Chasing the brokers

Last task today before the end of the week was to chase the two brokers for the two existing cafes we made offers on a week or so ago. Just to re-cap:

- We have made offers to purchase two existing cafes

- We are considering leasing two new shops (brand new concrete boxes)

Each of the above presents different challenges, and advantages/disadvantages. But we decided it was important to maintain concurrent strategies and investigate the possibilities of each pathway.

We faxed offers to the two brokers on Tuesday 29 Jan. Both rang that evening to say the offers would be too low (which we knew), and we responded that unless they came through with some realistic financials, we would not be reviewing our offers.

Didn't hear a thing since then. So I rang around late today. Broker #1 says owners want an amount around 2.5 times what we offered, but they won't supply any financials. Even the broker says he's told them this is a dumb position. I guess some mug might come along and buy the business, but it ain't going to be us. Pity, the location is great.

Broker #2 says the owner promised to drop P&Ls off today or tomorrow. He'll fax 'em over to us if and when they arrive.

Not very promising. Still maintain our amazement at the businesses practices prevalent in the small end of the cafe sector. When we sold our online company in 2006 we spent several months prepping the business for sale, including restructuring the corporate entities to create a 'clean' and tidy business. Much work went on documentation and so forth. We 'packaged' the business for sale as our advisors termed it. True, there was an investment required, and yes the deal size was many times larger than we're talking with these small cafes. But surely the same principles apply?

A well managed, well documented business is going to sell for a higher price, and quicker, than a poorly managed one with incomplete or unavailable documentation. These cafe owners cripple their wealth creation opportunity by taking a short term view about cash, record keeping and their attitude to potential buyers.

I've been pondering the motives. And unkind or uncharitable it might seem, for me it's all about expertise and experience. Some people make the effort to learn how to be competent in business. Some of them have a particular propensity or talent for business - and they'll fly even higher. But basic business practice is not hard. Or at least that's what I thought. I'm possibly having to change my mind. Maybe the harsh reality is there are a big bunch of people out there running businesses who you wouldn't put in charge of a race between two flies, let alone a retail outlet turning over several hundred thousand dollars a year.

If that's the truth, then there's an even scarier notion - if they're rubbish at business, just how good are their health and safety standards? Bear in mind, these people are directly responsible for your health. They sell you food, you eat the food. History is littered with an abundance of examples of poor food safety resulting in widespread illness - and death. The same people who can't manage their way out of a paperbag; who seem hell bent on avoiding selling their business (despite professing a desire to do so); who deliberately under-report their cash takings to avoid paying tax ---- are the ones making your lunch tomorrow. How's your stomach feeling now?