Time For A Business Turnaround
3 reasons there’s never been a better time for ‘business turn-arounds’ You no longer need a huge bank balance behind you to become an entrepreneur, writes DG Institute’s Founder and CEO Dominique Grubisa.
It’s the great Australian dream – quitting your job and making a profitable living as an entrepreneur. Unfortunately, up until now, it’s a dream that’s been off limits for anyone without substantial finances behind them. Buying and selling businesses is expensive and has traditionally required lots of cold, hard cash.
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But a clever strategy known as ‘leveraged business turnarounds’ is putting entrepreneurship within the reach of ordinary Australians. What’s more, a coming together of unique social and economic factors means there’s never been a better time to try the strategy out.
So how does it work? Put simply, a leveraged business turnaround involves firstly identifying a business that is faltering or underperforming, but that has potential. You then negotiate with the owner to acquire control – potentially on a no-cash-down basis – and use your acumen and business skills to put the company back on track. The final stage is to sell the business – or your share of it – and repeat the process. The beauty of the approach is that it doesn’t initially require an enormous cash outlay, a traditional barrier to entrepreneurship. The coming together of some exceptional demographic factors mean that now is a great time to try the business turn-around approach. Here are three reasons you should give it some serious thought.
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Here are three reasons why now is a great time to consider the turn-around strategy.
1. Australia is undergoing massive demographic change.
The baby boomers, the generation of Australians born in the two decades after World War Two, are retiring in massive numbers. Thanks to their hard work, they own a massive 75 percent of small to medium sized businesses in Australia. With so many boomers looking to retire at the one time, the owners of some truly fantastic businesses simply can’t find buyers in the younger generations. The upshot is that many owners are open to creative approaches from entrepreneurs willing to take over their businesses, often without an initial cash outlay.
2. Changes to company laws now benefit entrepreneurs.
One of the big deterrent to entrepreneurs coming in and helping a company trade its way to profitability has traditionally been Australia’s draconian insolvency laws. If a company is unable to pay its debts when they fall due, it is considered ‘insolvent’ and its directors are required to call in administrators. If the company keeps on trading when insolvent, those directors potentially face civil penalties, compensation proceedings and criminal charges. But the recent arrival of ‘safe harbour’ laws under the Corporations Act have made the situation more attractive to entrepreneurs wanting to bring about a turn-around. Essentially, subject to conditions, directors now have a ‘safe harbour’ from the civil insolvent trading provisions in the Act whilst they are attempting to restructure or turnaround the business. So, provided they have a clear plan of action and their intention is to do their best for the company, they can potentially trade out of trouble.
3. The economic downturn means even more opportunity.
If you’re a reader of newspapers and news sites, you will know the Australian economy is going through a rough patch. You don’t need to look far to find evidence that plenty of businesses are in trouble. Figures from the Australian Securities and Investments Commission (ASIC) show the number of Australian companies entering external administration grew 15 percent between the first and the last quarter of 2019. At the same time, debt collectors reported a spike in business-related collections. Meanwhile, liquidators and the accounting professionals responsible for winding up businesses have predicted a busy 2020, with demand for their services already up. The upshot is that there is an increased number of businesses in trouble. This opens the way for ethical entrepreneurs to come in and propose win-win exit strategies for businesses doing it tough. By offering owners a way out of being wound-up, entrepreneurs can both increase their wealth and help others.
So, put aside your pre-conceptions of what it takes to be an entrepreneur. With some business acumen and the right business turn-around strategy, you stand an excellent chance of building your wealth and living your own Australian dream.
Lawyer, Asset Protection Specialist and Property Educator
Dominique Grubisa is a practising legal practitioner with over 22 years of legal and commercial experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author. You may contact Dominique at firstname.lastname@example.org
This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.