You may not be aware of Penman and Sommerlad investigative reporters from the Daily Mirror, but they have recently become aware of the way that some of the business transfer agents in the UK have been operating.
Other business transfer agents have been aware of the way that certain agents have been operating for quite a while now. What is not noted on these complaints is that these agents habitually overvalue businesses in the hope that their potential clients sign an agreement with them. The RTA valuers were also on commission, being given a proportion of any upfront fees they brought in which they had to do to achieve their On Target Earnings.
Let me say firstly that I think that some contribution from clients via upfront fees is reasonable but this must reflect the amount of marketing activity an agent undertakes.
I have however always said that if I took £1,000 in unfront fees from each instruction and fees of £7,000 if I FAILED to sell a business I would not need to sell any businesses.
The market for selling businesses has become much tougher in the last year, and business owners looking for a business transfer agent to instruct have looked for value for money and have not wanted to pay large upfront fees.
Perhaps it is now the beginning of the end for these agents, on 9 February 2009 Bag A Business went into Administration. In fact Bag A Business only traded for 9 months, they bought their assets from SBS Commercial who also went into Administration. The directors of SBS simply started a new Ltd Co and started trading again using the same model.
I have also always said that the worst businesses are the ones that fail in a recession and the business transfer agency market is no different, you make money by selling businesses and if you dont sell any businesses you go out of business. Just as the Dipford Group, owners of Redwoods Dowling Kerr, Kings Business Transfer and Bruce & Co. Ltd did last year. (They are now owned by the owners of Knightsbridge plc)
There is another saying, you can fool some of the people some of the time, but not all of the people all of the time. These agents unfortunately have made business sellers wary about instructing business transfer agents and given it a bad reputation, however hopefully in the next year it will be only the good agents who will survive the recession and these “bad” agents who will go out of business.