Avoid the risks – be alert but not alarmed

In the last couple of years we have seen a fairly significant increase in the number of resident managers having difficulties in their businesses.

We have seen more body corporate disputes and more prosecutions by the Office of Fair Trading. Anyone familiar with the industry will be aware of the substantial number of receivership sales that have occurred recently.

Whilst diligent and competent managers have continued to do well in these times, a minority have struck difficult times. In many cases the problems they have encountered could have been avoided had they been more careful in researching, assessing and understanding the industry.

With this in mind we have decided to relaunch the mini seminars, Avoiding the Pitfalls that we had so successfully run in the past. These regular seminars that will be conducted in house at our Brisbane and Gold Coast offices have, in the past, been found to be of invaluable assistance to new entrants to the industry seeking to gain a better understanding of the actual and perceived risks of buying and operating a management rights business.

There is no doubt that buying such a business, after proper investigation with a complete understanding of the risks involved, is generally a rewarding experience. Indeed a number of attendees at our seminars have gone on to excel in the businesses they have purchased, no doubt having benefitted from what they learned from them. But like any business, management rights businesses have risks attached to them and regrettably many buyers do not fully appreciate what they need to do to identify and deal with these risks.

It has been a common theme in our dealings with our clients that we recognise that most buyers of management rights businesses are investing their life savings in their purchase. It is therefore essential for us to inform our clients about, and protect them from, those risks that might impact adversely on the business they are buying. Some buyers, unaware of the risks involved, are driven more by the savings they perceive they can make on the costs that their lawyer or accountant might charge for acting in the purchase, rather than by the experience, qualifications and thoroughness of the advice they will receive. Consequently we are seeing more instances of managers approaching us with a myriad of problems some time after they have bought their business.

Such managers may have been discouraged from using a particular accountant or lawyer on the grounds that they are “too expensive”, although that is often not truly the case. In the context of investing your life savings in a business it makes sound commercial sense to utilise not only an experienced professional but one who genuinely has your interests at heart, not just an interest in getting the deal over the line whatever the risk. As many have found out, had they spent just a little more at the outset they would have saved that many times over later on.

Perhaps not surprisingly there are few if any other ways to gain a true understanding of the risks that might be encountered in buying and operating a management rights business. Our seminars that run over about 90 minutes identify the common risks involved, explain how to identify those risks and allocate plenty of time to the attendees to ask questions and expand their knowledge and understanding.

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