Plenty of ground for Jim’s Group to cover

Jim Penman might be bullish about listing on the ASX, but it will be a long road.

When most companies decide to float, they orchestrate the announcement carefully. Press releases, media conferences, interviews, meetings with potential investors.

Jim Penman, head of the sprawling personal services franchise empire Jim’s Group, has taken a very different approach.

First he mentioned the float idea in an interview with Gold Coast Business News. The next day, he talked to SmartCompany about the idea, explaining the potential to build a $1 billion business.

He did a few more interviews and it was only then that the company decided to put its own press release out, selling it would look at an IPO before the end of 2012, with the goal of raising somewhere around $10 million.

Not exactly the usual way these things are handled.

Then again, Penman is not your usual business man. From his base in the outer Melbourne suburb of Mooroolbak, Penman has seen the expansion of the Jim’s group from mowing to dog washing to bookkeeping to plumbing and beyond. The business has also grown around Australia and to overseas, with differing levels of success.

Penman is a bit of maverick and this fact coupled with the sheer size of his empire – some 3,200 franchisees – means that Penman’s style is occasionally divisive, even within his own group. At one stage in 2009, a bitter dispute with a franchisee in Britain had a group of breakaway franchisees talking about kicking Penman out of his own company.

He survived this scrape and even launched successful legal action against the dissident franchisee. Just another chapter in the Jim’s Group story.

Floating the business would certainly represent another fascinating chapter for Jim’s Group, but it’s a task that will bring its challenges.

I am not saying Penman couldn’t float the business before the end of the year, but from what appears to be a standing start it won’t be easy.

As one franchise sector lawyer told me this week, the task of floating a business is a mammoth one – in most cases, there is about three years’ worth of worth involved just to get to the starting line, not to mention a good deal of expense.

Back office functions – particularly financial reporting and other administrative systems – need to be brought up to the level where mum and dad investors can be comfortable.

Financial reports need to be pristine.

Good quality directors need to be identified, courted and brought on board.

Governance systems need to be strong, if not perfect.

Potential investors need to be sounded out.

The growth story around the business also needs to clearly spelt out and strategies may need to be implemented.

On this last point, Penman has been very clear – if the company had more capital it could bring on board more franchisees to tackle the mountains of work Penman says the company has to knock back every month.

Exactly how far Penman has progressed down the path of building the other systems to a publicly-listed standard isn’t clear – presumably with so many franchisees his systems are reasonably robust.

The job of selling investors and even potential directors on the business will take some time. Jim’s Group uses a slightly different franchise structure of other franchisors, with divisional franchisors (say, the dog washing division or the antenna division) supported by regional franchisors responsible for small areas and then franchisees under that.

The way money flows through the business from sales of franchises, royalties from franchisees and administrative fees isn’t as clear cut as many franchise systems, where the franchisor simply gets a percentage of all sales.

Penman has suggested the quickest way to get on the ASX may be through a reverse takeover, whereby by Jim’s Group buys a cheap listed company or a listed shell.

But there will still be plenty of work ticking the countless boxes listed companies need to tick. Penman can pull it off, but it will take time.