Training Industry Newsletter August 2013

Training Industry Newsletter, August 2013

The Course Sales Training Industry Newsletter (sign up here) provides advice and help to those selling, running, administering or managing training organisations. It is for:

  • Training managers
  • Training coordinators
  • Training company owners
  • Those marketing and selling training
  • Training administrators
  • Owner-operated trainers

Sales & marketing focus: Selling a training company

In its most basic form selling a company needs a willing buyer. The price achieved for any sale is the best price the market will pay. This is where a good understanding of the market is desirable to ensure the business has a good chance of achieving the sale price being asked. Term and conditions associated with the sale determine exclusions that protect the buyer. While a training owner may be an expert at delivering courses selling a training company is often a new, unknown business transaction.

Use the following checklist to ensure you get the best price for your training company:

Three years of financial statements should show:

  • increasing revenues
  • managed costs
  • increasing profitability
  • accurate salaries for market
  • investment in new products and offerings.

Business should show:

  • repeatable workflow and processes
  • contracts with suppliers, customers, trainers and employees
  • consistent employee participation with minimal turnover
  • any property ownership; intellectual or physical
  • there is limited reliance on one person.

Reasons for selling
Realising a gain from the efforts made to build your training company is a satisfying and potentially lucrative way to conclude your training company ownership. Perhaps your training company has multiple brands or areas of delivery - selling any one of these could provide investment for the others. Other reasons include a realisation that the business no longer satisfies you personally, the workload may be too much or time commitments have increased beyond acceptable levels.

Getting the maximum price
As the seller you want the maximum price based on the value of your business. That price is a reflection of a range of factors including, the net profit, value of intellectual property, plant and equipment, market position, key person influence to name a few. It is essential to be able to provide clear evidence demonstrating the value of your training company. To get the best price it helps to have multiple buyers offering to buy your business. Have a clear idea who the buyer of your business might be; it could be an investor or an owner operator. Knowing who the buyer is will enable you to create value propositions that will assist in the selling process.

Who might like to buy your training company

Like any sale you may need to market your offering by advertising or promoting to niche groups. Narrow your target audience, here are some suggestions of who might be interested: competitors, customers (both students and companies that rely or use your services), practitioners in the area or expertise of your training. If you don't have any luck with initial prospects may wish to consider using a business broker who is an expert in selling businesses as they can introduce your company to their contacts, and give advice on the best way to sell your training company.

Engaging a business broker to help

Look for a business broker who has contacts beyond your own region, and possibly in other businesses. One that has sold a training company already will understand how training organisations work and are more likely to find a good fit and sound credible to a potential buyer. They will be brutally honest, however - probably suggesting values that are below the owner's expectations. They are probably more realistic as they have a view of the current business market, the health of that market and the likelihood of a sale.

Plan your sale

Why not plan now to sell? Choose a potential buyer profile for your training company then plan to be most attractive to that buyer profile, plan by setting targets, market penetration and begin to get financials together that demonstrate your evidence. Use the checklist above as a basis for that plan.

Common questions

1. When should I sell my training company?

Sell when business financials are good, when the growth prospects are increasing, and revenue and profits are advancing not decreasing. Ideal times are when you have just secured a large contract or have a steady pipeline of business expected.

2. How can I show how much my training company is worth?

To demonstrate the price you need robust financials over a period of at least 3 years that demonstrate consistent investment, advancing revenue and increasing profitability. Supporting documentation such as contracts, the pipeline of proposals and forecasts of future earnings are useful to demonstrate worth.

3. Why would the buyer purchase my training company?

In addition to profitability it is about uniqueness, what do you have that others don't - you need clear differentiators in the market so help you stand out from the crowd. These differentiators need to be protected so that the entry to the same market for others is not just a step away. There needs to be some protection; contractual obligation, priority ownership, trade marks or ownership of technology etc.

4. How can I demonstrate financial robustness?

Ensure that you are keeping good financial data, usually 3 years of demonstrated financial robustness - these are needed so that analysis can be done, and audited prior to a purchase. Demonstrating clear analysis of financials over a period of time will help strengthen your argument that you are improving the business - quarterly increases in revenue and managing costs when revenue dips is an indication of good management.

5. What, in relation to contracts do I need to show?

Legally binding contractual arrangements and agency agreements mean customers are less likely to just disappear. Not having contacts, agency agreements; employment or commercial, indicates that arrangements might be based on friends agreements rather than clear terms of business. Often the owner might have been the negotiator for any unwritten contract - these could mean unprotected liabilities and mean the organisation is more likely to have unknown commercial risks.

6. What, in the day to day business, will the buyer be interested in?

Primarily, good policies and procedures, robust processes and workflow that show repeatable ways of delivering the business, to ensure that work processes are not just in someone's head but are easily picked up by another, ie strong organisational capabilities. These needs to be clearly documented to ensure consistency during any transition.

7. Will a buyer care about the owner's part in the business?

Key person dependencies, particularly those that relate to the owner will likely make the sale hard. Therefore, an extended presence during the transition may be required to ensure a smooth transfer of ownership. If the training company business is based on a personality rather than delivery of a service by the company name then there is little value in the company and all the value is in the individual. Showing transitions to new trainers and new sales people, having clear roles and responsibilities will help clearly demonstrate that there is less reliance on one individual. Key employees must be receiving salaries appropriate for their roles, the lack of sufficient salary may indicate that financial statements do not accurately reflect the true costs.

8. What about the intellectual property of our course materials - these took ages to create.

Course materials can be licensed, or professionals can be engaged to produce them. The value in the course materials is only the amount it would cost to acquire them from somewhere else. Unless there is a demonstrable uniqueness that is not easily produced, or not able to be purchased elsewhere, then course materials are worth little.

9. So what is our training company worth?

Valuation is tricky, it depends on the current economic environment, historical financial figures for the company and the industry. The points above will play a part in creating a business value based on its expected future cash flows. Other valuation methods include the Guideline Companies Method, obtained by observing the sale price of other training companies in the same market. The Net Asset Value Method looks at the assets and liabilities of the business and capitalisation rates (multipliers) that take both risk and opportunity into consideration. Ultimately it depends on the value the buyer sees in the company, but these can give you an idea of how the buyers may value your company.

10. How do I negotiate & what agreement conditions might I expect?

In most contracts there is a restriction of trade clause based on time (12-18 months) and geographical distance (within a country or state during that time). Usually the owner will be required to not work in the same geographical location and business. You can also expect there to be a clause that talks about restrictions to starting companies or working with competitors. It is strongly recommended that you seek legal advice to ensure that the agreement or contract will stand up to a court and not be easily challenged. Remember your intentions and what you do is as important as the legal agreement, taking issues to court or mediation are expensive and time consuming.

 
I would like to thank Hugo Martin, a trainer and business broker, for his advice and time to review and suggest changes to this article. He has sold a number of RTOs and through my conversations I have found him to be a sound and reliable evaluator of businesses for sale. Feel free to email hugo@absbrisbane.com or phone him on 0411 617 140
 
OFFER to HTML subscribers: If you wish to sell your training company, I am happy to list it in this newsletter for free. If you are lucky enough to get a sale, excellent - just let the buyer know about this newsletter ;-) Send me a company profile (include location, area of training, estimated price), and your preferred contact details; scott.spence@coursesales.com

Training company market view: Australian College of Youth Training (ACYT)

A different training company every time... to feature your training company contact scott.spence@coursesales.com

Positioned in beautiful Emerald, Victoria, Wayne Collins and his team of dedicated staff provide youth program training; in particular CHC41812 Certificate IV in Youth Work and CHC10108 Certificate I in Work Preparation. A new program for 2014 will be CHC30712 Certificate III in Children Services, run on a weekly basis. As one, if not the only, registered charity based RTO with tax deductibility status in Victoria, fees are purposefully kept low. Having low fees does however have its challenges, including limited funds to undertake traditional marketing efforts such as advertising and meeting increasing compliance costs. Historically low advertising budgets were not an issue due to a prolific network of youth groups based mostly in churches and frequent conferences that promoted the ACYT offerings. This year however student numbers are down. While funding from Skills for Victoria can help individual students fixed costs (ie not the costs borne by additional students) are usually covered by the first 50% of students, meaning there is little money for the non fixed costs like courseware development, investment and marketing. A recent VRQA audit has put additional financial burden on running the RTO. Costs have increased from $2000 in 2009 to $13,940 in 2013. Jim Bunn, ACYT Administrator, says "The audits clearly sharpened the quality of our processes and the way we do business but the costs of preparation in terms of time and the direct fees are becoming a large portion of our costs, furthermore there are expectations that fees will increase up to $30,000 for our next audit in 4-5 years".

Jim's audit experience resulted in the auditor finding several small error that we were able to fix during the audit, including being consistent, e.g. you don't say 'Cert IV' you must say 'Certificate IV'. The auditor was however helpful and understanding, giving opportunities to demonstrate compliance rather than trying to set them up for a fail, as was the experience back in 2009.

Students continue to attend the programs, and the majority end up motivated and encouraged to complete school, get a job or enrol in TAFE programs. Jim hopes that the Victorian Career Guide, where he has spent much of his small advertising budget gets delivered on time this year so that numbers are bursting for 2014.

Trending topics

Topics currently trending in Australia over the past 90 days are:

  • management courses
  • business courses
  • first aid courses
  • photography courses
  • online courses
  • forklift training

Background about trending topics

There are many issues with scanning the topics and search terms used by people when using Google or YouTube. 'Training' for example has many other uses such as training horses, training with weights and military training. So instead we try to narrow down the options by excluding specific terms, eg. -military -horses, or searching for specific phrases like 'training course' or completely different words like 'class'. We also have a list of specific words like 'microsoft training' and 'first aid classes' that can reveal insights into the current trends. If you have terms that describe your training organisation please let us know and we can watch out for trends.

Some news agents and content providers are known to use trending topics to target online articles, increasing visits to their pages but also meeting a need for information about a particular topic. When ricin was send to President Obama a spike in searches for 'ricin' would be expected, if you have a training course about the first aid response to poisons then it seems sensible for you to republish any pages to include the word 'ricin' (in context), for those who might want additional information. Of course, you must include that content in your training to fulfil the expectations of those who register.

Where we look for trending topics:

Events

August

  • Pricing strategies that work for training courses ONLINE (10am AEST) - FREE, this presentation will show you how to gather data, analyze that data and then work out your best pricing point. When discounting he will suggest different models, using the airline industry as an example. You will see how pricing strategies can ensure you maximize attendance while maximizing profit.

  • TVET 14-16 August, Melbourne, The Conference is themed “Global Learning – expanding the boundaries of e-learning in the global TVET community”.

September

  • Seven training course costs to reduce ONLINE (10am AEST) - FREE, this presentation will focus on the top seven cost to improve your training course bottom line. It is well known that the best way to improve profitability in the short term is cost reductions, but these are long term, sustainable ways to maximise profit and remain competitive.

  • TAFE Directors Australia 2013 National Conference 2-3 September 2013, Brisbane Queensland, TAFE redefined

  • Learning live 2013 11-12 September, London, England, this is a must for all UK corporate and commercial trainers, training managers, L&D managers and HR managers. With over 20 focus sessions and seminars, split across five streams, the event provides an unrivalled amount of content for delegates.

  • National VET conference 19-20 September, the theme for the two day conference is Evolve, Adapt, Embrace and will focus on three distinct streams including; Policy & Compliance, RTO Business Management and Teaching & Learning. Plus the addition of a sixth elective stream for Master Classes.

October

  • Using social media to increase training course bookings ONLINE (10am AEST) - FREE, face to face training is by definition a social activity between the trainer, administrator and the participants. Extending this to the online environment for pre-course and post-course interaction will ensure learning outcomes can be maximised and repeat sales are more likely.

  • OctoberVet is the name of a season of local events (Australia & NZ) to share information and ideas about VET. OctoberVET complements AVETRA’s annual conference, and as the name suggests, it runs through October (with a few events usually spilling into November as well).

  • 9-11 October, 2013, Goldcoast convention centre, interactive teaching and learning conference program. Highlights include presentations from leading VET and higher education researchers, e-learning and digital specialists as well as a variety of workshops focussing on innovation, digital literacy and VET pedagogy.

Conversations...

Achieve RTO best practise Network (open to all)

ASQA Issues (signup required)

Australian VET Leaders (signup required)

National RTO Network (signup required)

Blogs/articles/slides

Important alerts

Where do we get this information?

Gathered from the internet (mostly Linkedin but public facebook groups, blogs and twitter are also good sources of conversations)

Education and training tenders

To get help writing tenders, take a look at a past newsletter, it has valuable tips.

Tenders WA

HOU2298113 Department of Housing - Provision of Training for Dealing with Aggressive Behaviour
Issued by Department of Housing
closing 16 Aug, 2013 2:30 PM

ETT23112013 Provision of Portable Electrical Training System
Issued by Challenger Institute of Technology
closing 20 Aug, 2013 2:30 PM

DOT304513A Provision of Training Module Development and Delivery for Taxi Drivers who operate in the Perth Taxi Control Area
Issued by Department of Transport
Briefing/Site visit is mandatory
closing 20 Aug, 2013 2:30 PM

HCNS235413 Provision of Professional Development Services in Sexual Health/ Sexuality and Relationships Education (SRE) to Practising and Pre-Service Teachers for Department of Health
Issued by Health Corporate Network - Supply
closing 22 Aug, 2013 2:30 PM

ETT23092013 Provision of the Pilbara Cities Internship Program
Issued by Department of Education
closing 22 Aug, 2013 2:30 PM

DTWD23A2011 2013 Apprenticeship Program
Issued by Department of Training and Workforce Development
closing 30 Aug, 2013 4:00 PM     

DTWD00032010 2013 Traineeship Program
Issued by Department of Training and Workforce Development
closing 30 Aug, 2013 4:00 PM

Tenders SA

- none -

Tenders QLD

PPB018A Addement to the Existing SOA PPB018 Project Management Learning & Development Services - Addition of Primavera P6 Thechnical Business Support & Learning & Development Services
Issued by Department of Transport and Main Roads - Project Delivery Improvement
UNSPSC: Project administration or planning - (50%)
closing 16 Sep, 2013

Tenders NSW

- none -

Tenders Australian Government

Establishment of an Education, Research and Training Panel
ATM ID     AEMI PSTC Panel RFT

Close Date & Time     23-Aug-2013 4:00 pm (ACT Local time)
Agency     Attorney-General's Department

eLearning Support Services and Solutions Panel
ATM ID     APSC 2013/0127

Close Date & Time     13-Sep-2013 5:00 pm (ACT Local time)
Agency     Australian Public Service Commission

Learning and Development Panel
ATM ID     APSC 2013/0124

Close Date & Time     13-Sep-2013 5:00 pm (ACT Local time)
Agency     Australian Public Service Commission

Tenders Northern Territory

D13-0234 All Centres - Provision of National Assessment Program Literacy and Numeracy for a Period of 13 Months    
Expiry: 14/08/2013 02:00 PM
Alice Springs, Darwin, Katherine, Nhulunbuy, Tennant Creek
Department of Education and Children's Services

Tenders Tasmania

- none -

Tenders New Zealand Government

To get help writing tenders, take a look at a past newsletter, it has valuable tips.

Where do we get this information?

Past articles

In addition to our regular list of tenders, trending training topics, online conversations and events we have a collection of past articles that might interest you:

What is coursesales.com?

More than just AVETMISS reporting, as a course management system, course sales offers workflow management, online bookings, HTML to PDF automatic generation of certificates and 'etickets' integration with accounting systems and CRM packages. Multi-currency and multi-tax jurisdictions. Take a look at some of the features and online instructional videos here:

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