Real Estate Institute of South Australia’s (REISA) Business Broker of the Year, Simon Winter, is no stranger to top level recognition, having been awarded the REISA Business Broker of the Year nine times: in 2005, 2008, and 2011-17. He was awarded the Real Estate Institute of Australia’s Business Broker of the Year for 2013, 2015 and 2016. Simon is also an inductee of the Real Estate Institute of South Australia Hall of Fame. 

Simon has over 22 years’ experience and has sold over 450 businesses throughout South Australia and the Northern Territory, yet he also has a first-hand understanding of the opportunities, challenges and rewards that flow from owning a small business, having previously owned his own business in the office products industry. Over 15 years Simon developed that business from a staff of two to over 130 and achieved a turnover in excess of $16 million dollars before selling the business. 

Simon brings an additional dimension to business sales as a Certified Practicing Valuer and, as a member of the Australian Property Institute, specialises in going concern business valuations. He has been involved in undertaking over 200 valuations on behalf of banks, the family court, to assist in dispute resolutions, partnership buyouts, compulsory acquisitions and to advise on fair market value. 
Simon is qualified as a Certified Practising Accountant, holds an Economics Degree, a Post Graduate Diploma (Property) and a Master’s Degree in Business. He is also qualified as Conveyancer, Licensed Land Agent and a Certified Business Broker. 

SCHWARTZWILLIAMS spoke to Simon about the challenges presented by the changes in technology and how he deals with difficult vendors.

How did you get into the industry?

When I was 26 years old I purchased a small office products business. It had a staff of 3 and operated from one shop. My dream was to create something big and 20 years later, I had a staff of 130, a turnover of $1.5 million per month and traded from 14 locations. However, I was going broke because I had outrun my own cash flow. I had learnt what it was to own a small business and a big business, I understood the joy of success and the desperation that accompanied failure. I had discovered that running a small business was excruciatingly difficult and I had also discovered the empathy you need to sell small businesses. It was a natural progression for me to become a business broker and I carry the lessons I learnt in my own business with me every day. 

What are some of your career highlights from your time in the industry?

The real highlight of my career and the legacy I will leave behind is my database of past sales that is a continuing project. It started in 1996 and includes reports on almost 800 sales. I use it every day; it shapes my work because it provides certainty, generates confidence and it underpins all the technological and systems development, not to mention the marketing strategies. It creates a point of difference that my competitors will never match and is the reason the business has progressed from being a bit player to being a dominant force.

The database has given the business a focus and strategy that has enabled me to win the award for South Australian Business Broker of the Year and also the National Award. I have completed a Master’s Degree in Business and I qualified as a business valuer which brings a level of professionalism that others would find difficult to copy.

What are the biggest issues facing your market at the moment?

The biggest issues facing today’s market surrounds vendors’ market expectations. Unfortunately, most vendors have never sold a business so they believe that the value of their business is likely to be a reflection of what they owe, what they need to retire, what they paid or a multitude of other factors, none of which have any relevance to the market. They seek advice from accountants that speak with authority and confidence but don’t understand risk so they seek to use formulas that don’t work. We find that because there is no market data available to advisors generally their advice is poor. In the end, vendors believe the advice they want to hear and, as a result, many vendors come to the market with an expectation that can never be met. So the real problem for the agents is convincing vendors they want too much and unfortunately many agents don’t have the skills. As a result, many businesses come to the market significantly over priced.

How has the industry changed in the time you have been involved with it?

When I first came into this industry, email was still a concept, Google didn’t exist, a mobile phone was a novelty, the concept of social media meant nothing, we had heard about websites, but nobody had one. If you wanted to sell a business, you put an ad in the paper, spoke endlessly on the phone, either posted or faxed a profit and loss and hoped they didn’t ask too many questions… things have changed.

The digital age has changed everything; we are now highly systemised, still use print media, but only just, our website gets over 500 hits a day, and is growing, our presentations seek to focus on the purchasers needs and create simplicity from complexity, we rely on social media, are on seven websites, run Google ads, keep a massive database of current buyers and a database of past sales extending back over 20 years.

Every marketing decision we make, every action we take is focused on getting people to look at our website. The more people that look at our website the more listings we attract. I expect that in 20 years’ time what we do today will look primitive. So any agency that is not changing as fast as they can absorb those changes is already in trouble… and they don’t know it. 

What changes would you like to see over the next two to five years in the industry?

I would like the industry to become much more professional than it is now and embrace a licensing standard that qualifies agents to work in the industry. Too many people come to the industry hoping to get lucky or because they failed elsewhere. They lack training in basic accounting, they have no experience in small business and have no concept of risk and return.  

Agencies currently operating in the industry must understand that they will not survive if they can’t develop faster than the rate of change within the industry. Nobody likes change but extinction is much worse and with the same commission rates, lower sale prices and longer periods on the market, agencies that have not changed at all will now have an income that is 50% less than it was 10 years ago. At an absolute minimum, the industry needs to embrace changing technology to create efficiency, generate increased levels of systemisation to enable simplification, be aggressive in eliminating costs that are not productive and be bold enough to develop a flexible marketing strategy that sells in today’s market.

What advice do you have for people who are just starting out in similar careers?

To people just starting this is a great industry where every day is a challenge but you need to be capable of withstanding the long haul. It will be 3 to 5 years before you make reasonable money and 10 years before you can develop a network that can feed you. Most people that start in the industry are lucky if they can sell 1 or 2 businesses in their first year and nobody sells more than 20 businesses in a year. To get established in this industry you will work more hours every week than you have ever worked before. If it was easy, everybody would do it. 

What do you believe is a unique factor of doing business in your market?

I work in a very unique and strange industry where everybody is an expert and vendors are always very keen to tell me how I should value their business. They attach value to things that are important to them but not the market. They don’t understand that their trading profit is the measure of their performance.  Vendors think they are in control and they determine the price; in reality they just decide if they will accept what the market offers. It is extraordinarily difficult to deal with people (buyers and sellers) that know so little and are convinced they know so much. The only way that agents can counter this problem is to come to the table with compelling data and genuine comparable sales evidence. We reject listing opportunities, not because of the poor performance of the business, but rather because we can’t work with the vendors. 

What’s your outlook for your sector/s for the next year?

My outlook on business sales is that what we have had for the last 5 years, we will have for the next 10 years because I can’t see where the improvement will come from. Particularly as banks are reluctant to become involved in funding sales. In 2007/08, 80% of our sales had bank funding but since 2013/14 the average has been 27%. The average time on the market is over twice as long as it was 10 years ago and the average small business is now making less profit than it did 10 years ago. On average sales generate less commission and it take 2 to 3 times longer to earn the commission. Business brokers are struggling and some will not get through this. Hotel brokers are now almost extinct and there is no reason business brokers will not go the same way.