FROM THE TANK: WHY 'ROLL UPS' BLOW UP

Written on the 18 May 2016 by Dr Glen Richards

FROM THE TANK: WHY 'ROLL UPS' BLOW UP 'ROLL UPS' of the professional services kind generally fail because the wrong people pull together a gaggle of small businesses for the wrong reasons.

Who are the wrong people to lead an industry aggregation? Private equity houses, founding practitioners having an entrepreneurial seizure, and industry outsiders having a crack (convincing high net worth investors to back their folly). 

Why do they fail? Impatient time lines (private equity wants in and out in three to five years), inability to scale up corporate support, lack of funding, excess debt, poor discipline on acquisition metrics (overpaying), lack of industry experience and understanding, lack of passion for why the business exists, failure to evolve culture in the company, and more importantly, an inability and lack of interest in engaging the front line teams.

The typical play by the wrong people is to approach practice owners via mail, email or LinkedIn requesting a cup of coffee and promising lots of money. This simple cup of coffee leads to a bunch of small businesses slapped together through an attempt to make them look like a cohesive and well performing 'bigger' business. Then, they are presented to the investment community with a big red ribbon wrapped around them: 'buy me, I am beautiful'.

The roll up is driven by a quick money mentality rather than a passion for evolving a scalable enterprise. The head honchos in this case are without a long term vision to create a sustainable, credible company that has at its core the foundations and platforms that will ensure it is built to last.

The right people, on the contrary, go through the pain of scaling up and developing all aspects of the business. They are focused on cultivating systems, processes, culture and corporate support capabilities - everything from finance to payroll, marketing, coaching and supply chain - and ensure they have the grassroots platform to grow and evolve a network. Once the right people prove they can optimise a business organically through innovative and superior management - grow year on year, like for like, revenues and profits - it is only then they earn the right to grow by acquisition.

When the business is ready to scale, a good cornerstone investor acts as an enabler, inspirer, a challenger and a mentor for the right people (industry insiders) to go to the next level.  The right people acting for the right reasons focus on creating and delivering value to the customer, employees, suppliers and shareholders.

Dr Glen Richards joins resident Sharks Janine Allis (Boost Juice), Andrew Banks (Talent2), Steve Baxter (internet pioneer) and Naomi Simson (RedBalloon) for season two of the Network Ten series Shark Tank AustraliaFollow 'From the Tank' - Business News Australia's Think Tank - for Richards' views on everything from private equity to IPOs and those unbelievable Sunday night pitches.


Author: Dr Glen Richards
About: Dr Glen Richards is a veterinary surgeon and founder and former CEO of Greencross, Australia’s largest pet care company. Glen spent 10 years building a multi-million dollar integrated pet care empire, which now operates more than 130 veterinary hospitals in Australia, New Zealand and China. The company is also Australasia’s leading specialty pet care retailer, with more than 200 stores operating under the brand names Petbarn and City Farmers.
Connect via: Twitter LinkedIn

Latest News

AUSTRALIA READY TO DISRUPT GLOBAL CARBON FIBRE MANUFACTURING

AUSTRALIA for the first time has the capacity to produce carbon fibre from scratch and at scale, following the launch...

HONG KONG FUND INVESTS $212.8 MILLION IN G8 EDUCATION

G8 EDUCATION (ASX: GEM) has secured $212.8 million from Hong Kong-based CFCG Investment Partners to pay down debt and...

MERGER DELIVERS THE FINANCIAL GOODS FOR TERRY WHITE

TERRY White Group has posted a solid half-year net profit of $1.3 million amid a period of major transformation fo...

BLUE SKY APPOINTS TWO NEW INDEPENDENT DIRECTORS

BLUE Sky Alternative Investments (ASX: BLA) has appointed two new independent, non-executive directors to its board: ...

Related News

WHY EMPLOYEE-OWNED COMPANIES ARE BEATING ASX200 SHARE PRICES

EMPLOYEE-owned companies command a higher share price than their publicly listed peers, reaping a 17 per cent prem...

RISE OF THE MACHINES HAS WORKERS SWEATING

UP TO 3.8 million Australian workers are fearful their job may soon be terminated by a robot, a new survey has shown....

LESS TALK, MORE SMALL BUSINESS ACTION IN 2017

THE future growth and prosperity of Australian SMEs could be undermined if governments lose sight of the sector...

TEST DRIVE A POST GRAD AT BOND

THERE'S only one way to really move your career into the fast lane, says Bond University, and 'test driving...

Contact us

Email News Update Sign Up Contact Details
Subscriptions

PO Box 2087
Brisbane QLD 4001

LoginTell a FriendSign Up to Newsletter