Hugo T Armstrong has run the legendary Blues Train for over 30 years. But now it's time to sell and he talks about his process and the key steps taken to get himself and this iconic business ready to hand over to a new conductor.
The hum of a steam train, the rhythm of blues and roots music and the energy of a live audience. These are the ingredients @Hugo T Armstrong mixed over 30 years to create and grow the legendary @The Blues Train in Queenscliff, Victoria.
Now it's time for Hugo to move it on and he's currently in the market to find a new owner for this iconic business . We cover a lot of ground in this episode and Hugo talks about;
Timestamped summary of this episode:
0:00:00 - Introduction,
Michael introduces the podcast and welcomes Hugo T Armstrong, the owner of the legendary Blues Train in Queenscliffe, for a discussion on business sales and exit planning.
00:01:13 - Hugo's Background in the Music Industry,
Hugo shares his extensive background in the music industry, including his early days at PBS FM and his passion for broadcasting and DJing. He also talks about his involvement in the St Kilda music scene and his role in saving the Queenscliffe Music Festival.
00:05:29 - Saving the Queenscliffe Music Festival,
Hugo explains how he took on the challenge of saving the bankrupt Queenscliffe Music Festival in 1996. With the support of the local community, he successfully transformed the festival by adopting the PBS FM model and showcasing a diverse range of Australian music.
00:10:15 - Growth and Success of the Queenscliffe Music Festival,
Hugo discusses the exponential growth of the Queenscliffe Music Festival under his leadership. He mentions his proudest moments, including the launch of the first digital radio platform in Australia and the festival's partnership with the ABC.
00:12:47 - The Blues Train and Other Ventures,
Hugo briefly mentions the Blues Train, his other successful business venture that started in 1994. He also mentions his involvement in curating other festivals and his past roles in Ballerine Tourism and Queenscliff Council's financial advisory.
00:15:09 - The Beginnings of the Blues Train,
The Blues Train started as a small winter concert series with a variety of musical performances. It was an organic and unplanned venture that gained popularity through word of mouth. The immersive nature of the show and its ability to provide a unique experience to repeat customers contributed to its success.
00:17:14 - The Evolution of the Blues Train,
The Blues Train initially had no intention of becoming a business. It was a DIY project with limited resources and technical difficulties. However, over time, it grew into a successful venture, attracting investment and government support. The internet played a crucial role in expanding its reach.
00:18:52 - Ownership and Infrastructure,
The Blues Train operates on railway tracks owned and managed by Victrac, a division of the Victorian government. The rolling stock is maintained by the Geelong Steam Preservation Society. The vintage trains, some of which are over 100 years old, add to the unique appeal of the experience.
00:22:56 - Saving the Blues Train,
When COVID-19 hit, the Blues Train was the only business worth saving for Hugo Armstrong. Its positive impact on the local community, including economic benefits and music tourism, made it a priority. The investment in the railway infrastructure and government support helped ensure its survival.
00:27:45 - Music Tourism in Australia,
Hugo highlights the lack of focus on music tourism in Australia's tourism industry. He believes that showcasing Australian music and leveraging its global success could
00:30:41 - The Local Economic Benefits of the Blues Train,
The Blues Train has brought in $3.1 million of local economic benefits and has the potential to attract more tourism with its new track. The Byra Bay blues and roots festival is a prime example of the economic impact of the music scene, generating millions of dollars. The festival could be complemented by an annual music festival featuring larger bands of various genres.
00:31:37 - Framing the Business as a Saleable Asset,
The Blues Train is positioning itself as a business that appeals to a range of potential buyers. While there is a limit to the number of people the train can accommodate, there is significant opportunity for growth. One suggestion is to introduce an annual music festival on the train, featuring different genres to attract a diverse audience.
00:32:31 - Planning Exit Strategies and Removing the Figurehead,
To plan for the future sale of the business, it was necessary to address the perception that The Blues Train was dependent on one person, in this case, Hugo T. Armstrong. Steps were taken to remove Hugo T. Armstrong from marketing and on-site activities. However, during COVID, he had to be brought back to maintain government support. The business underwent a rebranding process to establish itself as a separate entity from the figurehead.
00:36:12 - Importance of Having an Exit Strategy,
Many business owners do not have an exit plan in place, which can lead to difficulties when unexpected circumstances arise. It is essential to think about a future exit strategy when
00:45:24 - Importance of Operations Manuals,
Hugo emphasizes the importance of having operations manuals to ensure that a business can run smoothly even if the owner is absent. He believes that a business should not rely solely on the owner's knowledge and that having documented procedures is crucial for compliance and risk management.
00:46:01 - Planning for Business Sale,
Hugo advises small business owners to start planning for a potential sale at least five years in advance. He warns against relying on a miracle buyer and suggests removing the temptation of cash from the business, as cash is not a reliable indicator of the business's value.
00:47:45 - Tax Implications and Preparation,
Hugo shares his experience of working with his accounting firm to understand the tax implications of selling his business. He highlights the importance of staying up to date with tax laws, capital gains exemptions, divisional loans, and other financial factors that can significantly impact the selling process.
00:51:50 - Compliance and Business Value,
Hugo emphasizes the importance of compliance in making a business sellable. He compares a non-compliant business to an unroadworthy car, stating that compliance should be the core of every business. He also warns against letting the quality of the business decline once it's on the market, as it can negatively impact its value.
00:56:48 - Reconnaissance and Richard Branson's Advice,
Hugo encourages business owners to do their homework and reconnaissance when planning for an exit strategy. He also shares Richard Branson's advice to always
00:58:57 - Working on Multiple Platforms,
Hugo discusses their current focus on multiple platforms and digital marketing, highlighting the success of their content strategy.
00:59:09 - You Can't Sell a Secret,
Hugo emphasizes the importance of having a visible online presence and mentions that if the Blues Train is not easily found on Google, it would be a significant setback for their business.
00:59:37 - Casting a Wide Net,
Hugo advises that when looking for buyers or clients, it is necessary to reach out widely and not limit oneself to a small pool of potential opportunities.
01:00:02 - Learning from Resources,
Michael expresses gratitude towards Hugo for sharing his insights, acknowledging that resources like this podcast can provide valuable knowledge that helps small business owners avoid learning things the hard way.
01:00:10 - Time in Reconnaissance,
The conversation ends with a quote about the importance of research and preparation, highlighting that time spent gathering information is never wasted.
www.linkedin.com/linkedin.com/smallbusinessbanter
00:00:00
Okay, so welcome in to Small Business Banter Podcast. I'm sitting opposite Hugo T Armstrong. Welcome in, Hugo. Great to be here in this magical destination. Queenscliffe.
00:00:14
Yeah. For those listening, we're down at Queenscliff in the ospace on the harbour. Hugo is going to tell us a little bit about his background in a minute. Prior to that, though, the reason for our discussion today, hugo's been heavily involved in business and creative arts music scene for a long time. He's got the legendary Blues Train down at Queenscliffe up for sale now.
00:00:42
So I reached out to him a little while ago and said, hugo, love to chat to you about that, given it's such an iconic and culturally significant business for the whole area. So we're going to talk about that. We're going to talk about business sales and exit planning from his perspective. But Hugo, could you give us a little bit about your very extensive background? Well, modesty not being my strong point, I'll indulge you with and dear listener.
00:01:13
So this is my hometown. I grew up down here and went to school in Geelong and Point Lonsdale Primary. But basically, in a nutshell, have spent the last 30, OD years involved in the music industry and broadcasting in one way or another. So I guess first started PBS FM, Melbourne's community radio station. I started there in about 1989 and I was working in hotels and bars around Melbourne.
00:01:47
Was interested in always really interested in broadcasting. I grew up as like three XY cassette tapes, making your own mixtapes, DJing, the school socials at Geelong College, doing the school socials, doing the production. Sort of like want to be DJ Guy, always going to the beach, discos that three GL our Geelong radio station would have. And I just dreamed of being a DJ. I just thought it was just the greatest thing, bedroom DJ, making the mixtapes.
00:02:20
So I started in community radio and look, it was a really pivot early ninety s. I won't give you a rock and roll history lesson here, but St Kilda in the early ninety s, I mean, we're talking rock and roll scene is just off tap, sticky carpet. It's the peak of before anyone groovy had moved into St Kilda. Every artist in Melbourne and Victoria was pretty much in St Kilda. And the music scene wasn't in Fitzroy and Northgate, I can assure you.
00:02:51
The music scene and Melbourne was a ghost town back then. And the music scene was the epicenter was very much St Kilda and then probably the Brunswick Street, the Old Greek Theatre and a few others. But really the Espy was the home. PBS FM was sort of like the live music station and at that stage was beyond bankrupt. We were the underdogs.
00:03:13
We were fighting from a low base, we were fighting for our survival. And every week was just mind blowing. Before the internet, of course, you'd have three to four industry launches, a week because you couldn't just have a Facebook event or a live stream or a podcast, so you were out every night of the week either seeing bands or going to launches and eating and drinking. You see how that ended up for me. So I really enjoyed that and very quickly I started working at the radio station in marketing and promotions, selling sponsorship, found myself having a job there and 23 years later was still broadcasting.
00:03:54
There was PBS based down in St. Kilda at one point started in the Prince of Wales Hotel and I started when it was in the Ritz Mansions at the top of Fitzroy Street towards the junction opposite the Junction Oval. But I mean, these are really halcyan days. I know everyone says that about their youth youth, but it was quite incredible. And out of that, obviously, opportunities arose because I sort of always interested in blues and roots and I was the youngest sort of of my ilk, which was not the norm.
00:04:32
I also then started getting gigs like Mceeg Music Festivals, like Apollo Bay and other festivals and sort of trying to sort of give you a then I really wanted to get into marketing and promotions and I did not and do not have a marketing degree and I couldn't crack it out of sales. I could get part time jobs in marketing or everyone would go, mate, you're bloody great, we love you, we love you, mate, you're great, but you don't have a marketing degree, but we'll give you a sales job. And I was like, Mate, I've done sales most of my life, I'd done sales work all my life prior to radio and I just said, I've done sales and I couldn't crack it. And the Queenscliffe Music Festival started and in the first year it fell over. It was overly ambitious, to say the least, and it went belly up in one year and it was the old story.
00:05:29
I've had a few Poison Chalices and this was the first big drink from the Poison Chalice where everyone said, are you kidding me? You're going to quit your job at PBS, you're going to move back to your hometown and you're going to save a bankrupt music festival that the council's just taken out a bloody loan and you're going to somehow save this music festival? And you don't really have a strong business background, you've got a radio background. But that's how a lot of businesses or ventures start, though, isn't it? Enthusiasm, passion or whatever, commitment.
00:06:06
It needed all of that and above, but most of all it had a willing committee of management of local people that the festival's lack of success had flushed out people that could see that there was something to be had there and they'd seen it flop and it flopped. What year was that, Hugo? 1996. They ran the first one. They estimated huge crowds and I mean, it was an average attendance per venue of eleven people and it just didn't work.
00:06:40
So overly ambitious, which can happen in any format. So I took on the job in 97 as artistic director and promoter, having limited experience, but home ground advantage. Everyone wanted to see the local boy do good down here. And people who'd just known me my entire life, this isn't a story about me. It might sound like it is, just to preface it, it's not.
00:07:10
It's a story about a local community that found a trigger point, which was this guy who'd quit his job in Melbourne and come home to his hometown to make good. And by a miracle of miracles and just that moment in time, we managed to get 100% of the community on board, on every level, on every tier, from the mayor, the great John Bugg, the councilors, investing the community, the council, the traders, the businesses, the publicans, the local plumbers, school, teachers, community groups. We had 100% take up rate where everyone and I just went round and we had public meetings and I said, everyone's going to buy tickets, everyone's going to get books at tickets. We're going to create this festival, we're going to save it, and we're going to save it now, why was it. Important, do you think, to save it at that point?
00:08:04
To the community or to me? To both. Well, I could give you both answers. Yeah, I think I go. Since we've been down here.
00:08:16
I love it. It's a fantastic community event, but these things come and go and it's like a rare group of people that there's. Two reasons why it was important to save. The first one, to me, I've identified I couldn't break out of my career path. I couldn't break out of sales and radio committee radio.
00:08:35
I'd been offered a gig on commercial radio in Melbourne through Michael, the late Michael Kerr, and he said, but you won't be able to play any of your own music. And I just went, well, yes and no. I don't know. But I said know. But I could also see that people I'd known my whole life had started to get really involved down there.
00:08:59
People had been ringing me saying, oh, there's been meetings at the pubs. But the reason the community wanted it is twofold. But primarily it's because this was a bloody great rock and roll town. This was big on the touring routes in Excess played the Ozone Hotel, midnight all would play the Ozone Hotel, richard Clapton, I mean, the Colandina and the Ozone. Back in the day, this was a surf town.
00:09:22
And the Surfies and the local guys in Queenscliff were in bands. They brought in bands from Jeff Raglas, from the Braxtills, from Prague to the Prittle Brothers, to the history of the old jazz drummers, from P, Wee Anderson to Gil All. But to all these look, people could see that this town had something right back to military bands in its military history. And the community went, well, everyone's got these festivals. It was sort of an emerging thing.
00:09:51
And they were like, we used to go and see a lot of bands and a local guy, Kim Goodall, got a big old book and went around and made everyone sign up to help out. And it just sort of moment in time. And what the community wanted and what they got initially was a bit of a surprise. I guess what I developed was different. They were looking for more like everyone wanted to be like Port Ferry.
00:10:15
And I felt that's what had sent them broke, partially. And I said, I just completely and utterly copied the PBS program grid into a music festival. I just completely ripped it off and publicly said it at every launch. I thought, what can I do? Well, it's Australian music, but it's every genre that's apart from, like, I guess what you would have called Top 40 at the time.
00:10:38
Or I didn't do probably the metal stuff or anything, but I pretty much went, okay, PBS has got what it was that I know. And I know Australian music, I know blues and roots, I know African, I know rockabilly, I know funk, I know soul, I know all these bands. I went, well, why don't we just steal the PBS model and turn it into a festival? So all the bands that you hear on this radio station, let's put them on. And the idea was that it wasn't genre based, it was Australian contemporary music, which included, you name it.
00:11:09
And that was a bit of a bit challenging for people at first because they're going, what do you mean? It's not blues or folk or everyone thought, I'd do a blues festival. Of course they did. Anyhow that festival, within the second year, we'd paid out the debt and we went to 50% growth per annum. The festival went on to in my time.
00:11:28
My proudest moments were of course launching the first digital radio platform here in Australia dig with the ABC with a live broadcast from the cruel sea getting involved with the ABC in general as a principal sponsor which then opened know the ABC had a bit more money then had been slashed and burned by certain governments. So, look, the festival went on to really big things, but at the same time it grew exponentially at a point that I couldn't keep up with. And I reached out for help and found that the only way that there would be more people employed by that festival would ultimately, in a way, be for me to leave. It's like the job where you keep saying, mate, I'm doing two jobs, I'm doing three jobs. And then when you leave, they have an audit and they go, you know what?
00:12:16
Michael was doing two or three jobs. And you say, yeah, sort of trying to tell you that. So, look, that's like the jumping off point for you because before we go on, actually I wanted to just go back and for those listening in, talk about your other experiences because we're going to get to where you did jump off on the Blues Train. You've spoken about the Queenscliffe Music Festival. You're now currently Bay City events.
00:12:47
Yeah. The Blues Train. The Blues Train is your business survived post COVID. And the Blues Train started around that time, 94 actually, the Blues Train started a year before Queenscliffe Festival. Right.
00:12:58
It precedes it by about twelve months. Okay. And that's your business, your baby. But you also along the way, I think you still program or curate other. Festivals that you I haven't since COVID.
00:13:13
A lot of people haven't done a lot of things, but it's okay. But prior to that and then you were awarded a Centenary of Kerr Capital for Service to the Music Industry. And you've been a former chair of Ballerine Tourism and Queenscliff Council's financial advisory. To get back to that point where you came back from the city, you borrowed from PBS, which is what community radio is all about. The festival got to a point where you felt like you'd done your bit and the Blues Train started the year before.
00:13:55
So talk about the Blues train and if you just describe it in I've been on it a few times. Can you describe it in a minute? For those that haven't been on one. Steam train, four carriages, 200 people, four of Australia's best blues and roots contemporary musicians, and a progressive dinner and party that you'll never forget. So each time the train stops, you swap carriages, you see another act.
00:14:19
There's 50 people in each carriage. So it's like a progressive dinner, except the meals don't change. You have that at the beginning on the train, but the patrons move to each carrier. So it's like a little mini music festival, I think. Planes, trains, automobiles.
00:14:34
I think once you're in that confined space, in that immersive environment, you get a really good sense whether you like blues music or not. And people, again, do I like blues music? Well, have you seen the Blues Brothers movie? It's my favorite film. Well, hello.
00:14:48
You like it turn up. Most of our patrons aren't music aficionados. They're not particularly passionate about one genre or another, but they turn up. And I think it's just the perfect recipe. It's like those core ingredients that you would see in French cookery of your butters and your creams and your key ingredients.
00:15:09
And I think the train, the steam train, the blues and roots music which you can achieve a fairly high level of performance quality with a fairly limited amount of production, which is there's some logistics here and the immersive. Nature of the show and also the fact that the show, as you know, it stays the same, but it changes every week because most tourist attractions really struggle with a second return visit. And normally you need a new lion cub or you need a new 4d exhibit or you need a new slingshot ride or whatever, whereas the Blues Train has stayed the same and retained incredibly high repeat clientele. Because you know it'll be like it was last time, but you also know it'll be just different enough and just familiar enough to reinvest your leisure time in. So that's the Blues Train and sets.
00:16:04
Off from Queenscliffe Station, which is incredibly beautiful, setting down there on whatever night, saturday nights and Friday nights look, and. We just, you know, I guess it was one of those, again, incredibly organic things. Sounds like a practical joke. Merchant, banker, pastry chef, a chef and opera singer were running Pasquini's Deli in a homestead called Summer Park. They put together a winter concert series which included a night where I Djed, a night where Maria sang opera, a night where we played some rockabilly music, a bit of everything.
00:16:36
And one of the nights the idea was we'll hire the Train and a couple of girls from Goanna band, marcia Howard Rose bygraves some of the Brunswick Women's Choir, myself and a schoolteacher and the opera singer. And we just made it up and we did it once and everybody wanted to know when the next one was. Is this another example of you said organic? Did you have in mind at the time that it started that it would become a business or was it just like absolutely right? So you had an intent to build?
00:17:14
No, absolutely not. Sorry. No, I'm laughing because it's like the thought that it would have ended up a business is almost quite preposterous. Because we were literally I mean, the PA blew up in one of the carriages the minute we started with the rose and mass, and I got the tin foil out of a cigarette packet and wrapped it around the fuses. The railway hadn't run night services with the train broke down, the generator broke down.
00:17:41
This is 1994.
00:17:46
It was just completely made up and truly, truly there was literally no portal, just used the bush. There was a back of a ute for a bar. There was some cold food in a little foil packet or something. It was beyond literally today. The first night the Blues Train ran, if you ran that today, people would sue you.
00:18:06
They'd go, you got to be kidding me. You can't run that. That's not safe. And it was our family and friends. It was all just point lonnie people.
00:18:13
It was completely just like so many things. It was completely embryonic. Yeah. At the single cell form. Yeah.
00:18:24
It's like some of those mountain biking tracks that the mountain bikers go off and dig, build and then eventually the thing gets legitimized because people are going to keep using. So how did you get it? Who owns the train? A stakeholder. But in simple forms, all railway tracks in Victoria are managed and owned by Victrac, which is a division of the Victorian government.
00:18:52
So it doesn't matter which train line you're looking at met, Regional, blah, blah, blah. They own the infrastructure in a nutshell, the tracks and the land. The infrastructure in Melbourne might be a French company. Have the rolling stock for our trains. Or in Queenscliffe here, it's the Geelong Steam Preservation Society, which was started because the quarry in Geelong was went and the old steam trains were all donated by the McCann family from the Geelong Finesford Cement Works.
00:19:21
They went to the Belmont Common and then when this train line was deregistered as a main, as a part of the mainline in 1979, the Volunteer railway regged it to narrow gauge and it moved here. So, again, this is a narrow gauge railway. So it's not a Victorian railway, it's on Victorian track, but the rolling stocks narrow gauge and that's because in a quarry, you need narrow gauge so you can go down the quarry. How old is the rolling stock? Up to 100 years old or more.
00:19:53
This is one of the things about that business that is for sale that you've had. It's just so totally unique, these beautiful old trains maintained by another community organization, Volunteer, because they do it for whatever reason they do it. But it's preserving history. I mean, we all do what we do well. I've got the business that provides the entertainment, the bookings, the compliance, the organization, the railway do what they do really well.
00:20:24
They run trains, hook and pull and they do it brilliantly and keep it going. It's a miracle. And nowadays, thanks to the success of things like the Blues train and other products down there, like the Thomas weekends and the way the railway now presents itself, for the first time, we've had some really serious government investment, including from the current Andrews government, 2.1 million to redo the track, which has just been completed last week. Oh, really? So all the tracks been replaced for the first time in over 100 years.
00:20:53
And previously, a lot of the money went to Puffing billy and we've lobbied for a long time saying, that's great, but if railways are so popular, which we know they are, and steam trains are really popular, which we know they are, why just keep pumping it to one of them? The second largest one is here in Queenscliffe. So the Blues train started, I guess, from a very organic thing. It ran a few times a year and then many years, about ten years in, we sort of realized that it probably needed to be a business like it was running. I was in partnership with the local original partners.
00:21:29
We were all there. But times changed and then so did the business. And also the business changed. This thing called the internet rocked up. This was a business that was started with flyer on a deli counter.
00:21:42
There wasn't even a phone number. You rang you had to just go down, you had to know to go to Pasquinis to buy a ticket to the Blues Train. And if you didn't know, you didn't get mean. When I say word of mouth, I mean original word of mouth, not social media. So, look, I guess that's the Blues Train bay City Events was something I ran motor City Music Festival, a chuka winter blues festival, festival of sailing in Geelong, which is sort of like a Hamilton race week.
00:22:08
Some incredible bands through that one.
00:22:13
Cut forward 26, 27 years, COVID hits us and the only thing that was worth saving to me was the bluest trend was worth saving. And I realized that the resources and the finances and what would be involved in saving that business, which closed in one night, 20 March 2020, I realized that there was only one that we could even try to save. And there was only one that I probably thought that the impact, positive impact financially to the community made it worth saving. And all the work that had gone in the railway, us, the musician, so. Look, well, you've got a few people.
00:22:56
All the other stuff sort of just has had to find its own ways and gone on to bigger and better things. The radio station PBS is now an incredible COVID did it proud. PBS has never been more successful, thanks to COVID, which is brilliant. Queenscliffe Festival is now, thankfully, after a few years of being quite wobbly with their international programming, which cost them a lot of patrons. I will say, as an observation, not a criticism, but when they'll bring in Spencer Davis group and a bit of that stuff, I think it lost a little bit of that fuel.
00:23:29
Now they're really strong on their Australian content. Their lineups are amazing. They're selling out, they're in a new location. Other things that had a I had a big fall with Motor City Music Festival. I put three years into a festival in Geelong and I went in really hard there.
00:23:47
Like, I went in far out, 1.4 million we put into that dollars over three years and we couldn't turn it around. Everything we did there, I threw more at that than I threw it mentally, physically. And the team that I worked with at the time, more effort went into Motor City Music Festival than all the other events I've ever done combined. You can't polish a turd, you can resonate with the audience. The weekend was wrong.
00:24:17
The location didn't have cut through, the branding was confusing. People didn't get Motor City Music Festival. Geelong being the home of Ford. Detroit liking it to Detroit. Look, it just didn't work.
00:24:28
So, I mean, look, it's not all been success for this little black duck. And I just get this strong sense that you go after things really hard and there's a bit of backfilling, right? And that's what a lot of business owners do. And I think they relate to this things start but with the Blues Train. The reason I reached out to you is because I think at any one time there's 8100 thousand businesses for sale across Australia listed.
00:25:09
There are probably ten times that that would be for sale if you knocked on the door of owners. They just don't get around to doing something. But there are only so many businesses that are, this is my term culturally significant. Blues Train is unique. But you talked about the stakeholders that would also like to see this continue as a successful venture.
00:25:40
Right? You've got the people that proudly maintain the trains there's the tourism piece. Yeah. Well, on the local businesses or during. COVID a gentleman contacted me and donated an economic impact statement for us.
00:25:55
He said I want to donate money to your GoFundMe or I do economic impact statements. And he'd done a business model for Clarksdale, Mississippi of all things. This is Claim Fitzroy, Melbourne and John Henshaw. His name is and he said it's. A very famous blues town.
00:26:11
What's the crossroads? It's where Morgan Freeman's got ground zero and he'd done a business state plan for Clarksdale, Mississippi as a volunteer. He said I'm about to retire. He said would you like money or an economic impact statement? You know which one I chose.
00:26:26
So 3.1 million a year into that into the local community directly from the Blues Train, overnight stays flow in effect. So showcasing great Australian blues talents. Of course you know it's music tourism in Australia is completely and utterly ignored on almost every level. It drives me bonkers. When you go to the USA, music tourism is you go on the blues and barbecue tour, you go on the Louisiana High Ride tour, you go on this.
00:27:02
Music tourism is you go to Austin City Limits music festival and the conferences and things. Now, I'm not saying we're America, we're a much smaller country, but our tourism bodies keep going back to wineries and tasting boards, which they should. But music tourism at visit Victoria tourism Australia. Australia's music tourism when you think of the success of our industry on a whole globally, music tourism in Australia should just be the biggest no brainer. And people coming here and experiencing Australian music and it's not really leveraged on.
00:27:45
And it's an industry that's constantly referred to an industry when they have the arias and they say it's the industry's night of nights and it's like? Well, if it is an industry which it is, and an industry that employs millions of people directly and indirectly in Australia, where's the really big picture? You want tour Australia, you want the music tour of Australia, you want the Arnhem Land music tour, you want the Blues music tour, you want the Grunge. Motels, you want to go to the. Tote, you want to go to this or you want to go the opera.
00:28:23
I don't know whether it's a cultural cringe or a lack of understanding of truly music tourism. But going back to the blues train, blues train is music tourism personified. It's absolutely that people say to me, who goes on the blues train? I go the same people that go to Tullamarine Airport go on the blues train every day of the week. That's people, people, people.
00:28:44
So music tourism, I've proved that it works. We all see it working. But there just seems to be a level of lack of engagement on state and federal levels in our peak tourism bodies of our music industry as a tourist product. Anyhow, I guess that's not why we're. Here, but hey, no, it's part of why we're here.
00:29:09
And there are some thriving regional festivals. There are. So when you visit Australia, where's that definitive download, where's that definitive app, where's that definitive guide, where's that pocket guide? Where's that thing that says, hey, you. Got to listen to PBS or R to find out.
00:29:27
It's all too hard. But anyhow so I guess the bluestrand is a tourism product first and foremost. That's got to use that cliched term now as pillars. It's got some very strong pillars in tourism, hospitality events and as I said, you've mentioned it's for sale. We're in an expressions of interest campaign because we've realized that it will be challenging to think about the right curator for that business in the future, but also what that might look like and how that would make sure that the core of it's maintained.
00:30:03
Whilst the music may become more diverse or the food may be more diverse or something, I've tried to sort of I'm a big believer in stick to, your know, like if you're a steak restaurant and everyone comes because you do good steaks and you bring all your mates down from Melbourne and say, We've got to go. This steak restaurant in Queenscliff, it's really iconic. And the night you turn up, we're at the front door saying, oh, we're doing a vegetarian menu tonight. I'm a stick to your knitting kind of guy. But I can see that the blues train would the blues is a pretty broad term which covers a lot of it's a root music covers a lot of genres.
00:30:41
There's a couple of things I don't. Know that's it $3.1 million of local economic benefits, which is very significant. You've got this new track going in. So the future, maybe some of the tourism bodies will catch up when you're investing that much money in the tracks. So we'll see.
00:31:04
Let me say, I don't think that they're ignoring us, but I just think that, as you see it, those of us who see the music scenes of Melbourne and Australia can see what's the economic impact of Byra Bay blues and roots nowadays. I mean, we're talking millions and millions and millions of dollars into that economy. And that's a great example where it's called the blues and blues. It's very diverse, which is and. I understand the subtlety of expression of interest versus for sale.
00:31:37
So I don't mean to limit that. But I don't think you do. I'm just trying to be we've had to try and frame all this into a business sales model because it's a. Business that is going to potentially appeal to a lot of different buyers for a lot of different reasons, and there's some capacity around how many people you can get on the train, but it's a platform. Well, there's a lot of opportunity for growth.
00:32:04
The festival I can tell you what the Blues Train is missing. Blues Train needs an annual complementary music festival which has larger bands of those genres and subgenres. So Hillbilly 50s, rock and roll, grungy, rock and roll, pub rock and roll, bluesy, bluesy this, bluesy that, which has a complementary festival. The Blues Train could also have Americana on it, could have different nights. I could see all that, but it's time for me to hand that baton.
00:32:31
And I guess going back to what we're here talking about was that how do you plan those exit strategies? How do you think about what a future owner of a business would look like? And how do you demystify when you've had a figurehead, personality type, Ronald McDonald character? So we've addressed those things over a number of years. So prior to COVID, we'd removed Me from all the marketing and we'd removed Me from some of the on site activities.
00:33:01
So we were removing this character tour. There was a character tour of him, this guy, Hugo T Armstrong happens to be me, but not really me. So me used to get up and play with harmonica with the bands every night. Me used to be at the gate, me used to so this Hugo T.
00:33:20
Armstrong guy. And so prior to that, we started realizing that no one's going to want a business where everyone the hairdresser is the person that you and they're not there. It's not there. Or the chef, a celebrity chef. Very hard to buy a George Kalambaris restaurant or a you know, because they're not there anymore.
00:33:38
And Ian Hewertz and how do you keep that? You know, we saw that with we'd. We'd pulled Hugo T Armstrong out of it knowing that we wanted to have a future where it was sold and not too daunting. But then with COVID we had to bring Hugo T.
00:33:54
Armstrong back to show that especially the federal government of the day, which were not leaning towards the lefty music industry because they were a right lending government, which is just the facts. We knew that we were going to need to bring the family face back to the business. So Hugo T Armstrong re emerged, whether it was on barbecue sauce or online or fundraising. So we put him back into the business knowing that that would also we'd need to remove him back out again.
00:34:21
And that's what we've currently like a. Special op come in because you can't. Make it about one person. And the problem was, people thought The Blues Train was about one person. But as I said, I don't build the trains, I don't run the trains, I don't play the music.
00:34:35
But there was this perception that it was specialized to a person and because of my background in radio, so that was really challenging. I think we've addressed it and we've got plans moving forward and we've got a number of things that we're doing in that space, but at the same time, what do you do in a small town? You're a local business, you're a local media kind of guy. I do spots on the radio in Geelong, on the commercial stations. Had a long running spot on drive time in Geelong on Bay FM with the catch up.
00:35:06
So it's Hugo T from The Blues Train. So, of course, but know, we've had to make sure the business was, you know, whether it's operational handbooks, guidelines, financial planning, strategically looking at really making sure that you got it really, which has taken five years. It's been a concerted effort to de Hugo T. Well, we could see that. Was probably one of the things that people might find daunting or it might find that it was brand confusing.
00:35:39
So we did a rebranding process leading into COVID and during COVID so rebranded the business, freshened everything up, redid all our audience personas, redid all our operations handbooks, our manuals, our HR manuals, our ticketing manuals, and also whilst using the caricature of Hugo T Armstrong as the face of literally reviving the music scene. So, channel seven. Oh, here's the guy from the Blues Train. He's going to go under if we can't get the regulations on 4 person.
00:36:12
I'm literally on channel seven with Paul Dowsley during COVID regularly, I think two or three times there, or I'm there with Minister Pearson or meeting with Dan Andrews saying, come on, guys. So we had that side of it. But at the same time, I knew that my time was up and that we needed to make sure that the business was something that it's a business, it's a brand, it's a trademark, it's trademarked. And the exit strategy, I would say, moving on to thinking about if you're going to exit plan a business, I would say it's a five year strategy. And I think it's a five year strategy for some key reasons.
00:36:53
You need five years of financial records for your tax anyhow, so it's a nice round number, but 90% of small businesses, well, 90% of businesses in Australia are small. 90% of small businesses in Australia do not have an exit plan. But they all wrote a vision and mission statement and a business plan to get the bank loan in the first place. So ten years ago, 15 years ago, 20 years ago, two years ago, you went to your bank manager or your financial advisor and you wrote a little downloaded a business plan. You wrote a vision and mission, and you had this idea.
00:37:23
You should almost be writing the exit strategy on the back of it the day you submit it. I know that might sound completely to some preposterous, but if you go and meet 90% of business owners and say, what's your exit strategy? They just look at you. And I've been there. I've been there for the reasons I just said.
00:37:44
Yeah. And this is the work I do day in, day out, with owners getting out, and mostly they haven't thought about until something extraneous happens, like there's a health issue or partnership.
00:38:03
That'S forced redundancy. It's not the redundancy that any of us want. And that's why, if you're thinking of starting a business, folks, think about what your exit strategy would be and when could that be? Like, when could that occur financially? When could that occur logistically?
00:38:21
When would that or how long I've run this business? 30 years in January. If you'd asked me 20 years ago would I be running it in ten years time, I would have just wet my pants laughing. Yeah. I'm no expert here.
00:38:39
I'm just saying you are an expert. Most things I've learned in business, unfortunately, I've taken them as a suppository, but slowly some of them are coming through the ears and eyes and I'm learning to do things differently. I think when I called you an expert because you're an expert on your own business and the scenario that's in, but you're also other owners listening, like to hear from other owners. And this is raw. Can I tell you the best advice a business owner ever gave me?
00:39:09
I went to a business lunch when I moved to Geelong, some wine lunch, and I met a guy who'd had a very successful roast chicken shop, who then bought the building and had a massive swimming pool. Pool shop. Not building pools, selling all the crap that you put in your pool. Right. Really big pool shop, lot of staff, big building, big pool shop.
00:39:30
And then he went and had a fine food shop. And I sat next to him to lunch and I'd met him and I said, David, how did you go from roast food to incredible? Big pool shop, chemical shop, 20 staff, and now you've got I won't mention the business, but you've got a franchise business selling jams and fine foods and coffees and cakes. And he said, they're all businesses. If you're good at running business, it's all the business of business.
00:40:01
And the same skill set worked across all three platforms and it was one of the few times I actually properly listened and went, yeah, it's the business of business. Yeah. So what's important for you with your advisor on the sale, you've structured this as an expression of interest process, which is I'm a big fan of, because it draws out. But what's important for you as the outgoing owner? Great question.
00:40:32
I'm glad, glad you got me here today. Wow.
00:40:39
What's important to me is that I've and look, everyone's different and for me is that I'm more than willing to stay on with the future business, whatever that looks like, on one condition, is that I do not and will never work a weekend again in my life. You've got so many Saturday nights in your life now, I'm 56 years old and I don't look at, but I am. And I've worked in an industry where most of my weekends I worked, and that means I've missed a lot of birthdays, barbecues, catch ups, 50th, 40th, 30th, 21st, et cetera, et cetera, engagements. So to me and to me, something like having weekends off, like it's a really effing big deal, and to someone else they might go, I couldn't give a crap about weekends. I'd love to have a couple of weekdays off.
00:41:31
So everyone's different, I guess is the point. But to me that's a really big deal. So in the expressions of interest, people have been saying, well, would this guy Hugo stay on and do music programming? And the brokers have been instructed to say, yes, but come Friday, AVO, so no more weekend. So that's something that I place a value on.
00:41:54
That. What's also important is that, as I said, look, you're a custodian of this type of business. It might be altruistic or whatever the word is of me, but I think I've already met some people that could run it and could run it better than I have. And whether they will or should is up to them, but I can't choose that. But if I've met a couple that I've gone, man, you guys, I've walked away going, you're mad if you don't buy this business.
00:42:22
This is perfect for you guys. But for example, I met a couple who just had all the skill sets between two people. And I think that's what's really important, too, is I'm a one man show. And from a flyer on a deli counter to managing $100,000 a year marketing campaign and a retainer, digital marketing company and Facebook, it's a lot. And the level of compliance and the level of tax collecting, which I don't like.
00:42:47
I don't mind paying tax, I just don't like the way I have to collect it on behalf of the government. But look, there are people that I've gone. If you had two of you, whatever that format is, business partners or life partners or both, one might be more businessy, one might be more on Sitey, kind of like event based. I could see that. That would be really important to me to see in the future owner of the business and someone that also understands going back to my chicken shop mate and my pool shop mate, David, was that at the end of the day, the business is about all businesses should be about compliance.
00:43:27
And if compliance isn't at the heart of what you do, literally, then you are grossly negligent. And that compliance is not just with the ATO. That compliance is that PowerPoint, that desk, that stairwell, that toilet block. And if you're not compliant in what you're doing, you're not running your business. You got 100 people on the train.
00:43:49
200. Sorry, 200, and everyone's having a good time. Yeah, and it's licensed. We've been through that and we've had an incredible I've only said this once so far in today's interview, I hope, but we do have a very good track record. But compliance in business and that's compliance with your staffing, with your HR, with your superannuation, with getting in people.
00:44:15
So I think that I want to see the next owner of the Blues Train, someone who has as much passion for compliance as they do for music, which might sound and that might be two different people. And that's okay. And that's often a really good small business model where one partner is really good with the bookkeeping and then this and that and the other one's really good on the tool. Complementary skills. If you think of a lot of people in trades based industries where they're pulling cables for the MBN, one's out there doing that, the other one's sending the invoices, getting the supplies.
00:44:48
If you look forward from that, it's where a lot of those businesses that the millions that never some of them don't, a lot of them don't want to scale, but they're not sellable because it is all entirely dependent on one person. And that's okay if you're conscious of that. But what you're saying here is that you've thought forward about how the business could be run by somebody else, which makes it a bit easier to sell. Got to get it out of your head. And also there's different skills needed to take the business from where it is to where it might be or where it could be.
00:45:24
If your business is in your head, your head's not for sale. And it just daunting. So we've handbooked into operations manuals. So if literally next Saturday night I can't run the Blues Train, I could hand you the manual and you would be able to run it that night at a level of compliance that does not leave us at risk. Exposed.
00:45:45
Exposed. So if you're in small business and you want to sell up, I'll tell you what I do know. Five years out, if you're not talking about it and thinking about it, you're not going to get there within five years. And you might have a miracle where someone walks through the front door and buys it. But how often?
00:46:01
Don't plan for that. Yeah, it's like planning for winning lotto. What I would say is that the first thing that you should be doing, and here's my pearls of wisdom, and I did this is the first thing you need to do is remove yourself from the temptation of cash in your business. If you think you're going to sell a business because you've been putting some cash aside, which many businesses have access to, or did more, so pre COVID, but still do. And if you think that's adding to the value of your business because you're paying less tax and that's going to make it more sellable, you're dreaming.
00:46:35
You can't sell a secret. And if cash is a secret, cash is not king, cash is the devil. And if you're pulling cash out of your business and you never want to sell, it half your luck. Pull your cash, do what you got to do. But I have done that in the past, like any business owner, but not for over ten years.
00:46:57
Where that temptation to grab those couple of 50s every week, those few pineapples? That is not going to help you ever get out of your business, period. And if you think that I've met business owners going, we've got a secret spreadsheet with the cash in it, I'm like, It's all bullshit, mate, you can't prove it. So cash is not king, cash is not your friend. You can't borrow against it.
00:47:20
More and more buyers will just walk away. Yeah. And a lot of people, when you offer them cash now, is all they'll drop is the GST, anyhow which you could have claimed. So cash is not your friend. The other thing I'd say is really taking into account some key factors with not only and this is five years out and I've done this, so this is not me telling you with hindsight, which is how I normally learn things.
00:47:45
Five years ago, started working more than five years ago due to COVID. So for me, this is probably six years ago, started working really intensively with our accounting firm. What's going to be our position on capital gains tax? I started the business as a $1 shelf company, which means I'd be paying 50% of on 50% of the sale value on capital gains tax on a business, not a business that you bought for 400 and sold for 500, which means you've paid capital gains on 50% of that 50 grand, I'll be paying capital gains. So zero to wherever it counts.
00:48:18
There are exemptions for capital gains. Have you been running more than 15 years consecutively? Are you over 55 years of age? So there are different concessions, but those concessions have further flowing effects. So we hired consultants to work with the ATO to get advanced rulings, because how am I going to value my business if I don't know what the tax implications of selling it are with capital gains?
00:48:41
So we got some advanced rulings, which you can get from the ATO, where you bring in a third party accounting firm that doesn't work with the general public. They're an accounting firm that works for accountants to get decisions from the ATO money well invested. So the first thing was when I sell it and whatever that magical figure was at the time. What are my tax implications? Are the last five years of tax up to date?
00:49:09
Are there divisional loans in the company? If you're not familiar, if you got a proprietary limited company and your accountant's been paying, we'll put that through to the loan account. What's your div? Seven a status. Divisional loans are sitting there.
00:49:20
They're accruing interest. They are again, handy at times, but the devil really. What is your tax status going to be when you sell the business period definitive to the tax laws at the time? Do you have a family trust associated? Has the laws changed as they did two years ago on disposal of funds to minors?
00:49:41
It's all changed.
00:49:45
This is why five years, you're absolutely right, because all these things, you've got to be aware of them and you've got to give yourself time to unravel or change or restructure. I had divisional loans in the company that needed to be paid out. They need to be paid out at a tax rate and an interest rate set by the ATO from you back to your proprietary limited company. Was there outstanding? Was there any outstanding things in the back end of it?
00:50:11
Did you have any super you owe to anyone? Was everything up to date? This is why a lot of preparation needed before you even think about talking to a broker, because you're going to talk to the broker and the broker is going to say what's your accountant said and you're going to go back and waste everyone's time. Or they say, what do you want? And we'll have a go at selling it for?
00:50:32
Well, we went in with our accountant. We went in with a broker at the time who is now in a retirement phase, a very dear friend of mine, Jim. So Jim came in. I also brought in two business consultants in Geelong called the Wingmen. Now, not hard to work out what they do.
00:50:49
And I also brought in a business mentor because I'm a one person business. So basically when we started the process five years out, we had the senior accountant, principal partner, junior accountant, my business mentor, trained accountant, one of the Wingmen, also trained accountant, my business broker at the time, and myself, all in the room to even start the discussion.
00:51:17
You've learned rapidly from those at the time. By putting that much investment into something five years on is remarkable. And not not enough owners even think about doing it. They don't see the return on investment for it. But you've clearly outlined, considering Michael, it.
00:51:41
Comes back to what I said a minute ago. Compliance has to be the core of every business. And if you can't sell a compliant business, how can you? It's unsellable. It's like an unroad worthy car.
00:51:50
It's not worth crap. So getting it to road worthy the other one. The next step, of course, then was getting it out of my head, because the consultant I was working with, the wingmen, Jim, said to me, he said, Jim Thompson. So I had two Jim's here, by the way. He said to me, he said, everything's got to get out of your head, mate, there's too much in your head.
00:52:09
So handbooks, documents, getting that stuff, and then moving in recent times towards building a prospectus audience, personas, opera, really. So, look, the process, I think, is five years, and you go back and you revisit it and you might say, well, we've realized we've started pulling some PNLs and the business isn't as profitable as we thought it was. There's cost blowouts and that could take quite a while to address, identified in the first place. You might turn all this around in two years or one year. But if someone said to me today, let me put it the other way, if I said to someone, people have been saying to me, oh, you're selling the Blues Train, you're getting out.
00:52:59
They say, do anything to get out. I've been here too long in this business, this restaurant, this bar, this cafe, and I'm like, well, have you started planning? And they're like, no. What do you do? You just call a broker and you call the broker and I'm like, yeah, you call the broker and they're going to say and then you're going to start learning about all the ad backs and you're going to have to work out what the ad backs are and got how to prepare a document to get into an Im so that that can go to a broker, which actually shows the real costs.
00:53:27
And not just the costs, because one year you had to buy a new delivery van. So all the backing out. So, look, I think the process for me, I could be sitting here in a couple of years, still in this process, but getting to the starting line. But you've done just calling a broker. Yeah, it's definitely not calling a broker, it's definitely not saying to, I think I'd like a big amount of money and hoping for the best.
00:53:55
That's not a strategy either. But all of those things you've done, it might take a couple of years, but you've done everything you can to put it in the right place to sell. Probably the only other thing sorry to interrupt, Michael that I have seen people do in businesses and I'm not doing is I've seen people take their foot off the gas, they put it on the market and they let the stock run down on the shelves or they let the clients run down, or the quality of the staffing hours, because I'll. Be out of here in a month. If they're thinking, Ten four, big buddy.
00:54:28
Breaker, breaker. And when that doesn't happen, the value of the business decreases and then the opportunistic buyers step in and they go, mate, that guy's so keen to get out, and you see them come in with the low balls, and you end up doing that.
00:54:48
What's happening in the business today is what swings a sale, often in the end, because you could be profitable. Two, three last year. But if it's tanking because the owners checked out, that's a big problem. Hey, Hugo, some pretty grounded advice in there for other owners, and that's primarily why I wanted to have a chat with you. I really do appreciate your time and your honesty and straightforwardness about your experience of it.
00:55:21
Well, when I left, PBS's program manager had a reputation, apparently, and I wear it as a badge of honor. And people said they, oh, at least with Hugo, you always knew where you stood. You might not have agreed with him, but you knew where you stood. And I'm happy with that. That's cool.
00:55:39
That's a good legacy. Hey. An ongoing legacy. I think it is. And the other thing is that I will say to your listeners today, dear listener, he's no longer with us anymore, colonel Carruthers.
00:55:50
He passed away some years ago. He was a beautiful man here in Portland. When you grow up in a town that has an aging population, you get to be exposed to people with incredible life experiences. And Colonel Carruthers, before the blokes would come and do his garden, every few weeks, he'd take the boys out for five minutes before they started work, and he'd say to Paul and Graham, the gardeners, he'd say, gentlemen, time in reconnaissance is seldom time wasted. So he'd go out, he'd say, this is what I need done around the garden.
00:56:20
And then he'd just leave him to it. And I will say, if you are thinking of what you want to do with the future of your business, and if an exit strategy is part of that future, and it should be, I will only once again reaffirm what Colonel Carruthers says. Time in reconnaissance is seldom time wasted. So do your homework. Do your reconnaissance, and don't wait till you're emotionally or financially broken and then sell it for a fire that put in worse.
00:56:48
Not sell it at all. Yeah, just walk away. And we've all seen that, and sometimes they've been our favorite little cafes and things, and we've seen we just gone, oh, mate, they ran the race. So look, do the reconnaissance. And the other one could I just leave you with another richard Branson's, one of my great sort of things, and it's widely acclaimed, this statement to him, but I'm sure it probably wasn't even him, but it works for me.
00:57:16
And today's one of those days for me, too. Whenever you go to a meeting, make sure you're the dumbest person in the room. And Richard Branson allegedly says that. But when I talked about that business exit strategy meeting that I went to. And the team, I was like, by.
00:57:31
Far the dumbest guy in the room. And all those other people share the passion for me. Music, my business, great people. And if you add up those people's life experience, but you have to park your ego. Now, I got one, everyone got one.
00:57:47
I got a ripper, but I'm happy to sit. And the biggest business mistake I made with that festival I spoke about was because I didn't listen. People said, it's the wrong weekend, you need to move it, you need to do this. And I knew better. But nowadays, when I'm sitting with people and their life experiences and you add up all the years and all their quals and what they've done, and if you're not listening, make sure when you go to those meetings, surround yourself by really smart people.
00:58:16
And don't worry if you're the dumbest in the room and I'll be there with a pen and paper, writing notes, trying to keep up, going back, going, guys, what is it you said? And everyone will help you. It'll be fine. I don't think it's being the dumbest, I think it's being self aware. But anyway, that's a topic for another day.
00:58:32
Hugo, hey, just before we sign out, where can people get information about the expression of interest process around the Blues Train? Well, you could just Google it because it's trending at the moment, Michael. You know that I'll find it and I'll put it on the show notes, CRE business brokers. But realistically, just Google it, because there is only one. We are working on a lot of platforms.
00:58:57
Pardon? I said tracks and platforms. Now I've done it. We're working on multiple platforms at the moment with a lot of digital marketing. The content we've got out there is going well.
00:59:09
And the other thing I'll leave you with, the other couple of pearls is you can't sell a secret. So if you can't find the Blues Train for sale on Google, then I'm screwed. I may as well just go home, pack my bags and get on that Blues Train to, you know, if you are going to know, you've got to really think about that. You cannot sell a secret. And you might only have one business to sell and you only need one buyer, but when you're fishing, you need to cast a wide net.
00:59:37
All right, Hugo T Armstrong, thank you for taking time on small business banter, really appreciate it. And I'll add some notes and thanks. For doing this, mate, because most small business people, we tend to learn things the hard way. And it's resources like this that I hope will give people just that little bit of insight, whether it's just that little micro piece of what we've said today that can give them a journey.
01:00:02
So thanks for having me, I really appreciate it. Well, I'm cheersing to Mr. Carruthers. Or Colonel Carruthers. Colonel Carruthers.
01:00:10
Time in reconnaissance is seldom time wasted. All right. Thanks, Hug