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Hi, this is Michael Senoff with HardToFindSeminars.com  and Consulting Secrets. Here’s another exclusive interview for the HMA consultants. This is on contingency based consulting with potential businesses who want growth. This was an interview I did with a lady out of Melbourne Australia. She is one of the pioneers in Angel Investing. She matches up investors with businesses who want growth. Well, many of these businesses don’t really have a good understanding of marketing, and it’s opportunity where you can approach these businesses who want to grow and trade your consulting services for a piece of the action, for a piece of the business, for ownership of the business based on your performance. It’s not something Richard recommends in your consulting practice from the very beginning, but it is an application and something I would consider looking into. Listen to this 25 minute interview with Christine about Angel Investing. I think it has huge potential and you have qualified businesses who have paid money and raised their hands saying they want to grow. Make sure you listen to the interview with Lawrence of Company Partners. This is another Angel investing service but this one is out of the UK. I hope you find it interesting. Enjoy!

Michael: Hi, I’m calling for Christine.

Christine: Speaking.

Michael: Hello, this is Michael Senoff calling from the United States.

Christine: Hi, Michael.

Michael: How are you doing?

Christine: Good.

Michael: Okay, well thank you for taking the time to talk to me. We have a group of people who are searching for businesses to buy in the one to ten million-dollar range and we were trying to expand our contact base in offering them solutions for finding potential investors for the business. I have been to your site and I would like to just talk a little bit about your service and how it got started and what it can offer some of these finders as far as matching up business buyers with sellers. Would that be okay?

Christine: That’s fine.

Michael: I’ve heard the term “angel investing”. Where does that all start?

Christine: It’s a very old term. It was initially used in the tea traders way back then, and then in the US it was used to describe the person who backed the Broadway show. You often hear the term in the old movies.

Michael: Oh, very interesting. What is the name of your company?

Christine: It’s called Business Angels the Party Limited.

Michael: And, you’re the founder of the business?

Christine: I am.

Michael: And, how did this all come about?

Christine: I read an article in the newspaper talking about a person who retired and was getting bored and didn’t want to play golf and trim his roses, and he discovered that a young business had been set-up within the area that he’d been working in. So, he offered to put a bit of money into that company and to work with the fellow to grow the business.

Michael: Okay.

Christine: So, he’s the angel.

Michael: So, you read about this article. He was the angel.

Christine: Yes.

Michael: And, that gave you an idea?

Christine: I thought there were a lot of businesses that could use a mature person for extra funds and the network that come along with that.

Michael: Right, when someone needs money for the business, what have you found over the years to have been the traditional stumbling blocks, the barriers, for people getting the money?

Christine: The kind of money that a private person, a business angel, invests is private equity funding. It’s not debt funding that you have to make repayments each month. So, that’s very attractive to a business that the banks aren’t going to lend money to. So, it’s basically two-fold that they’re going to have to meet the bank’s requirements, and they don’t have to make a repayment on the loan each month.

The other benefit is that they get the person, the business angel, who can assist them with their business.

Michael: In the funding part, or in other areas.

Christine: Both, all areas.

Michael: All areas.

Christine: Yes.

Michael: So, it’s not just about the money.

Christine: That’s right.

Michael: So, are you saying when you make a match with a business for sale and an angel investor, you’re trying to match up an angel investor who has some background, some knowledge, some experience in the type of the business.

Christine: Exactly.

Michael: Is that key?

Christine: Yes, I think so. I think especially these days when businesses are far more technology driven. Business isn’t as simple as it was in the past. So, it might be an IT company where the founder of the business is highly skilled in his niche, but has no financial administration expertise or no sales and marketing expertise. Or, another business might be the angel, and they bring their infrastructure into the deal.

Michael: When our people are buying the businesses or looking at potential businesses from sellers, it’s identifying the real market value of the business. Do your angels, because of their experience, somewhat solve it because they’ve been in the industry and they can evaluate and value the real worth of that business to the seller?

Christine: Yes, indeed.

Michael: Okay, that is a solution to a problem that we’ve had with our sellers and that’s evaluating the real value of the business. That’s interesting.

Christine: What I should just add to what you were saying is that some businesses today may not be a good proposition to buy out right. It may be better to buy into the business or buy fifty percent of the business, and work with the owner with a year or two, and then buy them out, because the business may well depend on the owner’s skills, and so it’s good to take a year or two to see exactly how dependent the business is on these skills and how best to replace them.

Michael: Okay, that’s good advice. Let’s go into a little bit of the history and some of the services you provide on both sides. You’re in Melbourne Australia. You’ve been around for 13 years. How many deals have come through over the years because of your service matching angel investors and sellers or buyers?

Christine: I’m not exactly sure because I don’t always get follow-ups, and sometimes money doesn’t change hand. So, a business might say to an investor, “Look, we really need your skills. So, please join us.” In other words, consult equity. So, your contribution to the company will earn equity in the company, in other words shares in the company.

So, because of the various ways these deals are structured, I actually don’t know, but daily, I introduce many people to each other.

Michael: You match them up?

Christine: They’re all matched up very carefully and referred to each other, and have meetings with each other. So, there’s many meetings going on each day as a result of my work, and especially as the service grows because it is quite a new procedure. I’m on one the pioneers in this area, possibly in the world.

Michael: What services do you provide? Let’s say I have a seller, but I don’t have the skills in doing the transaction. Is that something you offer services in, helping the deal facilitate and go through between the angel investor and my seller?

Christine: No, I don’t get involved in financial matters and legal matters. I recommend the people use their own consultants, their own professionals in this area. I think it’s pretty important that they use the people they know.

Michael: So, basically, you’re almost like a dating service in a way for sellers and investors.

Christine: I am. I think it’s got a human resources component to it. It’s not just about the money. From what I can tell, the business angel process in Australia is a bit different from the way it is in the US for instance. The market’s bigger. So, groups of investors get together and just like the stories that come out of Silicon Valley about the angel investors that kick start some of the IT businesses, and probably one of the results of that was the dot.com saga, and it’s great that we’ve recovered from that now. And, I think Australia takes a bit of a different course where we don’t back things so readily. The due diligence process is much more drawn out.

Michael: For your service or for?

Christine: For the company looking for the investor.

Michael: I see. Did you take part in the due diligence? When people come in as angels, is there an application process they go through or qualifying process that you screen them and make sure they’re legitimate?

Christine: Yes, and the fact that we charge a registration fee is also a good way of screening out interested people.

Michael: Yes, that is a good qualifying thing. So, what could you say about your group of angel investors, if you were to give a summary? These type of people are legitimate businessmen and women who have a sincere interest in looking for investment opportunities?

Christine: Indeed, and also they’re increasingly businesses registering looking for expansion opportunities. Say it’s an IT business might be doing really well, and instead of developing new software or new information technology processes, they think, “Well, why don’t we buy half of another company or all of another company that’s doing something like ourselves? Something that our accounts department can look after their accounts, and our logistics people can look after their logistics.” It really makes for a very good growth path for a growing company.

Michael: What’s the relation between how many angel investors you have participating in your service and how many businesses? Is it half and half?

Christine: It’s about one in four, one angel to every four businesses.

Michael: One angel to every four businesses.

Christine: Yes.

Michael: Do you have several hundred angels or is it just a handful of the same people?

Christine: I think there’s always about 400 businesses and 100 investors.

Michael: So, these investors combined probably have some considerable buying power.

Christine: They do indeed – multi, multi millions.

Michael: From your experience, there’s a lot of money out there, isn’t there?

Christine: There is and I think that there’s more money than ever because of what’s happening in the corporate world. A lot of my investors come out of the corporate world from middle or senior management and take their packages, some multi-million dollars sometimes, and they’re up and around the 50 age mark, and they’re having a set of crisis in their lives. I think there’s statistics to show how many sports cars are bought, for instance, in their late 40s. So, business angels is the new sports car. The investors are investing in businesses to get that thrill.

Michael: Yes, that makes sense.

Christine: And, look it’s great for the businesses because they could never afford to buy the skills of these people. You’re paying 250 Australian dollars an hour for this kind of business opportunities.

Michael: And, are your members all local, Australia, all over the world?

Christine: All over the world – more and more Asians, and Americans joining.

Michael: What’s the dollar range? Is there stuff in the five and ten million dollar range?

Christine: Yes, there’s some. It depends. I ask them for the minimum amount they need to take care of their very short-term goals, and the maximum amount if they were to enter the global market. So, there’s an awful lot of companies that can enter the global market, but they would really need American investors. I’ve got an awful lot of deals on my books that would benefit from an American investor especially someone who’s got contacts there into the market that these products are for.

Michael: Are a lot of these listings small businesses like a restaurant or a donut shop?

Christine: No, they’re manufacturing.

Michael: Oh, they are manufacturing.

Christine: Yes, manufacturing, IT. There is some recreation and tourism businesses that could go with some business services. There’s certainly some health here.

Michael: Okay, for someone if they want to review the portfolio of businesses, tell me how it works. They would come to your website, www.BusinessAngels.com  .

Christine: Dot AU.

Michael: Dot AU for Australia, and let’s say I was interested in looking at the portfolio. Do I pay to take a look at the listings?

Christine: No, you can just click on the buttons and look through the anonymous profiles.

Michael: Okay, so if I see something that looks interesting, than what’s the next step?

Christine: Then it’s worth your while to register, and you need to register with us and pay the fee.

Michael: How much is the registration fee?

Christine: There’s a choice of two levels of service - $550, that’s Australian dollars so that’s quite a few less American dollars, $550 for basic service and $750 for the full service. The difference between the two is how much assistance I give to the case.

Michael: I see, and what kind of assistance can you give to the case?

Christine: Of course, I’m matching you up all the time, and hearing all the feedback, I’ve really got some insider trading information, and if you want to take advantage of that, then you need to pay a little more. But, if you’re very savvy investor or a very savvy in business, and you’ve got a lot of advice you’re giving tip, the basic would be sufficient.

Michael: Let me ask you this, you have business brokers out there, right?

Christine: Yes.

Michael: What are some of the advantages over this compared to a “business broker”?

Christine: A lot of my businesses aren’t for outright sale, yet. The sale would need to be transitional. A lot of business brokers won’t handle that. They want an outright sale or they don’t take ownership. Business brokers certainly don’t do the matching that I do.

Michael: Okay, let’s say I sign up and I’m able to browse the listings. How much detail am I going to get on that business in this application? What’s it going to tell me about the business? Is it a comprehensive package and is there any way, not that it’s audited, but how do you know that the information on that application is somewhat accurate?

Christine: That’s where the due diligence comes in, and you would need to get professionals to audit the books. If I were to get involved in that I would introducing the buyer into the matching process, and I try to stay as unbiased as possible. Again, though, I can tell if a business has got substance or not.

Michael: How much information is in the listing?

Christine: The little short profile on the website is only about fifty words. It doesn’t tell much because obviously there’s commercial sensitivity involved. When you register, I send you back a package of information that explains the business owner’s background. It explains the business, and it describes the expansion plans of the business, and it also explains what kind of investor they need.

Michael: Then basically we take it from there.

Christine: Then, I recommend that you contact them and get a copy of their business plan or speak to them for a time and find out who they are and what they’re doing, and then the communication will flow back and forth until a deal is done.

Michael: Okay, so I have access to the entire database for one fee.

Christine: Yes, but you can’t just say you want information on that business. I have to make sure that it is a match, and show that there are no commercial sensitive areas.

Michael: So, you’re going to do the personal matching. If I signed up as a member, you’d look at my background. Let’s say I’m very strong in marketing and I’m looking for businesses that have large customer lists who want expansion that are poor at marketing. Could you make some matches for that?

Christine: I sure could. I think most of them would like your marketing expertise, Michael.

Michael: That’s very interesting. It’s all about contacts and who you know and if this is what you do. You probably have some good insights into what the situations are. I’m sure you’ve found over the years there’s all kinds of reasons people want to invest, people want to grow and sell.

Christine: Michael, do you know what? More and more, I’m getting people like yourself trying to be an investor because of your marketing skills for instance. People like yourself who say, “Look, I consulted this company and I fixed up their marketing, put it in motion, and then they make thousands and thousands of dollars on my advice, but they just paid me a set fee for that advice. I’d like for them not to pay me that set fee. I would like a set fee. So, I’ll give them five strategies for free in return for a percentage of their company according to how successful my strategies were.” So, you might end up owning five percent of the company.

Michael: Yeah, absolutely. That’s a great way for a marketing consultant to go in there and to take a contingency on ownership of a company based on performance and growth.

Christine: And, it’s much more exciting.

Michael: Oh, it’s very exciting.

Christine: And, a lot of businesses have been burned in the past by business consultants who claim to be able to produce this, that and the other, and this way they know that the work is going to be done. It’s going to offset the consultant’s profit.

Michael: Yeah, just about every business listing who says, “I need angel investors.” They’re saying, “I want to grow.” And, they believe if they don’t have an understanding of marketing that money is the only thing that’s going to make them grow when they have no clue about marketing.

Christine: That’s right.

Michael: That’s a great way to look at it, absolutely.

Christine: I think more and more businesses are coming to that conclusion that they’re going to have to give up a little bit of the ownership of the company to achieve the potential that they can see.

Michael: Very good. Do you have an idea of what percent of businesses are in the United States in your listing, the business listings?

Christine: It’s so far quite small.

Michael: Quite small, okay.

Christine: But, it’s growing, and more and more inquiries are coming from the US. On the other hand, I’ve got more and more Australian businesses who’ve got excellent products to go into the US market. It’s just very, very hard for us in Australia to get into the US market even with the new free trade agreement between our countries. The only real assistance we can get is from a government body called AusTrade and they are government employees and not commercially savvy consultants. So, if we could get a bit more collaboration between US businesses, I think there’s potential for a lot of money to be made.

Michael: Let’s say I had an interest in an Australian product and I’m a United States citizen. Would I have barriers importing a US product? Or is it just hard from your end?

Christine: I haven’t read the free trade agreement that has just been signed. It’s only a few months old, but I think a lot of those barriers are gone now.

Michael: Okay, well, the Australians are great inventors and great ideas, kind of like some of the people out here in California.

Christine: Yes, and the problem in Australia is if you come up with a great idea, we’ve only got twenty million people here and not everyone’s going to want one of these new gizmos.

Michael: Right, that’s true.

Christine: And, even a lot of these products need to be taken into the Asian market which is ginormous where there’s a lot of opportunity there for American investors, American businesses to team up with Australian businesses and then take the products into both America and Asia. Now, we’re on the verge of a trade agreement with China. It’s all happening in this region, Asia-Pacific ring.

Michael: How’s the economy in Australia right now?

Christine: Very good. Very strong.

Michael: All right, well this has been good. I mean, it’s a pretty simple concept what you have. Basically, what you’ve said you’ve got legitimate investors that are screened. You’ve got legitimate businesses who want growth who are screened, and you are a matchmaker and you’re personally involved in this. I think that has value, and I think the application process is $250 US dollars or $350. I think it’s a necessity to weed the con-artists and the serious people.

Christine: Yes.

Michael: You’ve heard of Biz Buy Sell, right?

Christine: Yes.

Michael: So, compare Biz Buy Sell to what you have here? What advantages do you have over what they offer?

Christine: You’ve got the personal matching that occurs. I think that we do get more details from both the investor and the business. I think there is a bit more personal service and also it’s about buying into the business in a lot of cases not buying the business out right.

Michael: Right, and you are saying that you are pretty much one of the pioneers of this. What do you know about venture capital? Is that a tough road to go?

Christine: Yes, you’ve got to give up too much, and venture capitalists usually want the business to be quite – not mature, but they want the business to be able to capture a sizeable portion of the market within a few months of investing, and they usually invest much higher amounts of money than a business angel.

Michael: In the hundred million over that?

Christine: Over ten million, I think, over five, ten million.

Michael: What percentage does a venture capitalist take, almost half the business?

Christine: They take too much and if you read some of the things that are written about the venture capitalists, they wanted to get rid of the business owner as soon as possible. The business owner is just a nuisance, and that’s not always the case. And, of course they have to produce a good bottom line. They’ve got their investors transitive. There’s a lot of venture capitalist’s firms. It’s not their money.

Michael: Yeah. That’s true.

Christine: So, in the business angel process, it’s usually the investor’s own money or the company’s own money that’s being invested.

Michael: Is there a set percentage on return, or is it all negotiable between the business and that angel?

Christine: It is all negotiable, and in fact that’s a very good point actually because a lot of the textbooks talk about what is the business going to produce? How are they going to measure up in terms of return? But when an angel buys into a business their skills also affect the results. That’s the kind of pay method. It’s not just “What are you going to do for me?” It’s “What are we going to do together?”

Michael: In Australia, is it tough to get money? Are the requirements as strict as they are here in the United States? Is it frustrating?

Christine: Yes, it’s very tough and very frustrating unless you’ve got bricks and mortar or guarantees.

Michael: I’m sure you’ve heard the stories.

Christine: Oh, yes. It is just impossible. It’s an absolute waste of time, but banks don’t want to talk to business owners unless they’re going to make money.

Michael: And, then they want you to sign your life away.

Christine: Yes.

Michael: Do you hear a lot about government funding small businesses? I know in the US here, you’ve got the small business loans, but that’s for the small businesses. Are there any government funding to encourage small businesses that will give money for that? Or is that just as tough as the bank with the requirements?

Christine: Yeah, it’s really tough, and by the time you complete all their paperwork, you can take your eye off the ball running a business. So, you’ve really got to make a decision about where you’re going to invest your time. A lot of businesses, if they look, it’s not even worth the time for this funding.

Michael: What other options are there for people who need money for their business?

Christine: Mom and Dad.

Michael: Mom and Dad, that’s right, Mom and Dad and family members.

Christine: Yes.

Michael: You’ve got all these businesses there. They want to grow. That’s all I want to hear. As a consultant, that’s one of the toughest things is to find someone qualified who says, “I want to grow. I want to expand.” If someone’s listed on your site, that’s really important to know that they want to grow, and they just believe that it’s money that can do it. There’s many other things that can help them grow.

Christine: That’s right, and I also think, hats off to you for realizing that this is a global market. Australia is not just a back water at the other end of the world. We’ve got very swift people, very sophisticated economy here, and Australians and Americans can do a lot more business than they are doing, and Australians can also help Americans get into the Asian market.

Michael: That’s true.

Christine: George Bush has realized that. He realized that by forging a very strong alliance with our prime minister that US involvement in Asian economy has strengthened.

Michael: So, when you’ve got a business start-up in Australia and they’re looking for expansion, they’re thinking about Asia before the United States because it’s easier?

Christine: Yes, plus also we can get our products manufactured in Asia for a fraction of the cost.

Michael: That’s true. As far as getting manufactured, where would that be done, in China?

Christine: China, any of those Asian countries, Thailand, Singapore, Indonesia.

Michael: How long does it take to fly there?

Christine: Hong Kong, China, that would be the furthest away, it’s eight hours.

Michael: Eight hours to Hong Kong.

Christine: Yes, from the bottom of Australia not from the top. It’s not fast.

Michael: Is there anything else that you can think of that’s important fro any of my people to know?

Christine: I do think there are some great opportunities there. My website is worth reading from cover to cover. Some of it might seem a bit Australian, but the principles are universal. They’re not just for Australia.

Michael: Well, thank you very much. This has been wonderful.

Christine: Thank you very much.

Michael: Have a good day.