15/12/2010 by info.

A report in the Daily Telegraph on 13 December stated that “Family business owners are struggling to sell up to staff because of bank lending policies and the weakness of the economy” Which seems to be based upon a statement made by the president of the Electrical Contractors’ Association.

The president a lady called Diane Johnson stated that some of her members are “closing them (their businesses) down because they can’t find people to buy them, because the people working for them can no longer raise the finance.”

Well certainly if you are just looking for your employees to buy your business you may be disappointed.

It is certainly our experience that there is not a shortage of buyers in the market as the President declares indeed when we obtain an instruction we seem to have no trouble in obtaining plenty of enquiries.

In our opinion this article shows three failures in the selling process with these businesses leading to the business owners failure to sell:

1. The business owners have clearly failed to plan their sale, their strategy seemingly is to look for a buyer within their business and employee without access to any capital. The lack of planning will also affect the selling price of the business.

2. They seem to have not instructed a business transfer agent, rather they would prefer to blame the banks who refused it seems refused their employee funds to buy their business.

3. They perhaps want too much for their business. Business owners sometimes have strange ideas about how much their business is worth. Rather than closing down the business and get nothing for the goodwill, perhaps their best course of action now would be to simply reduce the price.

We have plenty of buyers enquiring about businesses, certainly we do not recognise a lack of buyers, confidence in the economy and access to funding to be an issue, rather that the fault lies with the business owner.

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

14/09/2010 by info.

About 15 years ago before I started selling businesses I was a consultant for Petrol Stations around the South of England, one of the chains I advised was Esso Petrol Stations.

Around that time Tesco’s started an agreement with Esso to rent some of their larger sites and to re-brand the shop as Tesco’s.

I was telling a client what was happening and he said, that Tesco’s would not be interested in his Petrol Station in Haslemere as there is a Tesco’s a mile down the road. I replied to him that I wouldn’t bank on it because Tesco’s don’t really care whether every shop in the country was Tesco’s.

I was absolutely correct.

Today I tweeted the fact that Tesco’s have 15 outlets in Norwich and received a large number of retweets, clearly this is an issue that strikes a nerve with a lot of people

I am not anti Tesco’s but I do not think that bigger chains like this are good for the economy and I would only wish that customers would support local businesses more.

Some of it is purely selfish as the less independent businesses there are, the less there are for Horizon Business Agents to sell, and it affects the total market size for selling businesses. Having all these larger companies dominate the high street damages the local economy in other ways as well.

Why?

These worried residents in Dorking, Surrey explain some of it on their website.

Perhaps therefore you should be supporting towns such as Sheringham, Norfolk who are opposing planning permission, they know what it will do to the town and local economy.

Posted in The Economy | No Comments »

19/04/2010 by info.

Uncertainty is often a reason given for people not making long term plans, they delay making investment decisions, don’t start businesses and wait to see the outcome of world events.

Some people may be awaiting the outcome of the Election and perhaps may delay making a decision if there is a hung parliament, as they don’t know what that might mean to their plans. Although evidence has shown that businesses still make profits and grow regardless of the government and their politics.

The volcano eruption of Eyjafjallajokull in April 2010 is creating uncertainly within the tourist and business community however life still needs to go on and the airlines loss is the trains, taxis and ferries companies’ gains. Supermarkets may not be able to fly exotic fruit in but it does not affect local suppliers.

The recession was an excuse for people not buying businesses however I have spoken to numerous business people in the last couple of weeks who have shown me that their businesses turnover during the recession has demonstrated linear and or exponential growth, during the whole of the period of the recession. Recession, what recession they say!

Their businesses are doing so well, they need to slow them down so they can grow at a reasonable rate and manage the growth!

It just goes to show that the best businesses will always do well, and if a business has survived the recession and has done well during the recession then there is absolutely no reason to worry about buying it due to lower demand nor worry about short term uncertainty in the world such as a change in government.

Posted in The Economy, General | 2 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 »

02/10/2009 by info.

There are many businesses who will be looking to the future with relief that they have survived the recession however they may, in the next financial year, have to face paying higher business rates.

Business rates are revalued every 5 years and business pay a multiplier of the rateable value of the property. So for the last 4 years a business has been paying tax based on 2005 commerical property rental values.

But these rates in April 2010 will be revalued and will be based on rents in April 2008, right at the peak of the market, before the bubble burst. So businesses will be paying higher rates regardless of whether the multiplier changes.

Also if the small business threshold does not change for many businesses they may go over the £10,000 rent relief threshold.

So what can a business do?

If they are close to the end of their lease they can look for other premises, ones that may be better located or more suitable give knowledge of their business activity. Premises that may result in higher turnover, but may have lower rents due to the landlord being more reasonable - letting at 2010 rates.

They can ensure that they are actually claiming full rates relief entitlement and halve their rates payable. There are loads of small businesses who STILL do not do this. Alternatively, if they are an essential business in a village (Pub, Post Office) they can apply for full rates relief.

They might consider appealing against the rates valuation. To do this they will need to compare their ratable value against others in the area this needs and note whether they are in the right valuation scheme. I.e you may be valued assuming the business has A3 use, but it may no longer be applicable.

If a business does none of these they may have to face the fact that their profits and the technical value of their business will fall.

Posted in The Economy, General | No Comments »

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 »

11/05/2009 by info.

Almost unnoticed the FSE100 the share price index of the UK’s largest companies has increased by nearly a third since mid March 2009.

What does this mean in layman’s language, well it means that the value of these companies has increased by nearly a third in a couple of months. Great news if you or your financial advisor recognised the bottom of the market, this however indicates that the worst of the recession is over for these companies.

An increase in the share price means an increase in the value of the company, which indicates that the profitability of that company is increasing.

I would doubt whether the value of these companies were actually that low as markets tend to overshoot as the masses overreact to circumstances.

At the first sign of swine flu the share price of British Airways fell by 20%, I tweeted at the time that surely the value of the company has not decreased by that figure, what has happened? Well the share price has recovered to its previous level after the fear fell away.

The property market in the UK is about at its long-term real house price trend value; however expect the value of property to fall further as the market overshoots due to continued fear. By Winter 2009 you will see real property bargains.

For the prospective small business owner what does it mean? Well now is your chance to make money by buying a business before the masses recognise that the bottom of the recession has been reached as in the few months time by the time that your purchase has completed the recession will be over and you will be best placed to start making money.

The purpose of this is to show that you can take advantage of other people’s overreaction or as Warren Buffett has been quoted as saying, “Be fearful when others are greedy and greedy when others are fearful”

Perhaps now is the best time to be greedy before others do.

Posted in Buyers, The Economy, General | No Comments »

28/04/2009 by info.

You can often get hold of the wrong end of the stick when looking at statistics.

American listing website for businesses for sale bizbuysell.com have recently issued statistics showing that the average price of a business sold via their website fell by 17%.

A reporter for cnnmoney.com reports that “it’s a lousy time to sell your business” presumably on the basis that if you sell the value of your business will have reduced by 17%.

These business sales however have included an element of distressed sales, and of course if you needed to sell your business because you were not doing as well, you had to be realistic with your expectations.

They are right with one aspect of the market that is there are fewer businesses being put up for sale. Baby boomers who would normally be looking to retire, are now delaying that decision, due to fear, thoughts that they may not be able to sell their business for top dollar price, or maybe because their investments have reduced elsewhere.

These are the businesses that a lot of businesses buyers would be interested in buying.

The fact is that business buyers are always interested in buying the best businesses, and if you own the best restaurant in your town or city you will STILL be able to sell for a good price.

But are business owners taking the wrong decision in delaying their retirement?

Profits are a function of the enthusiasm that a business owner has about running their business, and if they feel that they have no option but to carry on trading, perhaps they will start to feel resentful and their enthusiasm may start to wane.

It is this phenomenon that may lead to a reduction in the value of their business not the economic conditions.

Posted in The Economy, General | No Comments »