26/02/2010 by info.

Your employees ARE your major asset and the main reason why you have goodwill to sell, and if you have been a good employer then you will have run your business with half an eye on your staff’s welfare. So breaking the news to your employees is one of the most difficult elements of selling your business.

So how should you deal with this issue?

You could wait until the very last minute to tell your staff when contracts have been exchanged, or you could address the subject and state the obvious at the earliest opportunity – that, based on your personal situation, that you have given some thought to selling, but that nothing is imminent.

This basically comes under the heading of dealing with change management as a change in boss will clearly affect your employees in one way or another. Redundancy may be on the cards, perhaps promotion it the new boss will not have a hands on approach to running the business, almost certainly there will be a difference management style.

Change management entails thoughtful planning and sensitive implementation, and above all, consultation with, and involvement of, the people affected by the changes.

Our recommendation would be, when you place your business on the market there is no point in rocking the boat and creating uncertainly in peoples lives over something that MIGHT happen in the future, after all it may take a year or so for you to find a buyer. So you shouldn’t tell your employees en mass.

It is only when a deal has been reached in principle and negotiations have reached an advanced stage where the effect on your employees will be known they should be told.

The new owners will certainly want to be involved in this process, and will be in a position to scotch the rumour mill and tell their new employees whether anything is likely to change, otherwise they will be in a position of losing their major asset, and all the goodwill they have purchased.

Posted in Selling Your Business, General | No Comments »

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.

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

10/02/2010 by info.

Many readers will answer that they have a business; after all they are self-employed and perhaps have their own Company.

But can a buyer buy your business and carry on running your business at the same profitability level.

You see, many peoples businesses are based around their own skill set or personal contacts, remove the owner from the business and if affects the business.

What they have is not business goodwill but personal goodwill and if they were to sell their business then their business contacts that used their business because they trusted that person might wish to look elsewhere, because no one can do it like the owner.

Many small businesses can be sold for up to two years profitability, so how can you ensure that you get paid that £40,000 -£50,000 for exiting your business?

The answer lies in creating a brand for your business and ensuring that it can be run without you.

The main criterion for assessing whether you have a business or a job is looking at what happens to your business when you go on holiday.

If your business has to stop trading then you have created a job for yourself not a business and to be able to sell your business you will need to make changes.

Posted in Selling Your Business, General | No Comments »

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!

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

26/01/2010 by info.

Well firstly growth of 0.1% for the last quarter of 2009 is a preliminary estimate, based on 40% of the returns and experience has shown that the actual figure has been within 0.2% of the figure initially announced. So we could STILL be in recession. The growth figure is still extremely small so in essence the economy is broadly flat.

Interest rates also rise at the end of a recession, inflation is above the governments target and so interest rate rises is inevitable.

So if you do need to borrow the cost of doing so will increase, and of course we have not even started paying back the cost of this recession and government will want to increase the tax paid on your profits.

The possibility of a double dip cannot be discounted if the government squeezes the economy too soon.

In a war situation often the hand-to-hand combat may end but there are still plenty of explosives in the field ready to harm the unexpected passer-by.

The same is true in business today, when a recession ends it shows that demand is returning, and sales are likely to increase, profit is likely to increase and business values will recover and demand for buying businesses will return to traditional levels. But what does that mean in reality?

Imagine if your sales increased overnight by 50%, what would that mean to your business from a logistical point of view?

Perhaps you might need additional stock, new machinery, have to employ additional members of staff, need bigger premises, all of which needs money to fund it, your businesses resources have been depleted, and the banks are still risk averse, they are not interested in funding your speculative growth. What can happen is that your business may paradoxically run out of money and fail.

So planning and cash flow forecasting is increasingly important. Growth without access to funds is a dangerous thing.

You’ve probably heard the saying “cash is king.” Now you know what it means and why so many business owners take it to heart. If your demand in your business sector is increasing, don’t fall victim to your sales success by running out of cash.

Posted in The Economy, General | No Comments »

19/01/2010 by info.

Here’s a danger to avoid!

Retirement beckons. You’re off for ever to your idyllic alpine chalet in its idyllic alpine village in Europe’s idyllic number one avalanche zone… just as soon as the house is sold.

Ah, the house. The modest seaside semi you’ve lived in all these years while your retirement nest-egg grew: the place on which you’ve stamped your personality, and which has YOU written over every feature.

The lighthouse on the roof, the one the coastguards tried to ban.

Your model railway, 4,000 feet of track riveted to the floorboards and punching tunnels through the skirting boards.

The pagoda, modelled on the one at Kew but with your signature touch, a regiment of plastic terracotta soldiers.

Those busts of Karl Marx scattered among the osier-beds!

And the pièce de résistance in the front garden, the mausoleum: 28 tons of white Carrara marble housing the embalmed remains of great-grandpa Jabez.

The market value of this Shangri-La? Three words come to mind: not a lot! It’s so much YOU that NO ONE ELSE WANTS IT!

Ok so that it an extreme example however exactly this problem occurs with business owners and people who want to become business owners.

Many of them think only of moulding a business in their own image, inside their own comfort zone, with never a thought for an exit strategy. So when it’s time to sell, potential buyers just vanish into thin air.

Such people are very often fabulously talented individuals who run fabulously complex businesses. They do people’s accounts, cut their hair, give them marriage guidance, all in a day’s work as they run their leather goods and perfume factories, sell insurance and rent out rowing-boats. But most people want something a lot less complicated.

So it might suit you down to the ground to work 24/7: perhaps you don’t like going home. But it’s not everyone’s cup of tea, and if it takes that level of commitment to make your business function, most people will want to run a mile.

And it cuts no ice to say you work 24/7 because the landlord keeps on raising the rent. That is precisely the point! That’s your choice and your comfort zone: you can’t expect a buyer to pay a rent you’ve never dared question.

So before you rush in, think. Don’t tie yourself up!

Arrangements that suit you now could in the long run cost you thousands by a reduction in the value of your business.

Posted in Selling Your Business, General | No Comments »

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.

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

09/12/2009 by info.

Running a business via the legal structure of a Limited Company can be beneficial to a business owner on more than one level, however if you wish to sell a Limited Company it could become much more costly.

A business owner should be only interested in the net sale proceeds from the sale of their business. That is after the costs of the sale, agents fees, solicitors fees, and of course tax.
When you sell a business trading under the structure of a Limited Company there are two basic methods of structuring a sale of your company. Firstly as a share sale, or secondly as an asset deal.

In the first of these methods you just sell the shares, whereas in an asset deal the company sells the assets of the Limited Company to the purchaser.

In most cases a share sale would be preferred if you’re the seller as it will usually lead to the lowest tax charge. However, many purchasers prefer to acquire the assets of the company so you may therefore have to go down the asset route.

After April 2010 if you sell the assets of the company rather than the shares of the company, the tax changes could prove very costly.

The reason is that as from 6 April 2010 anyone earning over £150,000 per tax year will pay income tax at an effective tax rate of 36.1% on dividend receipts.

In addition the rate of corporation tax for small companies is supposed to increase to 22%.

When you take these two changes into account the tax charge for anyone looking to extract profits from a company via dividends could significantly increase.

So what can you do? Either:

· Sell your business before 6 April, however this even now is very a very short period of time.
· Offer your business for sale selling the share of your company not the assets
· When the business is sold, take out less than £150,000 a year from this company; this would only work if you didn’t need the full sale proceeds immediately.
· Become of non-resident and extract free of income tax, however you would of course need to live abroad.

By far the easiest of these is the sell the shares of the business not the assets

Posted in Selling Your Business, General | No Comments »

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.

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

13/10/2009 by info.

Well the answer is it is important to listen to both.

From purely an investment point of view you should hold the business if it generates more pure profit than the investment earnings from the sale proceeds.

So if you have a business worth £200,000 you should be asking your Independent Financial Adviser what return on investment he can obtain for you from your proceeds and compare that with the “pure profit” made from your business.

Pure profit is the excess profit over and above what you could earn from having a job running your business.

So for example:

Business Profits £45,000 less assumed salary £30,000 your pure profit would be £15,000.

Sale Proceeds £200,000 invested at say 10% would be £20,000 so it would be preferable to sell on an investment level.

Owning a business requires passion and a level of commitment, and a business owner should always sell BEFORE that passion dwindles, otherwise the possibility is that the profits and therefore value of the business will fall.

So when making the decision to sell your business, you should check your gut instinct and ask questions like does it feel right to sell? Can I move the business forward next year?

However sometimes, a potential buyer may not support your idea of the business’ potential. Typically, buyers will not pay for future potential, especially if it is not supported by historical performance.

Additionally you should be asking the following questions about your business as without these buyers would be thin on the ground.

· Does the business have a favourable track record of profitability and cash flow?
· Does the business have an attractive outlook for the future?
· Can the business continue without your day-to-day involvement after an interim transition period?
· Are there key managers who will go along with the sale and help the new owner with the transition?
· Does the business have unique assets that would be hard – or impossible – to replicate by a prospective buyer (e.g., an attractive customer base or unique supplier arrangements)?

It is these sorts of issues that should lead you to the right decision as to when you should sell your business.

Whatever your decision you should be taking advice first from all your advisors, your IFA, business agent, accountant as often your assumptions may be incorrect and may lead you to the wrong decision. I.e whether tax would be payable on the proceeds, and your proceeds would be less than you thought.

Posted in Selling Your Business, General | No Comments »