Redundancy opens new doors

TODAY’S redundant workers may be tomorrow’s entrepreneurs.

That’s the view of several business brokers and franchise experts, who say that, armed with a redundancy payout and with little opportunity to find other work in a depressed labour market, ex-workers are forced into finding their own ways to put food on the table either by starting their own business or seeking out business opportunities available through their local paper.

With more than 20,000 workers laid off in the past six months at Ansett, Optus, Coles Myer, Daimaru and HIH, the level of enquiries to business brokers has been gaining momentum.

Figures released by the Australian Bureau of Statistics this week indicate that the unemployment rate has risen 1.1 per cent over the past year to 7.1 per cent while the level of job vacancies in Australia has fallen by a quarter over the year. In the past quarter alone WA job ads fell 5.6 per cent to their weakest level since March 1997.

Goodwin Mitchell O’Hehir & Associates managing director Graham O’Hehir said the real flood of interest would occur in the next month and early in the new year.

“It (the high level of redundancies) hasn’t actually flowed through to us yet at this stage,” he said.

“I would say it’s 100 days before they come through to us. Before that they seek new employment opportunities and when this avenue is exhausted they look for businesses.”

With the September 11 tragedy fading into memory and the election now over, people are now more attune to what businesses may continue to suffer and where the opportunities are.

“There is certainly strong buyer demand and I would say every two out of ten people looking for businesses have been made redundant,” Mr O’Hehir said.

But while the recent growth in job seekers will cause a spurt in demand, Mr O’Hehir believes the demand for businesses has been trending upward since March last year, coinciding with the tech crash.

“Since that date, people have started to realise that they have got to make real profits and not just paper profits,” he said.

“There is quite a bit of money looking for a home.”

But while fat chequebooks are fuelling interest, the number of good businesses with healthy profits and a strong outlook are few and far between.

“There are a lot of marginal businesses but not many are showing good profits,” Mr O’Hehir said.

He suggests that most demand has been in the service, hospitality and lifestyle businesses, while some wholesalers have also registered strong demand.

“The businesses that have government licences, like liquor stores and lotto kiosks, have strong demand,” Mr O’Hehir said.

“Things where you have some security, like government licences, are getting stronger demand and there is usually a premium placed on these businesses because of that.”

The Franchise Council of Australia has also noticed a strong increase in the level of interest for business franchises. The FCA web site received more than 240,000 hits last month.

Franchise Alliance principal John Brown says while growth in the franchise sector was strong, increasing by around 13 per cent a year, it has actually dropped off from the high point in the mid 1990s as potential buyers become more astute before rushing into a business.

He says the 20-plus per cent growth in franchises experienced in the early part of the last decade was simply not sustainable.

Mr Brown says not all franchises are a good investment, cautioning those seeking food franchises, while the demand for service businesses such as domestic services are continuing to do well.

Other stores like retail outlets, fish and chip shops and video stores are considered second-rate and people are not willing to pay as much for those.

“Food is very well catered for. I would caution people against buying them,” Mr Brown said.

“Retail is still a good sector but it depends largely on what is being sold.”