25/06/2009 by info.

Selling your business is for a lot of people the second most important transaction they will have. If you have been particularly successful in business it may be the highest single value transaction in your life.

I am therefore constantly surprised that sellers of businesses do not carry out research on a business transfer agency before they instruct them, but rely on the agents version and the opinion that they are the best business agents in the country.

For there are certain number of high profile business agents in the UK who, if you search their name, not only does their website and their marketing story result but also complaints about unfair contracts, over valuing, excessive fees, intrusive telemarketing calls and broken promises also appear.

One particular business owner I recently became aware about signed a contract with RTA business agents to make life easy for the valuer (on the understanding that he would inform him the next day whether he wished to proceed). You may say that he was silly to sign a contract without being sure that he wished to use their services but he trusted the valuer.

The next day he telephoned the valuer informing him that he did not wish to proceed, however this valuer had already processed the documentation, when he contacted RTA to withdraw his instruction they threatened him with legal action for c. £8,000, even though they had not done any work whatsoever. This situation is still ongoing.

Now if that business owner had simply googled this agents name they would have seen a number of complaints from other dissatisfied business owners, and presumably he would not have instructed this agent.

So before you contact any agent I would suggest that you google their name, if you do not find anything negative about them perhaps it indicates that you might be making the right choice of agent.

Posted in Selling Your Business, Business transfer agents | No Comments »

11/06/2009 by info.

The character Captain Mainwaring in Dad’s Army showed how bank managers were once upon a time a respected authority; everyone believed what he said (even though most of the time he was wrong). This created farcical outcomes we enjoyed laughing along with.

Banks however are not the Cassandra’s of this world and do make mistakes, which has lead to a great loss of authority, almost bankrupting the country. There is however one area where a banks authority is still regarded as being paramount and that is the bank status report.

There are two aspects to buying a leasehold business, the first one is to reach an agreement with the owner of the business, and the second is to persuade the landlord of the property that you are able to continue to pay the rent. So a bank status report and trade references are required to prove that you are likely to be a good tenant.

The most important of these is the banks opinion on whether the buyer can meet the rent payment, now this opinion could be totally wrong, but is an overriding make or break piece of paper for a buyers plans.

This is where a first time buyer often becomes unstuck, as they have not informed their bank about their plans. So when the status report is returned often the bank reports that “ they cannot speak for your figures”. Such a report of course is unacceptable to a landlord.

A seasoned business owner with a track record with the bank should never fall foul of banks lack of knowledge of them. A first time buyer should realise that regardless of whether they think they need the support of their bank manager to buy a leasehold business, they have to accept that they need his blessing.

Whether of not you make friends with your bank still has a bearing on your goals and dreams.

Posted in Buyers, General | No Comments »

04/06/2009 by info.

I was told a story last week about a Company Director who was hosting a dinner party/business meeting in a plush and upmarket apartment in Central London. He was asked whether he owned the freehold of the apartment (worth millions)…. he said he did. His business contact then reminded him that for £3 he could find out whether he was telling the truth, he didn’t back down. The truth is that he doesn’t own it, but he lost all credibility because this person knew that he was a liar and perhaps couldn’t be trusted.

Jump forward to The Apprentice and Yasmina Siadatan’s interview in the Semi Final where she claimed that her restaurant trading under the name of MYP UK Limited was turning approx £8,000 per week and had a gross (sic) profit of 4.5% this would mean that the net profit would have been in the region of £19,000 per annum. (Actual turnover for the company is apparently approx £290,000 per annum with a net profit of around £8,000)

She was, for a Finance Director, naïve enough not to realise that Alan Sugar, you or I could obtain the annual accounts. The programme suggested that she was not telling the truth but it actually showed that she was a very poor accountant. As the restaurant had only been trading for 9 months pro rata she maybe WAS telling the truth, but the lack of technical knowledge meant that she was unable to explain herself.

These two people were both naïve, one simply wanted other people to think that he were doing better than he really was and the other didn’t want to admit her own weaknesses. Even though she was a Finance Director Yasmina Siadatan knew nothing about finance.

But when you have something to lose such as when negotiating with buyers of your business, honesty is not the best policy, but is the only way forward. At best you can lose face when found out, at worst you can be sued for damages should someone rely on your representations in buying your business.

If you know something isnt true dont lie about it, if you are not sure about the answer, dont be afraid to admit that you need to ask advice before answering.

Posted in Buyers | No Comments »

04/06/2009 by info.

The recession has hit many sectors, industries and businesses. Some businesses have deliberately contracted cutting their operations and costs in order to survive with a related reduction in turnover; others have had this forced on them by the market.

Many business owners are holding off selling their business until they return to previous levels of profitability, and perhaps they are right in doing that. When you are selling a business, profit and the size of the business is everything. A small business where the owner is simply making a wage could be worth nothing, or at most two times its profit. The larger the business becomes, the multiples someone is willing to pay increases.

So if you own a business and find yourself in this situation of wanting to sell but not believing that you business is worth enough what could you do?

You could accept the lower price, or trade your way out of it of course; another alternative would be if you wanted to sell your business for a good price is to buy a business.

You can buy competitor, and incorporate their turnover into your business, but because you are using your existing infrastructure a good proportion of the costs will disappear increasing your profitability.

Or buy a business or two in slightly different locations and create a chain, re-branding those businesses.

In other words you speculate to accumulate, a £40,000 investment now, could result in a much larger return a matter of a few months later. One time when 1 +1 = 3

Posted in Selling Your Business, Buyers | No Comments »