01/03/2010 by info.

So you want to exit your business and you want the highest possible price for it. The bad news is that you have messed up on the best way of achieving a high price, that is via planning your exit strategy, it would now take a few years of changing the way you conduct business to achieve that price.

So what do you do?

One option is to instruct an agent such as BCMS Corporate who claim that they can achieve times more than a seller would by instructing a “normal” business agent, but want up to £36,000 upfront before they can achieve that price. They effectively spend time grooming your business.

Can’t make that investment then the decision is easy, you instruct the agent who tells you that they can achieve the highest price for you and accept their terms.

There are plenty of examples of business transfer agents who have become seemingly very successful out of achieving higher prices than their competitors because they claim that they are different in the way they will market your business.

RTA business consultants are one of those, however after many complaints and investigations they have been exposed. The Federation of Small Businesses are listing their services as a possible scam and warning their members against using them. They, overvalue to fool business owners into signing a sole selling rights contract, take money upfront, and demand an exit fee. They then wait for that client to sell via other methods and then sue in the courts for their commission. Ex clients have now set up a website to help and warn other business owners against using their services.

Recently Horizon Business Agents failed to gain a client in London because a Corporate Finance Business claimed to the client that they could achieve a much higher price for their business.

The fact is that greed amongst business owners is feeding this beast, when it comes to selling your business an entrepreneurs common sense deserts them. Comments are made in retrospect such as “I didn’t actually think my business WAS worth that amount of money however if they tell me that it is who am I to disagree.”

In building the general rule is measure twice cut once. Our advice when selling your business is, give the agent enough time to sell your business and think twice, sign on the dotted line once, and don’t fall for the agent who simply claims they can achieve a higher price for you as you may be feeding the scammer.

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11/02/2010 by info.

150 years ago there was no need for the services of a business transfer agent. As if you wanted to sell your business in your town or village then the probability was that you simply transferred your business to your son, and it didn’t really matter what price you obtained for it. Alternatively you might sell it to someone you knew in the village and took the best offer that came your way.

A business contact told me that his father was a business agent in the 1950’s. His marketing strategy was to travel to Cornwall, look for local business owners who wanted to sell their businesses, and then travel back to London where he would advertise these businesses to London residents. The idea was that the alternative buyer in London might have been willing to pay a little more than the local buyer.

The fact is that the wider the marketing exposure is to potential buyers the more choice a seller is likely to have, it is simply a case of simple economic supply and demand.

If a buyer relies entirely on personal contacts generally speaking they will not find that person who is willing to pay a little more for their business. But that is the big issue, often sellers will still look for the easiest option and offer the business to their employee, a customer or a business contact rather than try to maximise the selling price. In other words they will market their business the same way it was done 150 years ago, the market over the last 150 years has changed essentially due buyers mobility and technology.

A business transfer agent now brings that marketing into the 21st Century, and advertises literally to the whole world. It may take a little longer to find that buyer however the seller is likely to be able to obtain a higher selling price than using a Victorian approach to selling.

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29/01/2010 by info.

Ah, yes, the World Wide Web, the Internet, what fiendishly clever stuff. Everywhere, isn’t it? Still Growing and a fabulous business tool!

Yes, it is. But do you realise quite how fiendishly clever? Quite how much everywhere it is? And what a double-edged business tool it is?

A little bit of history to begin with. As a business transfer tool, the Internet’s been with us for about ten years now. In contrast to traditional newspapers such as Daltons Weekly, it is a hugely efficient medium for agents to find buyers and get businesses sold. Using business for sale websites, buyers now have at their fingertips a wealth of information about virtually any business on the market that interests them. A fabulous marketing tool indeed for the agent.

But just imagine (if you don’t find the idea too outrageous!) a seller trying to pull the wool over a buyer’s eyes.

Imagine that sales details of the Stalefish Arms, a Suffolk seaside restaurant, has charmed a prospective purchaser with glowing descriptions of the reputation the establishment enjoys for service, good food, quality wines and well-kept local beers.

And now imagine the prospective purchaser searching Google, just to impress friends with the Michelin Rated Restaurant he is going to buy, but finding instead independent reviews putting the Stalefish Arms top of a list of Restaurants Best Avoided If You Enjoy Eating. The customer comments are unprintable in a respectable newsletter.

That’s the snag with the Internet. Without your having the foggiest idea, it’s looking over your shoulder at everything you do, recording your secrets on so many billions of terabytes that a bailout of City bankers sounds like small change!

It’s no longer a case of buyer beware. In the Internet age, it’s the seller beware.

For buyers there is sufficient information out there to highlight pros and cons alike of a transaction and to speed up due diligence before any binding commitment is made.

Whereas sellers nowadays are well advised to go online to find out what people are really saying about their businesses. If they’re lucky, they might have time to change their reputation. Not by posting false reviews but by improving the way they run their business.

If they don’t, there’ll be no sale, or not at the price they want!

As the old, true saying has it, keep your friends close - but your enemies even closer!

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15/01/2010 by info.

Well (in retrospect, I suppose) what was Sir Alf Ramsey thinking about when he substituted Bobby Charlton in the 1970 World Cup quarter-finals? He obviously thought the job had been done.

And precisely what can explain just about every shot decision made by Kevin Pietersen in the last year which led to his dismissals?

Decisions, decisions, decisions! Even the smallest ones can have the most devastating consequences, and nowhere is this more blatant than in sport. Supporters are passionate, bad decisions lead to bad results (don’t even mention Kevin Keegan’s perm!), and supporters get angry and exasperated.

But hang on a minute! Even in sport, you can’t moan if your team loses in the ninth minute of extra time after defending like a bunch of hibernating sloths. After all, if they’re professionals, they’re supposed to know what they’re doing. Aren’t they?

And it’s no different in business. I care passionately about people selling their businesses and making the right decisions when they do so.

So nothing is as sure to make me as sick as a parrot as people making the wrong decisions when it’s so easy to make the right ones!

So what’s the kind of decision that makes me want to shout ‘foul’? Here are four.

Using an estate agent to sell a business

Trying to sell your business yourself.

Ah, but the customer always knows his or her business best. Or that’s what people usually say.

Well, if the customer has been reading these blogs, it’s to be hoped that the customer does know his or her business best, because one of the main aims I’ve had in writing them is to help you all make the best decisions when selling your business.

So just in case they’d passed you by, I’ll take this chance to repeat these three gems of blunt advice.

Instruct the right business agent.

Give your agent the sufficient time to sell your business - at least 6 months.

If you don’t do these things, and you make the wrong decisions, then you really can’t yell ‘foul’ when your sale snarls up. And I’ll be there on the terraces beside you, telling you that in your case, sadly, you’ve scored an ‘own goal’!

So if you do know someone who is trying to sell a business please let them know about us.
You’ll be doing them a considerable favour.

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12/01/2010 by info.

Business Transfer Agents have the same frustrations as Will Writers.

As a Will Writer will tell you…. you are not going to die in the near future so there is no need to plan for that death, you all have decades to live and to contact them to draw up a Will and put your affairs in order, so we can deal with it next year.

The fact is that a Will Writer will tell you exactly the opposite and unfortunately fate may have other things in store for you.

I am also sure that a good proportion of business owners reading this blog have no intention of exiting their business, they are not going to die, get ill, move, retire and have no intention of finding another business opportunity. So of course they do not need to plan for their exit.

However, the vast majority of people who approach me to sell their business are looking for a quick sale, why is this? It is because their circumstances have changed and they now need to sell or they have been trying to sell their business elsewhere and have been unsuccessful; however because they did not plan for a sale they will not be able to sell their business, or at least for the amount that it technically could be worth.

There are a few very easy steps you can take to increase the value and saleability of your business, too many to list here. The one question you need to ask yourself is “If I put my business on the market tomorrow will it sell for its market value?”

I can assure you that if you answer, “Yes” to that question you may be being over optimistic.

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04/12/2009 by info.

One of the most frustrating aspects of any sale is perceived and unnecessary delay after solicitors have been instructed.

I am sure that many of you who have not sold a business but have been though the process in the sale of a residential property can recognise this feeling.

But if there is any fault whose it is?

There may be a number of reasons for a delay and the simplest one is that either a buyer or a seller is deliberately slowing down the sale process for personal reasons. Perhaps buyers are not ready to buy because they are waiting for a sale of their own to complete or the seller wishes to take advantage of seasonal profitability.

There may be issues that arise that neither party was aware about or one side wishes to try to hide and hoped that due diligence would not uncover the truth.

Sometimes the parties are at fault by instructing the wrong solicitor for the job. A solicitor without significant experience in business transfers can often stress and want answers to unimportant issues in the sale.

If a lease is being transferred the fault can lay with the landlord or landlords solicitor who have no incentive to hurry the process along. Often for them it is the better the devil you know.

Most of the time it is the fault of the buyer, seller or both for not managing their solicitor allowing them to sit on and not deal with paperwork when they receive it; the solicitor as a result with deal with matters when they have the time, so if you want a speedy conclusion you should be more proactive.

So is it ever the agent’s fault?

Well there are a good number of private sales where the seller and buyer conduct a good proportion of sales negotiations directly so an agent never gets involved in the process at all.

If an agent is involved they should provide comprehensive head terms for each sides solicitors and apply for references on behalf of the buyer, however when solicitors are instructed the agents job, that of finding a buyer, is technically over.

An agent may act as a go-between to communicate to both sides who is at fault in slowing the process down. But finding a buyer is what an agent is paid to do, not to try to hurry along professionals whom they have no power over.

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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.

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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.

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08/04/2009 by info.

It is often useful, now that we have the Internet, to look at how comparable businesses are marketed in another country, as perhaps they have new ideas that could be applied in your country.

In America TV advertising simply delivers a message, where as in the UK advertising agencies seem to want to entertain, often the message is lost. How many times do you watch a TV advert and not remember what product it was supposed to be promoting?

This is perhaps due to cultural reasons, British people do not like “in your face” marketing, or maybe it is because airtime in America costs more. Once again, companies in the UK simply add on the cost of advertising to the consumer, US advertising seems to focus on the cost benefits of the product.

In America business transfer agents are called business brokers, and it seems that generally speaking the way that their portfolio is presented to buyers is generally the same. Brokers in the US however don’t seem to provide photographs of the business, indicating that US buyers are not concerned with how a business looks, the financial information is more important to them.

The finance aspects of a business transfer is the main difference, whereas in the UK agents charge 3% – 5% of the sale price on a successful sale, brokers in the US charge 10% – 12% with minimum commission of $15,000 being quoted.

This is where the difference lies, business transfer agents advertise a business and introduce the parties, the finance for that business is provided by banks and other financial institutions. In the US, seller financing is the norm, where the seller provides the loan to the buyer to buy the business, the broker is involved in brokering the deal, not only the priced agreed but the repayment schedule.

It is the norm for the buyer to put down a deposit say 25 – 30% of the purchase price with the balance being repayable over maybe 5 years.

So why don’t British business owners offer the same deal? Often because they want a clean break, or maybe because they are not certain about the strength of their own business.

However if business owners had more confidence in their own businesses and offered finance to the buyer, they would be more likely to sell and get a higher price.

Maybe this is the area where business owners can learn from our US cousins where selling a business is concerned.

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23/03/2009 by info.

If you have not read Richard Koch’s “The 80/20 Principle” perhaps you should, it has applications thought your life.

In business this 80/20 Principle suggests that 80% of a businesses profits come from 20% of that businesses efforts, Business Brokerage is no different.

I was trained by a very experienced, no longer with us, Business Transfer Agent called Todd Barriscale, who told me that he didn’t actually want the Internet to take off and that he never supported any new venture because he simply wanted one place to advertise, that was at that time Daltons Weekly.

Now is well known there are a multitude of places a Business Agent can technically place an advert for a business for sale. In fact on a regular basis I receive telephone calls from new websites offering free advertising if I place my businesses for sale on that website. I always decline, why? For the simple reason, for the same reason Todd gave, it simply increases the effort for no return, time is a cost in business.

That is the reason why most Business Transfer Agents primarily use two websites, businessesforsale.com and daltonsbusiness.com.

Business Transfer Agents are also working on the premise that buyers are also using the same 80/20 Principle. Buyers will find a website at the top of the search engine rankings find plenty of businesses for sale and search that website.

If Business Brokers advertised on all websites available and in all publications they would simply be spending all day updating websites for price changes etc, not a productive use of their time.

So if you want to buy a business in the UK, simply visit the websites at the top of the search engines no further; they will list most of the businesses on the market.

If you are one of the new websites, get to the top of the search engine rankings, perhaps then you will persuade Business Agents to advertise with you.

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