31/07/2009 by info.

It is generally accepted that you should sell your business when it is doing well rather than when it is doing badly. Hence business owners during the recession, unless circumstances have forced them to do so, have delayed putting their business on the market.

Official statistics indicated that for the quarter ended June 2009, the UK was still in recession, however increasingly I now talk to business owners who tell me that for them their turnover has now increased.

So how long would a business owner have to wait to obtain a good price for their business after this recession?

Ideally a business owner should be able to show a number of years of increasing turnover and profitability, however business owners often cannot wait that long, they may be close to retirement age, or simply have to move location.

At this point it would be appropriate to remind the reader that when selling a business an owner is selling the next couple of years profit, so in a way historical information is irrelevant.

Looking at historical financial accounts and making a decision as to a businesses value is like looking at photographs of a potential partner on a dating website when they were a child and making a decision as to whether you would like to meet them!

No, a business should be able to achieve a higher price for their business as soon as they can show that their sales and profitability has improved. So a seller should present to a buyer recent Management Accounts, copies of Vat Returns, Order Books etc showing these improved trading figures.

So the business owner has to prepare their business for sale by providing up to date information if they want to obtain a good price for their business. And as long as they can do this, a Business Transfer Agent should be able to present the business to obtain that good price.

If they do not provide this information they will have to wait for these historical figures to prove that what they are saying is simply not a verbal spin.

Posted in Selling Your Business, The Economy | 1 Comment »

29/07/2009 by info.

When you are selling a business you will probably be asked to sign an agency agreement. This does not differ from the sale of a residential house in that the agency agreement you sign will either be a sole selling rights agreement (where the agent is the only one who can sell your house) or a multi agency agreement (where the agent only receives commission if they sell their house)

A contract with a business agent however differs in many other respects and if you contact three agents you may be asked to agree to completely different terms, the two material aspects being the payment of up front fees and cancellation fees.

Now I consider that it is perfectly legitimate and reasonable to charge both but not on the same contract.

An agent may ask for upfront fees to cover their advertising expenses if they will be embarking on a proactive marketing campaign, or if the client wishes the agent to sell their business at a higher figure that the agents own marketing appraisal.

Alternatively there may be cancellation fees if agents are asked to operate on a multi agency basis or if the seller withdraws their business from the market within an initial period under a sole selling rights agreement.

In my opinion the agreement that the seller should avoid is the one where there is both an upfront fee and a severance/cancellation fee, especially where the agent is operating under a sole selling rights agreement. There are agents such as RTA Business Consultants who operate such an agreement.

With an agreement like this the seller is trapped and the only option they would have is to complain to the OFT that the agreement was unfair under the Unfair Terms in Consumer Contracts Regulations 1999 (The Regulations), or to pay the fees as and when demanded.

It must be noted that the OFT recently ruled that Foxtons Estate Agents operated unfair contracts . They said “businesses offering services need to ensure unexpected or surprising terms are not hidden away in small print. Contracts need to be written in clear and straightforward language with important provisions, particularly those which may disadvantage consumers as in this case, given prominence and actively brought to people’s attention”

A lesson learned by Foxtons and perhaps one soon to be learned by business transfer agents.

Posted in Selling Your Business, Business transfer agents | 2 Comments »