p>\n
Too often we are seeing P and Ls being presented by vendors that reflect what they would like to be making, not what they are actually making.\u00a0 There\u2019s always a reason and rarely does that reason hold water. Labour costs are the big one. The vendor will say that some labour costs are discretionary, and the business can really be operated by fewer staff.\u00a0 I say if it costs a particular amount to operate a business successfully then that\u2019s the number that should be used. If the vendor says otherwise then surely it is the responsibility of that party to present an independent assessment of reasonable labour allowances to support adjustments.<\/p>\n
Of course, vendors will argue that the current industry standard of a one year adjusted P and L is how they bought the business, so they need to sell it that way.\u00a0 Tell that the previously mentioned taxi licence holders and Blockbuster franchisees. Unlike these unfortunate business people, we have an opportunity to pre-emptively review our profit verification process and bring it in line with common practices for commercial transactions.\u00a0 When the banks start knocking 20% off the verified net profit when assessing debt service capacity (yes, some are already doing this) you know the clock is ticking.<\/p>\n
My suggestion is that we need to start working on a new verification model. It needs to take into account the impact on existing operators balanced with the brave new world we are entering post banking royal commission. We need to look at other going concern based industries and review our own standards in the context of the broader commercial transaction framework. Most importantly I think we need to move to restore banking industry faith in the verification process. Trust me, they may not admit it openly, but the banks started losing faith some time ago.\u00a0 Overlay our unique standards for profit verification with increasing prudential pressure on lenders and there seems little doubt that bank credit policies will become more conservative if things don\u2019t change. Support from lenders is a key driver of value in any industry and if we start to see gearing levels drop and credit conditions become more onerous then we will see values impacted.\u00a0 If you want proof look no further than the tightening home lending credit environment and the corresponding signs of a significant property value cool off.\u00a0 It\u2019s happening right now.<\/p>\n
On the flip side I believe that implementing a more commercially realistic set of verification standards will renew confidence in the process and help in supporting continued strong values in the industry.<\/p>\n
I will leave you with this question.\u00a0 If I am a vendor with 3 years figures and I have an opportunity to present those numbers to a buyer to support strong buyer confidence and potentially a higher price, \u00a0why would I resist doing so ?<\/p>\n","protected":false},"excerpt":{"rendered":"
Bob Was Right The Stones said time is on our side.\u00a0 Prince said it was a sign of the times. The Foo Fighters said times like these. Bob said it best Come gather ’round people Wherever you roam And admit that the waters Around you have grown And accept it that soon You’ll be drenched to the bone. If your time to you Is worth savin’ Then you better start swimmin’ Or you’ll sink like a stone For the times they are a-changin’. Bob Dylan , The Times They Are A Changin\u2019, 1964 Life moves pretty fast and, as Ferris Bueller wisely noted, if youRead More →<\/a><\/p>\n","protected":false},"author":1046,"featured_media":1102,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mbp_gutenberg_autopost":false},"categories":[3],"tags":[],"_links":{"self":[{"href":"https:\/\/theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/posts\/1098"}],"collection":[{"href":"https:\/\/theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/users\/1046"}],"replies":[{"embeddable":true,"href":"https:\/\/theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/comments?post=1098"}],"version-history":[{"count":1,"href":"https:\/\/theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/posts\/1098\/revisions"}],"predecessor-version":[{"id":1103,"href":"https:\/\/theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/posts\/1098\/revisions\/1103"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/media\/1102"}],"wp:attachment":[{"href":"https:\/\/theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/media?parent=1098"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/categories?post=1098"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/tags?post=1098"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}