Is there a business need for this ?
Discussion
I would say yes.
However, offering your services at X per hour does not differentiate you from the competition, apart from price.
Where advice is given people really do give a value to the quality of the advice - as you have mentioned yourself the £200 advice is different to the £100 per hour advice. Cutting your price on a relative basis may have a negative effect to the perceived quality of the advice given.
If you genuinely want to add a new spin on things, I would offer your services for free as long as the client proceeds with the sale. You then work to an agreed %age of the funds on purchase.
I would certainly choose that as an option personally rather than a X per hour service. My experience of such deals is that the agent is much more likely to work harder on your behalf.
For this the client would get the benefit of you giving your advice to tie up the lose end in the business to maximise the sale price and secondly broker the deal on behalf of your client. My personal thinking of this is that whatever the percentage is (within reason) the advice and brokering would earn this back at least if not many times more.
However, offering your services at X per hour does not differentiate you from the competition, apart from price.
Where advice is given people really do give a value to the quality of the advice - as you have mentioned yourself the £200 advice is different to the £100 per hour advice. Cutting your price on a relative basis may have a negative effect to the perceived quality of the advice given.
If you genuinely want to add a new spin on things, I would offer your services for free as long as the client proceeds with the sale. You then work to an agreed %age of the funds on purchase.
I would certainly choose that as an option personally rather than a X per hour service. My experience of such deals is that the agent is much more likely to work harder on your behalf.
For this the client would get the benefit of you giving your advice to tie up the lose end in the business to maximise the sale price and secondly broker the deal on behalf of your client. My personal thinking of this is that whatever the percentage is (within reason) the advice and brokering would earn this back at least if not many times more.
surely the only problem with this (and it's certainly not a dig at Tonker's integrity) but might there be in inclination to complete the "wrong" deal to make sure of payment rather than walking away and waiting/not selling?
Perhaps a low "instructing" fee followed by a (lower) percentage of the sale price might mean working for nothing far less often?
Perhaps a low "instructing" fee followed by a (lower) percentage of the sale price might mean working for nothing far less often?
As a Chartered Surveyor I tend to find that companies believe they can do their own lease renewals, rent reviews etc or get their lawyers accountants to do it.
They are certainly frequently not prepared to pay for the professional advice to get the job done properly. Odd really as usually the professional advice fee is chanrged on the basis of rent saving so they are guaranteed to be better off!
Small businesses tend to think they know it all, will be able to do it tomorrow etc or of course believe the service you are offering doesn't apply to them!
So whilst I would agree that you are probably right whether you can persuade people to take advantage of the service is another question!
They are certainly frequently not prepared to pay for the professional advice to get the job done properly. Odd really as usually the professional advice fee is chanrged on the basis of rent saving so they are guaranteed to be better off!
Small businesses tend to think they know it all, will be able to do it tomorrow etc or of course believe the service you are offering doesn't apply to them!
So whilst I would agree that you are probably right whether you can persuade people to take advantage of the service is another question!
I definitely think that is a NEED for such a service.
Unfortunately, I don't think there is sufficient DESIRE amongst smaller businesses for a service like this.
Small businesses are much more fee sensitive than large businesses and will be reluctant to fork out fees unless they are utterly convinced that the fee paid is going to result in tangible benefits.
The difficult part is the convincing.
Unfortunately, I don't think there is sufficient DESIRE amongst smaller businesses for a service like this.
Small businesses are much more fee sensitive than large businesses and will be reluctant to fork out fees unless they are utterly convinced that the fee paid is going to result in tangible benefits.
The difficult part is the convincing.
anonymous said:
[redacted]
You're right, some deals are too small to be done through a corporate finance dept of a firm of accountants. Where a deal is this small it will typically be handled by a business transfer agent. I understand (but have no first hand experience) this then operates like an estate agency and unites buyers and sellers for a commission. These would have to be very small transactions though. Typically anything over £0.5m is certainly worth taking to a proper CF dept.If the vendors accountant is too small, then they will normally have a relationship with a larger firm of accountants which does have a CF dept. The vendors accountant will refer the deal on to the larger firm in exchange for a comission.
AFAIK the first point of contact in a disposal or purchase would normally be via a bank or accountant. We very rarely have deals referred into us from Laywers, as they tend to become involved later in the process once buyer, seller and lender have been identified.
I would be very interested in other people's opinions on whether there would be demand for early stage advice from a Lawyer.
Eric Mc said:
I definitely think that is a NEED for such a service.
Unfortunately, I don't think there is sufficient DESIRE amongst smaller businesses for a service like this.
Small businesses are much more fee sensitive than large businesses and will be reluctant to fork out fees unless they are utterly convinced that the fee paid is going to result in tangible benefits.
The difficult part is the convincing.
Seems to me it is a hindsight business. As you said youself most small guys will have sold the crown jewels before they think of calling a professional.Unfortunately, I don't think there is sufficient DESIRE amongst smaller businesses for a service like this.
Small businesses are much more fee sensitive than large businesses and will be reluctant to fork out fees unless they are utterly convinced that the fee paid is going to result in tangible benefits.
The difficult part is the convincing.
Have you ever thought of going one step furhter and buying a sound but organisationally fubarred business? Eggs in one basket and all that - not really something we conservative lawyers do!
A
Small businesses tend to have "small" accountants. Small accountants tend not to have the expertise in advising on buying and selling businesses.
I worked with a firm who decided that this was an area into which they would like to branch out. However, they had no partners or staff on their existing payroll who really new anything about mergers, acquistions and the relevant negotiating skills required. So they hired two new "experts" at pretty exorbitant rates. In the course of this, they made me redundant. The assumption being that they would wind down the traditional accountancy business and increase this new "business acquistion advice" service.
Within nine months of me leaving, the practice had gone bust.
My advice for small accountants is - stick to what you know and what you are good at.
I worked with a firm who decided that this was an area into which they would like to branch out. However, they had no partners or staff on their existing payroll who really new anything about mergers, acquistions and the relevant negotiating skills required. So they hired two new "experts" at pretty exorbitant rates. In the course of this, they made me redundant. The assumption being that they would wind down the traditional accountancy business and increase this new "business acquistion advice" service.
Within nine months of me leaving, the practice had gone bust.
My advice for small accountants is - stick to what you know and what you are good at.
Edited by Eric Mc on Monday 10th March 11:57
Eric Mc said:
Small businesses tend to have "small" accountants. Small accountants tend not to have the expertise in advising on buying and selling businesses.
Agreed, per my post above smaller accounts firms are better just refering the deal onto a larger firm with a CF dept, or possibly a boutique, and taking a commission on it.anonymous said:
[redacted]
Definitely. Networking is essential in this business, most work will come in through referrals from other professionals in the business. We win some work from existing clients, and some from advertising but the vast marority is referred in. With between accountants, banks and lawyers referrals tend to be on a reciprocal, rather than commission, basis too.Eric Mc said:
Smaller businesses may not have such a position. Indeed, many small businesses are totally owner managed. In these cases, the owners tend to know a lot about their own business - but next to nothing about what they need to do when they want to sell it.
Exactly.I would say that the huge majority of businesses valued at less than seven figures would have staff who could competently manage this. Secondly, there is also the issue whether the FD could be trusted to act impartially in such an issue as selling the business they work for.
If I've understood correctly, the services you propose are:
For sellers:
If so, yes there is a market. Most people, particularly smaller and family-owned businesses) would only do this on very rare occasion and would like at the very least some handholding. A one-stop shop (whether selling or buying) could be very useful indeed. You would be in competition with both accountants and lawyers, but there is an appeal from having all the services, skills and capabilities on the same phone number.
It's not something I've done personally, but I have known:
For sellers:
- An Idiot's Guide (book, consultancy service, etc.) called "So you want to sell up your business", explaining the method and best practice.
- Compiling a sales dossier (comparable to a Home information pack)
- Analysis & strategy: Developing a 12-month corporate strategy for improving the sale value of the company (e.g. cutting staff, renegotiating lease, revising accountacy methods)
- Prepping the marketing sheet (the Warren Buffett 1-page fax)
- Marketing the business (sort of like an estate agent)
- Responding to an unsolicited offer.
- Then managing the negotiation and all aspects of the sale.
- An Idiot's Guide to buying (process, establishing value, etc.)
- Analysis of a potential acquisition
- A finders service: locating possible acquisitions, vetting proposals of sale, performing first-sight viability assessment
- Negotiation of purchase
If so, yes there is a market. Most people, particularly smaller and family-owned businesses) would only do this on very rare occasion and would like at the very least some handholding. A one-stop shop (whether selling or buying) could be very useful indeed. You would be in competition with both accountants and lawyers, but there is an appeal from having all the services, skills and capabilities on the same phone number.
It's not something I've done personally, but I have known:
- A very well known food brand put up for sale. By prepping the business a year before it was offered for sale, the MD was able to double value and secure the jobs of all the staff.
- A businessman who looked at a new acquisition roughly every fortnight. He had a simple process for establishing viability and price. He of course had the experience, but a 'normal' businessman would would have paid this guy a fortune for his insight and rapid judgement.
JustinP1 said:
I would say that the huge majority of businesses valued at less than seven figures would have staff who could competently manage this. Secondly, there is also the issue whether the FD could be trusted to act impartially in such an issue as selling the business they work for.
I am in the same position as the OP target market. There are 3 of us turning over less than 500k with good profits and consistent growth. We are thinking of selling in 24 months or so and are now considering bringing in a FD in 6 months or so who's only job is to make sure we get best value from the sale. IMHO they are worth their weight in gold and to go in to a sale without one, as the OP suggests, could see you get screwed over.
HiRich said:
If I've understood correctly, the services you propose are:
For sellers:
If so, yes there is a market.
This is _exactly_ what the Corporate Finance team of a firm of accountants does.For sellers:
- An Idiot's Guide (book, consultancy service, etc.) called "So you want to sell up your business", explaining the method and best practice.
- Compiling a sales dossier (comparable to a Home information pack)
- Analysis & strategy: Developing a 12-month corporate strategy for improving the sale value of the company (e.g. cutting staff, renegotiating lease, revising accountacy methods)
- Prepping the marketing sheet (the Warren Buffett 1-page fax)
- Marketing the business (sort of like an estate agent)
- Responding to an unsolicited offer.
- Then managing the negotiation and all aspects of the sale.
- An Idiot's Guide to buying (process, establishing value, etc.)
- Analysis of a potential acquisition
- A finders service: locating possible acquisitions, vetting proposals of sale, performing first-sight viability assessment
- Negotiation of purchase
If so, yes there is a market.
With the possible exception of prepping the business for sale as that's the FD's job. Prepping for sale, if done right, and will take at least 12 months if not more (depending on the state of the business and the desired exit time and value) to smooth the profits and present some decent financials which will maximise sales value. The incumbant accountant (even without a CF team) should be advising the owner on how to do this if the FD needs some pointers. They should also help the company get set up ready for due diligence investigations by the purchaser.
I'm afraid I still don't see a place for a Lawyer to get involved at this stage.
Edited by mrmr96 on Monday 10th March 16:02
Ah, I see. I think I understand where you're going with this now.
(I had thought you were attempting to take over the roles performed by the CF accountants, but you acknowlege that it will not be you that finds buyers and sellers etc.)
Am I right to say that you want to be literally the first external advisor in there? You want to help the company to get the best from the accountants and banks before they even got involved. By providing a consultancy service to the owner manager who is considering a disposal you can make sure they don't f
k it up right at the start.
This being the case I would say the role you're considering is normally done by the owner manager/MD or FD, and yes, it is often done badly. So in that respect I understand that there is indeed a need for this service, but there are a couple of hurdles:
1 - Finding customers, as I think you will struggle to win this work by referral. (By definition you will not be the first person in there, and any other professional [like the incumbant accountant] will either take on this role themselves or pass it to a CF team, and by this point you're too late.) I guess you would need to enter the market in such a way as the owner manager calls you FIRST before doing anything.
2 - Getting your clients to pay for the service. As has been mentioned, smaller companies are inclined to be very fee sensitive. Getting involved at the outset of a deal may require you to do a great deal of convincing to get them to commit to a fee that you'll be able to make money from. At this point there will be a number of (potential) clients who are not convinced that the selling is what they want to do, and therefore not sure they need your services and hence unwilling to commit money. However, as a Lawyer I expect you're more used to winning work (of all kinds) from such "unsure" clients than I, being as my team get involved once a transaction is virtually certain (as I said, we win most work from referrals).
(I had thought you were attempting to take over the roles performed by the CF accountants, but you acknowlege that it will not be you that finds buyers and sellers etc.)
Am I right to say that you want to be literally the first external advisor in there? You want to help the company to get the best from the accountants and banks before they even got involved. By providing a consultancy service to the owner manager who is considering a disposal you can make sure they don't f
k it up right at the start.This being the case I would say the role you're considering is normally done by the owner manager/MD or FD, and yes, it is often done badly. So in that respect I understand that there is indeed a need for this service, but there are a couple of hurdles:
1 - Finding customers, as I think you will struggle to win this work by referral. (By definition you will not be the first person in there, and any other professional [like the incumbant accountant] will either take on this role themselves or pass it to a CF team, and by this point you're too late.) I guess you would need to enter the market in such a way as the owner manager calls you FIRST before doing anything.
2 - Getting your clients to pay for the service. As has been mentioned, smaller companies are inclined to be very fee sensitive. Getting involved at the outset of a deal may require you to do a great deal of convincing to get them to commit to a fee that you'll be able to make money from. At this point there will be a number of (potential) clients who are not convinced that the selling is what they want to do, and therefore not sure they need your services and hence unwilling to commit money. However, as a Lawyer I expect you're more used to winning work (of all kinds) from such "unsure" clients than I, being as my team get involved once a transaction is virtually certain (as I said, we win most work from referrals).
Unfortunately I suspect that even after getting the first one or two done it would still be an uphill struggle.
It would be interesting to look at some of the smaller deals and find out how long in advance the owner decided to sell, and what he did to prepare the business for sale. My guess is he knew for some time (as approaching retirement or whatever) but did nothing.
Its the marketing that is so important and having someone to actually get you in through the door to discuss your service. Mind you frequently even that is not enough! The number of businesses I know that have lost thousands by not using my services, mind you it might say more about my ability to close deals and get the instruction!
It would be interesting to look at some of the smaller deals and find out how long in advance the owner decided to sell, and what he did to prepare the business for sale. My guess is he knew for some time (as approaching retirement or whatever) but did nothing.
Its the marketing that is so important and having someone to actually get you in through the door to discuss your service. Mind you frequently even that is not enough! The number of businesses I know that have lost thousands by not using my services, mind you it might say more about my ability to close deals and get the instruction!
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