Agents spend their whole careers telling vendors and landlords why they will be able to achieve a better sale price or a higher rent than they could achieve themselves. Then, at the end of their career, they try to sell their own business. I am constantly amazed by this and during the twenty-five years that I have been selling businesses, I have seen countless examples of people selling their businesses for a fraction of what they were really worth. Selling a business is totally different to selling or renting a property and when the time comes to do this, you need to entrust the job to a professional. So what can a good broker add to the process?
The first thing we do is to prepare the marketing pack properly. The way that the numbers are presented is absolutely crucial and a properly prepared information pack can add tens or even hundreds of thousands of pounds to the value of a business. A lot of what we do happens long before the business goes onto the market.
2. An Accurate Guide Price
So many private sellers spoil their chances of a sale by going to the market at the wrong price. If it is too high, buyers will dismiss the opportunity out of hand. If it is too low, you could end up underselling your business. We will use our experience to set a guide price that can be properly substantiated by comparable evidence and by multiples of turnover and/or profit.
3. More Buyers
The third thing we do is to ensure that a business is exposed to a number of qualified buyers. It is almost impossible to achieve the best price by dealing with just one potential purchaser. We have over 1,700 buyers registered on our database which means we will usually have several dozen potential buyers for a business in a city location. Our database has been built up over many years and no private seller could possibly have access to so many buyers.
It is essential that your competitors do not find out about your sale before it is completed. If they do, they could start poaching your staff and poaching your landlords and vendors, and this could do terrible harm to your business. It is much easier to maintain confidentiality when you are approaching buyers via a third party. We will always use a non-disclosure agreement and if anyone disrespects it, we will never send them details of another business again.
5. A Fair Competition
In the first instance we will usually send details to half a dozen of our best buyers. We will choose them very carefully and they will usually be buyers that we have sold to before and know to be reliable and trustworthy. If one drops out, we will add a new buyer to the list. The marketing campaign usually lasts for six to eight weeks during which time buyers will ask lots of detailed questions and these must be answered accurately and in writing so that there is a proper audit trail of the questions asked and the answers given. Most buyers will then want to meet the seller in person or via Zoom.
When everyone has finished asking their questions and we have enough interest, we will set a closing date for offers and ask for indicative offers in writing so that we can compare them on a like for like basis. There is a great deal of skill involved in getting all the buyers to the finishing line at the same time.
6. Professional Negotiation
When you are selling a business, the price is not the only thing that matters. You also need to think about the payment terms, the penalty clauses, how many staff will be taken on, whether the premises will transfer, the reputation of the buyer and dozens of other things. We can advise on all of these many factors and ensure that you get the very best offer in terms of both price and/or other terms.
7. Heads of Terms
Once an offer has been agreed, we will help to produce Heads of Terms. The most common reason for sales falling through is that when the Heads of Terms come through, they do not reflect what the parties thought had been agreed verbally. If this happens, it needs to happen at the very outset before thousands of pounds have been wasted on legal fees.
Just as with a house sale, choosing the right solicitor will make a huge difference to how smoothly the sale progresses. Selling a business is a highly specialist area of the law and it is essential to choose a solicitor who does nothing but mergers and acquisitions for 100% of their working time. We have a panel of five highly experienced solicitors for this purpose.
9. Due Diligence
Once the Heads of Terms are signed off, the buyers will want to visit your business to carry out their due diligence checks. If they find anything wrong with your compliance systems, they will walk away immediately. If we have any doubt about the quality of a business and its compliance systems, we will recommend specialist due diligence consultants who will come in to conduct a full audit before the buyer carries out their own checks so that things can be put right in advance.
10. Progressing the Sale
This is the part where an external broker will really earn their fee. A sale typically takes two to three months to go through and there are literally hundreds of different things that can go wrong in this time. The experience we have built up over the years will be invaluable in making sure that the sale goes through first time and completes on time and at the price that was originally agreed.
Most sales agreements have a warranty clause which means that if the turnover drops in the year after completion, you will have to pay a penalty. In order to protect yourself against this, it is important to ensure that the handover goes smoothly and we have well-proven processes in place in order to achieve this.
Selling a business is not the same as selling or renting a house. In order to achieve the best price, it is essential to entrust this crucial job to a professional broker with specialist expertise in the lettings and estate agency sector.
Adam Walker is a management consultant and business transfer agent who has specialised in the property sector for more than thirty-five years.