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Don't buy a RTO until you talk to
us
The RTO you buy today might be your financial demise of tomorrow.
This is a true hard cold fact; more than 80% of people that buy
businesses pay too much. It’s also a fact that people who have paid
too much for that same business have a better chance of insolvency
(GOING BROKE) or exiting with a very Low Return.
Another fact is that a lot of RTOs
have hidden problems that the buyer will not see until it is TOO
LATE. This is why you need to go through the business with a fine
tooth comb.
Don't rely on the business broker to provide you all the details
(the positives is what you will only hear) remember, they work for
the vendor (the seller) and they want the sale, what more can I
say? If they don't sell the business they do not get paid.
What happens when a purchaser buys
a 'Dog' RTO?
The buyer then has to spend $$$ retaining professional staff or an
Education Consultant to clean up the mess and if there are
conditions on the RTO placed by the regulator then the new owner
will have another burden to deal with. In some cases it may be too
late. As you are well aware, the National VET Regulator has powers
to apply sanctions against the provider and even close the
provider. Not to mention the Civil Penalty provisions and Criminal
provisions (see the NVETR Act 2011) that may be applicable in worst
case scenarios.
My Recommendation
If you are in the market to buy a RTO, don’t go cheap on Due
Diligence. Here is an example of the wrong way to buy a RTO:
I received a call from someone that I
will call Jim. Jim was new to the education industry, he had been a
salesperson his entire life, he had some mates that worked at RTOs
in BD (Business Development), his 'mates' would say: "It's a great
industry, lots of commission, but the owner of the RTO is the one
who makes the real money." And so Jim was hell-bent on buying a
RTO. He stated to me that he had all the documentation to make a
qualified decision; and wanted me to take a ‘brief’ look.
The RTO
The RTO was up for re-registration and the vendor wanted about
$750,000, the business had an Ebit of $200,000. Jim engaged me for
a 1 hour consultation; I told him that I would need at least a day
to go over all the documentation; however, he was adamant that he
only wanted to spend 1 hour with me - I still agreed to meet. At
the meeting he produced a College Brochure and a MYOB profit and
loss statement – Yes thats all he had or so he told me. I ended up
providing him a brief introduction to the industry with the pros
and cons. I gave him a list of questions to ask the broker and
vendor and sent him on his way. I can’t go into more detail due to
client confidentiality, but you can guess his future.
The moral of the story is, if you are going to buy a RTO, get some
expert advice. Don’t take for granted what the broker or the RTO
owner tells you. The Due Diligence should be completed with ice in
your veins, do not fall in love with the business.
If you are in the market for a RTO and need advice, speak with your
accountant and lawyer first then source the services of a qualified
education consultant.
Please Note: We do NOT provide 1 hour consultations regarding
purchasing RTOs. Our minimum retainer is 4 hours. Reason: One hour
does not allow us to make any qualified recommendations based on
evidence and research to the level of risk on any business. It
would not be fair on you, the client, for us not to complete a
proper investigation of the business.
One hour is simply NOT ENOUGH..
©
Skynet Corporation Pty Ltd 2012 | 