14 August 2010

Selling a businesses in Australia

Dear TCG

I have been reading a lot about Chinese business investors looking to purchase property and businesses in Australia to start a new life and for better education for their children. How do I market a small-to-medium business for sale to prospective Chinese business investors? What is the best Chinese media to advertise foreign businesses for sale? Or do I use the help of a Chinese business brokers or bank managers with contact with prospective business investors? Any help would be much appreciated.

Thank you,

Dear Den.

I can only speak through personal experience and that of my wider family. But this is a wide question in that it depends what kind of business it is actually. In that in the 1970s the favourite unskilled business venture was hot food. Now hot food is crowded to hell it is not so viable anymore.

However there is one thing HPC will hate me for this but Chinese are generally Rentier Capitalists which are by and large considered to be parasites. This is pretty obvious in Hong Kong where many people want property not to live in but to rent to other people. Take for example Li Ka Shing He is the wealthiest man in HK and his business interest are nearly all rentier capitalistic ideas. He makes Yip Kai Foon look like a saint.

It is even more obvious in China where there are 10000000s of empty properties hoovered up by the wealthy middle class to rent out to the slaves.... I mean lower paid workers. I suppose they do this because inflation is insane in China. I remember it being 8.5% CPI in Hong Kong in 2007. People think about it and think well it is the only thing which tracks wages and inflation lets buy it.

This is of course not limited to Chinese people. British by and large are people are rentier capitalists, where they over leverage themselves and buy buy buy property restricting supply and think they can rent out to people and sit on their fat asses and do nothing. Way back in the 1990s it wasn't so bad to rent, but today its horrible. Amateur landlords expecting you to pay the mortgage and think they have you by the balls. To top it all of the governments hurt us with low interest rates and uber inflation to bail them out.

A quick cynic's word list for you.
Mark EBITDA = Earnings Before I Tricked the Dumb Auditor.
EBIT = Earnings Before Irregularities and Tampering.
CEO = Chief Embezzlement Officer.
CFO = Corporate Fraud Officer.
NAV = Normal Andersen Valuation.
EPS = Eventual Prison Sentence.
FRS Fantasy Reporting Standards
P/E Parole Entitlement

Anyway where was I....

I could tell you all sorts of dirty things I've seen in accountancy, but my old bosses will probably send assassins. Actually I moved house twice since I last worked for him.... a Korean guy moved into my old place though.... well if I find him dead....

However this is based on my experiences only and therefore may not be indicative of how things really are.

The problem for you is the Chinese capable of moving in such a manner are pretty bloody savvy, though some of the Migrants from the Chinese earth quake aren't. In the UK they have a close to 100% business failure rate. The dragon warlord wok, emperors kitchen, or whatever its called these days, a local place to me for example has changed hands 12 times in 4 years it is that bad! Though this is convenient for me because I can plaster and refurbish and get the odd bit of work on the side.

This may be indicative that simply business times are not as easy as before. When my dad opened his shop in 197x there were no competitors in his town and he made a fuck load of money. He managed to put the local bookie's sons through university (my dad is funny because he actually went to Holland first but realised there was no horse racing there and decided to go to the UK, probably why my dad is a freak who has a Dutch passport my family is freaky like that)

But marketing to Chinese people you shouldn't really go through the mainstream media, exclusively, people who aren't savvy in reading English will say hey Son can you read this for me? At which the son or daughter who is demotivated to do it will do it for them half hearted as they know they'll be used as labour for the place. Anyway a lot of business and house sales I've seen are by way of introduction. People use the Guanxi to sell people stuff. For instance a local shop round here did not sell for 5 years,. It was listed on pretty big agencies but nobody touched it.

After the git who sold it made friends with my dad, my dad introduced him to Benson, who introduced him to the sucker purchaser who ended up buying the place. Similarly my dad also has only ever bought places by way of introduction. Same thing with my uncles and aunts too. Therefore you need to try and get connected, now this is much easier said that done. My dad's connections run deep first in HK where he went to school with everybody (a fairly easy thing since 1950s HK had massive class sizes) and also in the UK. He was the king of moonshine vodka in the South West. Though he regrets this because this had negative outcomes on his best friend in Cornwall.

The other component is NEVER EVER EVER^1000 advertise your business as mature and cruising along. Chinese people I've met like to expand and a lot of them I have met will secretly think hey this place has potential for me to expand into it. A common British trick when selling a hot food place to sucker convince other Chinese to buy a place is to simply stop selling Chinese meals. Or pretend to anyway. The mark buyer sees this and thinks hey I could put Chinese meals in or add in delivery to it and therefore make more money than they are making now.

But I suppose this is a vulnerability of all humans.

Some points which go nowhere else.

Chinese are going to be very superstitious therefore will not want to buy places numbered 4 are opposite cemetaries, churches etc and will want to buy on days with the number 8 in the day. For instance the shop sale recently here they purposedly kicked it into the long grass to be bought at 8am 8th of August.

There is a big mentality of if it's too cheap there must be something wrong with it, I recall a few items from the SCMP where shops increased prices and sales went up. Which goes against basic economic theory!

Wait I never finished this post and drifted off on a tangent arguing with somebody who stated the USN must start bombing China.

Where was I...

Yes to get connections is difficult since getting them often requires you to be friends for ages so they will judge your character properly. Which presents big problems and if you just start showing up to Chinese associations people will see right through you.

Maybe offer a % commission not a massive amount to a well trusted Chinese businessman to sell it on or something, remember money makes people drop their principles, they'll be sceptical about it initially, but again such relationships are hard to build. For instance A of a certain firm wants me to give him my contacts, these are relationships fostered over decades. My dad's even longer therefore my dad is really iffy about helping him out as if his name is dirt he won't be a happy camper!

Gossip might work though, HK Chinese are obsessed with it, my friend working in an office there made a throw away comment, yeah shit I've got to go to the doctor. End of the day the whole office knew about it. Though this is probably a consequence of HK being not a great place to live therefore they need something to make their lives look better. I.e. a take out place or a Chinese businessman you've been working with for a while. You can mention the fact that you're tired to hell, because of working or can't get staff or whatever or you'r injured.
"I gotta sell this place I mean its making me money but I'm too tired to do this anymore." is a common one.

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