[EP 293] From Business Valuations to the Reality of “No Money Down” Deals – Your Questions Answered

Transcript below!

[00:00.4] Introduction:
Ladies and gentlemen, good evening. Are you ready? Okay, here we go. You’re listening to the Deal Room Podcast. Join us as we bring you the inside scoop on business sales and acquisitions. Get across trends in the area and hear the industry’s best recount their real life tips, traps and experiences.

[00:19.3] Joanna Oakey:
Now, here’s your host, Joanna Oakey. Hi, it’s Joanna Oakey here and welcome back to the Deal Room Podcast, a podcast proudly brought to you by our commercial legal practice, Aspect Legal. Now in this episode, I’m talking with Lucia Vuong from Seek Business all about answering your burning questions.

[00:41.9] Joanna Oakey:
From our recent webinar, we’re unpacking the complexities of business valuation, the importance of preparation when buying or selling a business, the realities of cashless transactions in the Australian market, and even diving into which industries are trending right now.

[01:02.2] Joanna Oakey:
Lucia is the head of Seek business, bringing over 15 years of experience in product and marketing to empower small business owners passionate about fostering thriving community. She leads a team dedicated to making business ownership accessible for all Australians.

[01:19.2] Joanna Oakey:
And in this episode, Lucia and I talk about demystifying business valuation, the buying and selling journey, and industry trends and opportunities. So let’s dive on in. Lucia, thank you so much for coming back onto the Deal Room podcast as a bit of a, I guess an additional add on to the webinar that we ran the other day.

[01:43.8] Lucia Vuong:
I am super excited to have you on board. Thanks, Joanna. Yeah, we’re really excited to come back and yeah, we loved the engagement on the webinar and so really keen to come back and answer some of the questions we didn’t have time to answer. Yeah, thanks for having us. Fantastic.

[01:59.2] Joanna Oakey:
Now as it turns out, we actually had a stack of questions in this podcast. What we want to do is answer some of them. Of course we answered some of them in the webinar as well, but we just not going to be able to answer them all today. So we’ll just run through and pick a few. But we’re going to be running more webinars next year, more podcasts and pushing out more content.

[02:20.7] Joanna Oakey:
So if you’re interested, if you have, if you came in with a question and your question hasn’t been answered, don’t worry, have no fear, we’ll be running loads of things for you next year. Now I don’t even know where to start and let’s just throw in if you’ve got questions that are top of mind, but maybe where I’d start and I’m not even sure I have the full answers to this but,

[02:47.5] Joanna Oakey:
think it’s an interesting one. In the webinar we actually probably focused a bit more buy side than sell side. And that’s why next year we’re going to be having a few webinars focusing on side. But this question of valuation is a super interesting one because buyers, any sellers, are interested in this concept of valuation.

[03:08.7] Lucia Vuong:
And from your perspective, Luz, is that a question that is asked often on your platform? Yeah, it’s probably the most common question that we get and that we hear in almost every webinar we do as well. So absolutely understand that it’s the top of mind for everybody in who’s looking to buy and sell.

[03:29.6] Lucia Vuong:
I think valuation, everybody wants a really easy way to value their business. I appreciate that, I understand that. But I think from our perspective, the reality is valuing a business is really complex and it depends on so many things.

[03:45.9] Lucia Vuong:
So we get asked questions like do you have multiples for certain industries? All that kind of stuff. And the answer is always yes, they’re there. Like there are people who deal with a lot of transactions, have access to past transactional data that gives them an indication of multiples, that multiples is a starting point, not, not the end result.

[04:09.4] Lucia Vuong:
And I think that’s where it can get a little bit dangerous if people rely on a multiple and just say it’s three times. And so this is what my business is worth, not taking into account all the other things that can actually either increase or decrease the value of your business in the eyes of an actual buyer.

[04:25.7] Lucia Vuong:
So I’m sure you see this a lot as well, Jo, in your interactions. And then obviously it depends, as you said in the webinar, so much on the deal structure as well, 100%. The interesting thing is, I think you pointed to this too, Luz.

[04:43.1] Joanna Oakey:
There’s no absolute in what the value of a business is. It depends what buyer is around in the market at the time and what the business means to them. So you have strategic buyers who might have a reason why that business might be more valuable to them than another buyer.

[05:04.5] Joanna Oakey:
And those are the sorts of things that are very hard to factor into this concept of valuation. The one thing I would say though is education is your friend because I find the business sale process is very emotional process for sellers, but also for buyers, particularly buyers who might be first time buyers.

[05:24.9] Joanna Oakey:
For the sellers, this mindset for them is this might be the last opportunity I have to monetize this thing that I built all these years. And so that concept of Value, they worry that they’re not getting the best deal that’s around and buyers on the other hand are worrying that they’re paying too much, that there’s some.

[05:46.8] Joanna Oakey:
That they’re not going to be able to realise the value that the seller has said is in the business. You’re dealing with not just the concept of value of a business, but value from different perspectives and then value based on how transferable that asset, the assets are in the business or the value is in the business.

[06:08.5] Joanna Oakey:
So it’s a really nuanced question and I guess just to give it like some depth. It’s all about creating the right deal team. That’s what I think it’s about education, having the right people around you so that you can understand the nuances. I reckon that’s my thoughts on that one.

[06:24.8] Lucia Vuong:
Yeah, I’ll just add. And like you’ve, you’ve just reminded me, I think that transferability of the value is something that we don’t talk about enough. So people think about assets and revenue and profitability, all those things, but they don’t think about how do you transfer that value.

[06:42.3] Lucia Vuong:
And I think the thing that both buyers and sellers also take, particularly sellers forget about, is you can make your business more valuable. The earlier you start thinking about your exit plan. And Jo, you and I talk about this a lot.

[06:58.4] Lucia Vuong:
If you’re, if you are thinking, if you’re a business owner and you’re starting to consider what is my next thing, when do I exit and how do I exit? The earlier you can actually start to think about how much value do I hold in this business, especially as the owner. Often you’re the brand, often you’re the expertise.

[07:17.1] Lucia Vuong:
Like all these things that are actually valuable to the business which makes it generate the profit that it’s generating today might leave when you leave the business or the perception that it leaves when you leave the business is in the buyer’s eye. And so the earlier you start to prepare and extract yourself from the business.

[07:35.8] Lucia Vuong:
That’s just one example. There’s other things that you can actually do in your business to increase the value. And so that’s why value is not. It’s not one number and done. It can take time to get to a valuation that you’re happy with as a seller as well.

[07:50.9] Lucia Vuong:
If this is something you’ve put your blood, sweat and tears behind, you might not want to sell it for what it’s worth today, but you might be happy to sell it. But what you can make it worth in 12 months time. So I Think those are other things to consider when you’re thinking about valuation.

[08:06.7] Joanna Oakey:
Absolutely. Early preparation is just like absolutely critical, not just to the sale price and certainly it relates to the sale price, but also the, the pool of buyers because so many buyers come in and will.

[08:22.9] Joanna Oakey:
I think we should run a separate webinar on this topic because there is actually a formula. There is a formula for what businesses can do to make them more salable and more valuable at sale. But I tell you, the classic is buyers who come to us and say we’re looking for a business that’s run under management, a business where I don’t have to step in and work on it, in it on a day to day basis. And that’s.

[08:49.7] Joanna Oakey:
There is a way to create that and you do that, you’re suddenly opening yourself up to actually a lot of competition in the buy pool there because there’s a lot of buyers who are looking. We did a keyword article recently where we showed that’s one of the most searched terms is under management or fully managed.

[09:08.0] Joanna Oakey:
Yeah, but okay. I love it when data backs up. When I say language. It’s good. Okay, yeah, let’s run, let’s run something on that. I think that’s a topic for the future, Luz. Definitely. Okay. All right. That rolls on actually to another question that when purchasing a business.

[09:25.7] Joanna Oakey:
So this is purchasing, but I think this question could also relate to selling. Should I speak with an accountant, broker or lawyer first or should I be jumping on the sick website for proof of matrix? This is an interesting one, isn’t it? Elias?

[09:42.0] Lucia Vuong:
Do you have any perspective? It’s going to feel like all my answers are. It depends. It depends on who you are. So I think if you’re an existing business owner and you’re acquiring a business to grow your existing business and you have, you have professionals that are currently helping you, then you should go to them first.

[10:01.2] Lucia Vuong:
If you’re, if you’ve got an accountant, go to your accountant. If you have a legal advisor, go to them and start to think about what it means for your situation. I think if you don’t, it gets a little bit more complicated. Who do you go to first?

[10:17.7] Lucia Vuong:
It’s hard to say. It depends on what type of business you’re looking for, what you know about that industry, what you want to know, how much risk you’re taking on. Because again, this comes down to your financial situation. This is a financial decision that you’re making and where are the risks? Is the risk legal?

[10:34.6] Lucia Vuong:
Are you going into an industry that’s highly has a lot of compliance and regulation and issue like things that you are not aware of or are you going into a very high financial risk environment, in which case you probably should consult an accountant. If you’re buying, the broker is probably not the first point of call, but the broker will help you.

[10:55.5] Lucia Vuong:
I know that people think the broker only works for the vendor, but we know there are a lot of really great brokers out there who are just like if you make an inquiry on a business that you’re interested in, their job is actually to help you realise whether or not you’re a good fit. And that is a great process to go through because they don’t want to waste time on you if you’re not a good fit and you don’t want to waste time on the business if you’re not a good fit either.

[11:18.4] Lucia Vuong:
So I think all of these professionals are great advisors and it depends on what you’re trying to do and what you’re looking for. In, in looking for a business. I don’t know what about you, Jo? I think quite often buyers start with this, this idea, right?

[11:34.1] Joanna Oakey:
And then they just want to get straight into it and start looking and finding a business that’s on the market. But to be honest, I feel those sorts of buyers can end up wasting a lot of their own time and the time the sellers, the brokers, the accountants, lawyers, because we see transactions that fall over most often relate to buyers who are super early stage and have progressed into a transaction before completely understanding what they’re looking for and why.

[12:10.8] Joanna Oakey:
So I think it is about making sure you’re engaging whoever those that deal team is to help you understand why you’re buying, what you’re looking for, how to evaluate what you’re looking for when you find it.

[12:26.4] Joanna Oakey:
And I think that just gives. It gives a lot more strength to the base of a buyer as they embark. And actually it’s an interesting point for sellers as well. Good to get to know the people who are sitting as part of your buyer pool.

[12:44.1] Joanna Oakey:
If you’ve got buyers there that are early stage, haven’t got finance in place, don’t seem to have a clear strategy, I think you have to understand that is likely to be a buy that may not progress in this transaction, but it’s just buyers who aren’t prepared, are more likely to be slower and find the transaction more difficult than buyers who have really approached it in method, methodical way and a way of getting themselves educated by their deal team around them. That’s what I think.

[13:23.9] Joanna Oakey:
But also websites like Seek, I think, provide the perfect opportunity for buyers to go in and understand how sellers are expressing their business. Right. And what the prices are that are there. And like, presumably, and I have no idea what tools you have on their Luz, but I just think from the eyes of the buyer, you should be going and getting as much information broadly as you can before you get serious.

[13:49.1] Lucia Vuong:
Yeah, no, I totally agree and actually, thanks for reminding me. We actually have a tool that it’s a template to help people think about why are you buying? And that’s one of the first things that you should be thinking about as a buyer is what is this business going to do for you? Is it to replace your job?

[14:05.2] Lucia Vuong:
As in, you hate your job and you want to get out of it, or is it. Is it a side project that you want to keep your job but you also want to do something else, or is it some other reason that you’re looking to get into business? And once you know that, then like what you look for changes.

[14:23.2] Lucia Vuong:
And when you start looking on a website like ours, you’ll start to see things that are immediately not right for you. And that search process, that discovery process is so important in just helping you get. It’s actually. It feels slow, but it’s actually gets you there faster.

[14:40.6] Lucia Vuong:
I think brokers probably won’t like me saying this, but I think you should make inquiries on multiple businesses once you start to know what you’re looking for. Because that is actually what helps you as well understand. Because once someone starts to tell you probably about a business, you’re like, oh, that doesn’t feel great.

[14:57.9] Lucia Vuong:
And you assess for yourself, why didn’t I like that? Then you start to know, oh, I’m not interested in businesses where I have to work these hours or where I have to manage a team, or where I have to. Whatever the things are that you suddenly realise as part of that business, you won’t know that.

[15:15.1] Lucia Vuong:
You won’t know that by looking at an ad. You’ll know a little bit. You’ll know, as you said, Joe, you can get a sense of pricing, you can get a sense of where value is attributed, but you won’t get a sense of how a business is run and whether or not you like running it. Because I think sometimes there’s this romantic notion of running a business if it’s.

[15:34.4] Lucia Vuong:
Especially if it’s in an area that you’re passionate about, running the business might not be the same as you indulging in your passion. And I think that’s one of the biggest mistakes that People make. Can I just wholeheartedly agree with that? The very few instances of people buying a business and then it working out right.

[15:56.0] Joanna Oakey:
We deal with hundreds and hundreds of transactions a year and I could probably count on my hands the number of transactions that don’t really work out. But the what, what I think characterises those, the majority of those that hasn’t haven’t worked out.

[16:11.7] Joanna Oakey:
Every now and again there’s an issue in relation to whether or not the financials have been true and correct. So that that is one thing to be aware of and super important buyers do their due diligence and that sellers are very organised and transparent when talking about the business.

[16:29.1] Joanna Oakey:
But the bigger issue is buyers having a romantic notion just as you’re talking about Luz and thinking it just being it not being anything about the business but more about what they’re own idea of being in this particular business.

[16:46.5] Joanna Oakey:
And it’s almost always people who are coming into an industry that they haven’t been before. Yeah. Whether or not that’s purchasing into. I’ve seen this in cafe businesses, in florist businesses, but I’ve also seen it in, in professional services businesses that are bolt ons where the buyers just haven’t understood the way the business works.

[17:08.5] Joanna Oakey:
Very good point. I think that understanding the industry that you’re buying in the reality of it with, with without emotion. Yeah. Like a very objective assessment of what skills do you bring and does that match what the business actually needs. Perfect. Okay.

[17:26.6] Joanna Oakey:
All right, maybe just one here and I don’t know if you have any thoughts on this one so no worries if you don’t. Liz. But this question, is it possible to negotiate a cashless transaction? I just wanted to quickly talk about that one just because we’ve got a real.

[17:43.4] Joanna Oakey:
I’m seeing a real. A large number of buyers coming in who have perhaps studied programmes from the US or the UK and it’s all about no money down. And it’s interesting because the Australian is generally, not always generally very different to that and I just, I really thought it’s useful to tackle this one.

[18:07.7] Lucia Vuong:
Luis, do you see any of this sort of trending on Seek in any of the searches or is there anything that seek sees in this area? Yeah, not necessarily in the searches. We do get this question a bit actually and the way I always answer it and think about it is you’ve got to think about why someone would accept an offer of no cash upfront if they’re a really good business.

[18:38.3] Lucia Vuong:
So there’s always this kind of balance of the what Are you paying for and how much demand is there for that thing? Because if it’s a really great business, I can tell you they will have no shortage of buyers interested in buying that business. If you’re offering no cash and someone else is offering to pay them the price that they want, then why would they consider you?

[19:00.4] Lucia Vuong:
Now, if they’re willing to accept the no cash, then I would question, do they have no buyers? And if they have no buyers, why is that the case? You don’t know. Obviously, everything is possible. I’m sure these transactions take place, but there’s always a reason.

[19:16.7] Lucia Vuong:
And I think sometimes when you look at it from the outside, it looks like a great opportunity and. But then you’ve got to ask, why is that available? I was speaking to a buyer actually the other day who came into us and. And we were just talking about this conceptually and he said, yeah, he’d done one of these programmes.

[19:36.5] Joanna Oakey:
He came. He’s Australian, he’s in the Australian markets and he’d spent the last year trying to find businesses using the strategies, cold calls, emails, whatever, trying to find this. He’d spent a year in the Australian market trying to engage these strategies and fire.

[19:53.0] Joanna Oakey:
And he’s gone. Actually, do you know what? I think this was really hard in the Australian markets. He’s gone and now got funding and he’s got a deal where it’s part cash from his funding, part vendor finance. And I just thought it was an interesting reflection on someone who’d been in the market, really smart guy, and given it a go, but had identified through his own experience that it’s really tough in the Australian market.

[20:20.4] Joanna Oakey:
But we’ve actually got a vendor finance webcam and we’ll put a link in this in these show notes because. Because we had, I think I recall, like, we had around about 1200 people for that webinar. It was really popular, showing the interest just from buyers, but from sellers who are responding to these sort of offers in the market.

[20:43.6] Joanna Oakey:
And I think the answer is this. As a buyer, once again, I feel like this is our answer to everything. Get educated. Yes, educated. Understand what you can do in the Australian market or what’s likely in the Australian market. But also understand you’re going to have to come in with giving security, because the concept of paying nothing, having no risk in the deal is.

[21:06.8] Joanna Oakey:
I know sellers have waited to actually monetize their business. Yeah, exactly. Not that you can’t, but you just gotta. You. It’s hard work. Like, you gotta find that perfect vendor. And, yeah, if you can figure out how to do that. Great.

[21:24.9] Joanna Oakey:
Good for you. Can actually probably make a lot of money here in the Australian market with your own webinar. Exactly. Yeah. But anyway, I don’t think anyone’s fully cracked it here yet, but love to hear if anyone’s got me into that. Okay, we’re almost out of time. Is there one last question you think we should be answering here, Luz?

[21:43.8] Lucia Vuong:
That is a good question. I think there was one about what industries are like performing really right now. And I think that’s really interesting because immediately after the lockdowns and the pandemic, we definitely saw increase in industries that were obviously doing well in the market.

[22:05.5] Lucia Vuong:
So things like gyms and fitness and adventure kind of businesses where people got to go out and do stuff and even probably accommodation spiked a little bit because everyone wanted to go on holidays as soon as we could. But then that kind of stabilised and returned to a normal level after a while.

[22:22.9] Lucia Vuong:
And I think that the takeaway that we have is it’s hard to predict the market. Nobody knew that Covid was going to happen. And then because of COVID all these things grew. And if you picked up on it early on in the trend, good for you. But like to time a business purchase exactly when this trend of industries is growing is really hard.

[22:44.7] Lucia Vuong:
And so we like my. My view is a good business is going to do well in any market and if anything a good business should be able to ride an economic challenge. There are obviously very specific industry specific kind of constraints like for example, Covid and all cafes had to close.

[23:04.5] Lucia Vuong:
But how likely is that to happen? Like many times that’s unpredictable. You can’t really. Yeah, you can’t really plan for that. But there is a great website which I only found out about recently. It’s a government website which we can maybe put in the show notes that shows benchmarks for industries and their performance.

[23:21.5] Lucia Vuong:
And of course the ATO uses this to make sure that if you’re putting in your. Your activity and your tax that you’re within the benchmark. But you can use it to see for a business that you’re looking at is it roughly, you know, within the industry benchmarks. And I think that’s a helpful starting point for assessing like whether an industry is growing or not or assessing a specific business relative to the rest of the market.

[23:48.4] Joanna Oakey:
What a fantastic. I’m looking at this link now. What a fantastic walk. I haven’t seen that one either. Anyway, we will put it in the show notes for you. So if you are listening at the moment. But don’t have your notes in front of you or whatever running along the beach.

[24:04.1] Joanna Oakey:
Don’t forget to go back, click the show notes and we’ll put that link there that Lizzie has provided from the ato. Super interesting. Love it. Really good. Okay, look, I think that’s all we have time for today. There were a whole heap of questions that we didn’t get to answer.

[24:22.1] Joanna Oakey:
We are committed to next year, 2025. In fact, maybe this will release in 2025. Oh, anyway, we committed in 2025 providing the answers to this question. So we’ve got a whole heap of webinars coming up and other content and other information that’s coming out to you, our listener, if you’re interested in finding out more about this.

[24:43.2] Joanna Oakey:
Obviously you’ve got the vendor finance webinar that we’ve already run and you can still catch the recording for and a whole heap of other content on the SEEK website and on Aspect Legal’s website. Lucy, can I just say a huge thank you for coming onto the show today? Thanks, Jo.

[25:00.5] Joanna Oakey:
Great to be here. And thanks to all your listeners for asking such great questions. And is there any, I guess just one last question before we go. What’s the pathway? I should know this before, before I ask, what’s the pathway for any listeners? Can they register on your website for updates in certain areas or how does it all work?

[25:19.8] Lucia Vuong:
Yeah, absolutely. We have a sign up on every page of the Seek Business website, so you can just go to Seek Business, probably scroll down to the bottom. If you sign up to our newsletter, we send useful links and articles, things that we’ve talked about today. So to help buyers and sellers on their business journey. And when you register, you can actually tell us if you’re a buyer or seller as well.

[25:38.2] Joanna Oakey:
Thanks for the plug, Jo. No, my absolute pleasure. Wonderful. Thanks so much for coming along and, and thanks to you, our listeners, and we’ll see you later in 2025 with lots more of this content to come. That’s it. Thank you. Well, that’s it for this episode of the Deal Room podcast.

[25:56.3] Joanna Oakey:
We hope you’re now primed for your next deal with these pointers and have enjoyed these fascinating insights. Now, if you’d like more information about this topic, then head over to our [email protected] where you’ll be able to download a transcript of this episode as well as access any contact details and any other additional information we referred to in today’s podcast.

[26:20.7] Joanna Oakey:
Now, if you’d like to get in contact with our guest today and the services they offer, you can go ahead and check out our show Notes for a link right through to them and their details. You can also book in directly with our Legal Eagles at Aspect Legal if you’d like to soundboard your next steps, discuss a legal question, or find out more how we can assist, whether that’s with buying or selling a business, or perhaps somewhere in between.

[26:48.1] Joanna Oakey:
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[27:06.6] Joanna Oakey:
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[27:24.8] Joanna Oakey:
That will conclude this evening’s energy. Thanks for listening to the Deal Room Podcast. To find out more about this episode and other episodes in the series, check out the show notes or head over to our website @ wwwthedealroompodcast.com au.