Selling a business - who to talk to?
Discussion
JackSTC said:
DSLiverpool said:
Accountants have a network of entrepreneurial clients who they suggest businesses to.
That is, I'm afraid, not how to sell a business! If the business is of any decent size, there's a ton of work to do if you want to sell it properly - see my previous post. You don't just introduce them to buyers! (And, no, most accountants don't have "a network of entrepreneurial clients" to whom they suggest businesses.)
If the business is a micro business - perhaps a one man band - 'entrepreneurs' don't want to buy it! It's basically a job, not a business. Entrepreneurs don't want to buy jobs. Furthermore, there's likely to be some level of skill required to perform this "job" whether it's a plumbing "business", a post office or a hair salon. Your accountant is not the best person to find you the right parties.
In many industries, if the business itself is managed anywhere near competently, the owners ought to have some ideas of their own as to who might be a good fit as a buyer. If the business is anything like decent, they may well (IME) have had several approaches from larger firms interested in buying them out.
Digga said:
Most decent accountants have been involved - both on the acquisition and disposal sides - of business sales. They are, therefore, in a good position to advise.
Unfortunately, it's not the case that they're in a good position to sell the business. They are in a good position to advise on the numbers in THAT business. No more, no less.Selling a business takes a whole different set of skills.
For one, accountants rarely know anything about valuation (and I speak as a qualified accountant) especially in relation to small and micro businesses. DCFs, CAPMs etc don't work. Comps can't be used because data you need for comparatives is not available; data on private transactions are, well, private. Valuation is whatever you can get the buyer to pay. Prices at which deals complete are based a lot more on psychology, demand and supply, vendors' willingness to offer deferred terms, and other factors but very little on accountancy principles!
When it comes to larger businesses, again, the average accountant isn't your best bet as they have no corporate finance expertise. About 200 accountancy firms in the UK have dedicated corporate finance arms - and staff qualified in corporate finance - and they would be in a better position to assist.
Accountants rarely have the skills to put together a kick-ass IM, to generate the right buyers, to vet buyers (many buyers out there aren't genuine, they have ulterior motives), to project manage multiple enquiries to get all the interested parties to the point of offer at approximately the same time etc. The last one is a specific skill one needs to have to build competitive tension.
When buying a business you'll expect the accountant of the business to engage and provide answers to your DD questions. And they'll be good at that. It doesn't mean they are good at selling businesses.
DSLiverpool said:
JackSTC you wouldn’t happen to be a business broker would you?
I like your cynicism. 
I've got a fair bit of experience selling my own businesses but I am not a business broker. One day I may write a book about how to sell a business, but I haven't started on that project yet! I'll let you know when it's for sale. Give me a year or two. My advice is that owners of small businesses should not use business brokers. They should learn about the sale process - invest some time in that - and handle the sale themselves. They still need the support of their accountant and they need a good lawyer, but it's very difficult to find a competent business broker who will take them on because there just isn't enough meat on the bone. Even a commission of 20% or 30% wouldn't pay the broker what he's worth! For many micro businesses, even a 100% commission wouldn't be enough.
For larger businesses, it's worth using external expertise. A good intermediary can add a lot of value. But you need to spend a lot of time and effort to find the right corporate finance firm, transaction advisory firm, M&A boutique, Rule 3 adviser, Designated Professional Body, Nomad (for IPOs) or whatever. Again, business brokers are not the right option, IMO.
Edited by JackSTC on Thursday 30th April 13:59
JackSTC said:
My advice is that owners of small businesses should not use business brokers. They should learn about the sale process - invest some time in that - and handle the sale themselves. They still need the support of their accountant and they need a good lawyer, but it's very difficult to find a competent business broker who will take them on because there just isn't enough meat on the bone. Even a commission of 20% or 30% wouldn't pay the broker what he's worth! For many micro businesses, even a 100% commission wouldn't be enough.
Bold bit exactly the opinion of our accountants. They have been involved in numerous sales and acquisitions. They can provide a lot of very useful advice and assistance, but the 'selling' is down to the owners mostly.Digga said:
JackSTC said:
My advice is that owners of small businesses should not use business brokers. They should learn about the sale process - invest some time in that - and handle the sale themselves. They still need the support of their accountant and they need a good lawyer, but it's very difficult to find a competent business broker who will take them on because there just isn't enough meat on the bone. Even a commission of 20% or 30% wouldn't pay the broker what he's worth! For many micro businesses, even a 100% commission wouldn't be enough.
Bold bit exactly the opinion of our accountants. They have been involved in numerous sales and acquisitions. They can provide a lot of very useful advice and assistance, but the 'selling' is down to the owners mostly.Firstly, I speak from 7 years in m&A and a few more involved to a lesser degree....so I do know what I am talking about.
Regarding the above, owners of small businesses are flat out running their businesses. Asking them to learn a new discipline can mean that, even if they want to, it will take them away from the business and this often leads to the business performance dropping at a key time.
A key challenge is that, as pointed out, 'business brokers' (using it as a collective term!) want to sell higher value businesses for obvious reasons. But owners of smaller businesses are often far less prepared and far less professional and it is disproportionately harder to sell a small business.
Accountants, and lawyers especially, without M&A experience are just as likely to scupper a sale as the business owner but they often try to get involved anyway as there is ££££ for them.
There's a lot of blaming the 'broker' here when a great many sales fail because of the owner or business itself. In just one example I saw a guy aim for £3m and when the broker got £4m the owner got greedy and said he wanted £5m! The buyer said no and the whole thing fell through... Another took a month off in the middle of the deal and by the time they'd got back to the sale process the buyer had lost interest and about 12 months later the company went under despite having had a £1m+ offer on the table.
Fundamentally selling a business can be difficult and requires skill and experience to achieve success. If you DIY it or use people who aren't skilled and experienced in this you'll get what you get...
Frimley111R said:
owners of small businesses are flat out running their businesses.
If they are the least bit organised and good at building a business, as opposed to a limited sole tradesrhip or partnership, they ought to be devoting significant time to business and personal development.About 20+ years back, we had the benefit of some excellent business coaching and one of the lessons that's stuck and has (literally) paid dividends was to spend time working on the business(es) rather than in them. Of course, to do that, you need a good team around you, which is all part of making a business that is saleable in any case.
Frimley111R said:
Regarding the above, owners of small businesses are flat out running their businesses. Asking them to learn a new discipline can mean that, even if they want to, it will take them away from the business and this often leads to the business performance dropping at a key time.
If they are flat out running the business that suggests the business is highly dependent on them. Buyers do not want businesses like these. These businesses are highly unlikely to sell anyway, so I wonder whether it's even worth such businesses going to market. These business owners working flat out would be far better concentrating their efforts on building a sound management team instead of thinking about "cashing out".
The stats say that 80% of businesses that go to market do not succeed in selling. But those are figures across the whole spectrum. When it comes to micro and small businesses it's probably more than 90% of businesses that fail to sell.
There's a big gap between how owners of small businesses see their business ...and what the market thinks of these businesses.
Frimley111R said:
Fundamentally selling a business can be difficult and requires skill and experience to achieve success
I completely agree with you there. And it takes time, a lot of time for this expert to do a proper job. Any such expert worth his salt ain't going to work for minimum wage. And he ain't going to work on a purely contingency basis as was suggested earlier in the thread. So the deal needs to be large enough to use an expert and the business owner needs to have the liquidity to pay a decent retainer. Otherwise they have little choice - either use a rubbish broker or attempt the sale themselves.
Edited by JackSTC on Thursday 30th April 17:11
My personal view from 20+ years of M&A / financial advisory.....
I can’t speak to small business sales in detail as not my focus area, however ultimately less economics to play with to hire a decent advisory firm so often result in personal networking and/or brokers (that offer very little bespoke advice, more spray and pray).
If you know your market well then you may be able to get some competitive tension running. Still a hard gig to do unadvised and get optimum value though. Make sure you have a decent lawyer as a minimum (who has done M&A and is commercial). Useful to try and find a retired / lone wolf adviser who can help with a lighter touch scope / lower fee to help steer you.
At the larger end of privately owned businesses (say £1-20m+ EBITDA) I would always advocate using an adviser, in fact think it’s essential 99% of the time for many reasons. I would use one to sell my own hypothetical business if I was in such a position.
I can’t speak to small business sales in detail as not my focus area, however ultimately less economics to play with to hire a decent advisory firm so often result in personal networking and/or brokers (that offer very little bespoke advice, more spray and pray).
If you know your market well then you may be able to get some competitive tension running. Still a hard gig to do unadvised and get optimum value though. Make sure you have a decent lawyer as a minimum (who has done M&A and is commercial). Useful to try and find a retired / lone wolf adviser who can help with a lighter touch scope / lower fee to help steer you.
At the larger end of privately owned businesses (say £1-20m+ EBITDA) I would always advocate using an adviser, in fact think it’s essential 99% of the time for many reasons. I would use one to sell my own hypothetical business if I was in such a position.
DSLiverpool said:
Just doing duedil now, if it goes well I’ll update. No broker involved and I’ll bring legals in after DD.
We found the buyer ourselves.
Tip for next time: It's a good idea to get the lawyer involved as early as possible. Even before drawing up heads!We found the buyer ourselves.
vanman1936 said:
Still a hard gig to do unadvised and get optimum value though.
Agreed. But if the deal isn't big enough then there's little choice. The business owner needs to do the sale himself. Which is why my original advice in this thread was for owners of the smaller businesses to just roll their sleeves up and get down and dirty with information on how to sell. In due course they can buy my book but in the meanwhile I know there are already several good books in Amazon.vanman1936 said:
At the larger end of privately owned businesses (say £1-20m+ EBITDA) I would always advocate using an adviser...
I second that.JackSTC said:
... but in the meanwhile I know there are already several good books in Amazon.
I'd be interested in your recommendations please? I've read "The E-Myth" (and should probably do so again); what next?
TIA, Dave (owner of a micro biz who struggles to stop thinking like a developer...)
Dave2P said:
I've read "The E-Myth" (and should probably do so again); what next?
Er, I'd love to help, but I haven't read most of them. I started off, rather stupidly, just doing deals. Back in the eighties there wasn't an Amazon. So I learnt a few bits and lost a lot of money from being an idiot and not researching the subject thoroughly first. Since then I've discovered some good authors of books, courses, websites, blogs, youtube videos. My top recommendation is a chap called Richard Parker in the US. He owns a site called Diomo. In the UK, you could check this site out and the UK Association of Business Brokers if you're looking for the right broker. There are some good Youtube videos by a Canadian called David Barnett. If you want to discuss the subject/ask questions you could try this Reddit sub.
Is the £100k net profit after a sensible level of salary for the owner/manager - if not it is not a realistic profit and the cost (mkt rate) manager should be netted off.
If it was me, I would ignore online brokers for now, and compile a list of local businesses that may be interested in buying and approach them. They are likely to be able to achieve the highest amounts of cost and revenue synergies and this could be reflected in the price they are willing to pay.
If you can get a broker to do this (rather that just stick it on a web site and blanket email their databases), even better.
If it was me, I would ignore online brokers for now, and compile a list of local businesses that may be interested in buying and approach them. They are likely to be able to achieve the highest amounts of cost and revenue synergies and this could be reflected in the price they are willing to pay.
If you can get a broker to do this (rather that just stick it on a web site and blanket email their databases), even better.
superlightr said:
What sort of mulitplier would you consider for a very establised letting agents (specialist letting agents) - residential landlords all on contracts to pay commission for length tenant stays in property most tenancies fixed 6-12 mths and then renewed. Plus extra streams of income from admin fees etc.
Quite a unusal type of office as the 'stock' is very stable and long term and one of the 'up' types of business in good and bad times.
Quite a unusal type of office as the 'stock' is very stable and long term and one of the 'up' types of business in good and bad times.
Edited by superlightr on Thursday 30th August 12:52
Wacky Racer said:
DSLiverpool said:
Just doing duedil now, if it goes well I’ll update. No broker involved and I’ll bring legals in after DD.
We found the buyer ourselves.
So are you putting your feet up Dave? We found the buyer ourselves.
I have more contacts, seen more strategies and know the game from both sides so it’s a good opportunity.
DSLiverpool said:
Not yet, if it goes through I’m going back to e-commerce selling after seeing the future I want to ride the second wave of online sales surge.
I have more contacts, seen more strategies and know the game from both sides so it’s a good opportunity.
Well good luck with the sale....I have more contacts, seen more strategies and know the game from both sides so it’s a good opportunity.
Dave2P said:
JackSTC said:
... but in the meanwhile I know there are already several good books in Amazon.
I'd be interested in your recommendations please? I've read "The E-Myth" (and should probably do so again); what next?
TIA, Dave (owner of a micro biz who struggles to stop thinking like a developer...)
Any books or videos offered by people who have training organisations as well are going to be the same. Why would they give away the information they are selling at a much higher cost on a one to one basis?
Why would selling a business be any easier (or any harder) than selling any other similar value asset?
Some people are better at such sales than others or, at the very least have experience of doing it and the time to do it. At the bigger end of the spectrum, the ladies and gents at Goldman Sachs, Credit Suisse, Citi, HSBC and Barclays are probably better at IPOing Calisen than they would be if they tried to turn their hand to installing smart meters.
Depending on how the sale is to come about depends on what value the potential seller would attach to the services of a specialist. If you have a business that you want to sell that no potential buyers even know about, then you need a different approach than if you are trying to juggle 3 or 4 unsolicited offers to buy a business
Similarly, if you own 100% of the shares of a company, then the decision about how to proceed is easier than if you have other shareholders to think about
I look, for instance, at some companies that have raised wodges of cash from investors and - to all intents and purposes - spaffed it (if you want a couple of examples, message me as I have loads!) and it makes me mildly curious about the "sale" process involved in reaching that stage.
Some people are better at such sales than others or, at the very least have experience of doing it and the time to do it. At the bigger end of the spectrum, the ladies and gents at Goldman Sachs, Credit Suisse, Citi, HSBC and Barclays are probably better at IPOing Calisen than they would be if they tried to turn their hand to installing smart meters.
Depending on how the sale is to come about depends on what value the potential seller would attach to the services of a specialist. If you have a business that you want to sell that no potential buyers even know about, then you need a different approach than if you are trying to juggle 3 or 4 unsolicited offers to buy a business
Similarly, if you own 100% of the shares of a company, then the decision about how to proceed is easier than if you have other shareholders to think about
I look, for instance, at some companies that have raised wodges of cash from investors and - to all intents and purposes - spaffed it (if you want a couple of examples, message me as I have loads!) and it makes me mildly curious about the "sale" process involved in reaching that stage.
JPJPJP said:
Why would selling a business be any easier (or any harder) than selling any other similar value asset?
.....
It is much more complex (than many other assets).....
- the value of the business is very different to different buyers.
- many potential buyers might not be in the market to buy and therefore need to be made aware of the sale
- how the sale is undertaken can have a big impact on the value realised by the seller (tax, earn-out, loan notes etc)
- the 'narrative', e.g. how the books are presented, recent performance and critical and contribution by the seller day to day, can have an impact on the valuation.
Sellers can sometimes benefit from starting the sale process a year or so in advance and adjust the growth versus profit equation in line with what might appeal most to a potential buyer.
Edited by Wilmslowboy on Sunday 3rd May 19:53
Gassing Station | Business | Top of Page | What's New | My Stuff