Clinton Lee
Member Since: 19th Feb 2016
Likes: 1
Thanks: 39
After doing an undergrad degree in accounting (India) and reading for an MBA in finance (USA) - in addition to taking professional exams in Cost & Works accounting and in Banking - I decided that this is all too complicated. So I spent 35 years buying and selling small businesses, and running them.
My full time occupation now is UK Business Brokers where I assist lower mid market businesses (generally £2m - £50m in t/o) navigate their way to an equity event. I act as a first stop advisory on strategy and help business owners find the right business broker, M&A / corporate finance firm or boutique investment bank to fit their individual needs & exit goals - from MBO to IPO. It's a minefield out there!
I maintain the UK's only database / knowledge base on all the talent in this industry - sector specialisations, fees, fee structures, FCA status, cross border transaction experience, awards won, feedback and reputation ...all sorts!
Here's why it's nearly impossible to find the right firm without my help and here's my LinkedIn profile if you fancy getting in touch.
I'm well connected in the world of corporate finance / investment banking / corporate law, and I love introducing people. Let me know if I can open any doors for you or answer any questions you have about my world.
My answers
I have extensive data on fees and fee structures in the industry - business transfer agents, business brokers, M&A advisory firms, corporate finance firms, boutique investment banks, all kinds.
Barring the very rare exception, every professional who handles disposals takes payment from the seller. Most take a retainer before even starting work on the mandate. It is almost unheard of for the buyer to pay. Why would a business owner trust the advice of any broker or other adviser who is getting paid by the other party?! The agent's interests wouldn't be aligned with the business owner's interests.
There are buy-side brokers who are instructed by investors / business buyers to do deal sourcing. They are paid by the buyer. They are pretty much the only ones paid by the buyer.
"However, I know from the client and from experience that the business' market value is around £150,000."
You know "from the client"?
Business valuation is easy peasy, lemon squeezy. As I've advised accountants before, there's a very, very simple formula: Ask the business owner how much his business is worth ...and divide by one gazillion.
With respect, there are no "normal valuation principles" for a business this size.
How do you quantify the risk? It's off the scale for OMBs / businesses reliant on a couple of founders.
At this end of the market transactions happen at prices dependent far more on personalities, desperation and psychology rather then DCF or whatever. Comps are difficult to obtain unless you've done a lot of transactions yourself.
In my experience of selling businesses it is generally the seller who pays the agent's fees.
Some industries are exceptions. This industry is one of them and, strangely, it tends to be the case that both parties pay the broker when it comes to selling practices.
The Draper Hinks you mentioned has charged both sides in transactions of which I'm aware.
I'm the UK expert on who's doing what when it comes to selling businesses and I maintain a national directory of the 1,000+ "business brokers" in the UK - the sectors they specialise in, their geographical coverage, their fees and over 100 other data points.
Draper Hinks & Vivian Sram have already been mentioned.
You can also approach other business brokers who specialise in selling accountancy practices. There's Bains, Watts and Co; Goldsmiths Accountancy Advisory Services; Maximiti Ltd; Crowley and Crowley Ltd; Nicolson Accountancy LLP; Owens Professional; Retiring Accountants; Swat UK and others.
There are 20+ who specialise in selling just accountancy practices, there are another 100 or so who specialise in selling "professional practices" including dental surgeries, solicitors etc (and accountancy practices). It's worth approaching them as well.
And there are many hundreds of sector agnostic brokers, some better than others.
From my monitoring of the industry I would say it's very much a sellers' market out there for accountancy practices and payroll companies, so expect a lot of competition especially for the smaller practices. .
All the best.
If it were for £500m, there'd be no VAT. You'd be offshore by now ;)
I'm sorry I'm late to this party, but as others have stated
a) This is way too small to justify the efforts of any business broker
b) But that won't stop some brokers handing out a mouth watering valuation in order to take on the client (whether or not such client is paying an advance fee!)
But, also, this is too small for most buyers to consider. It takes time and money to investigate an opportunity. One needs to ask for the books, go through the numbers to try and find the fiddles, visit the premises etc etc.
From a buyer's point of view, it makes sense to invest that time only when
a) the business is a certain size and
b) the vendor somehow conveys right at the start that the business really is making a profit (even if he were charging a full market wage), that it has an upward sloping growth trajectory, that his price expectations are reasonable.
It's on the last bit that most vendors fail. The majority of their businesses are worth zilch, nada. They are jobs, not businesses. And they don't even pay minimum wage!
The businesses that do attract a buyer often get no offers more than 1x earnings.
But if the business owner still wants to list their business for sale I maintain the UK's most comprehensive list of marketplaces and portals for selling businesses.
http://ukbusinessbrokers.com/where-to-list-businesses-for-sale/
I hear what you're saying, but sometimes being rude does the job like nothing else can.
One common characteristic of the PITA clients is that they aren't very good at taking hints.
But they almost always know how to take offence. So try being honest. If that doesn't work, I'm sorry, but you do need to ramp up to rude.
Why do you believe the trading loss in B is relevant here?
Unfortunately, it's more than that.
You are right in that there's an element of 'my baby' syndrome. But a large chunk of unrealistic expectations is driven by shows such as DD and SharkTank. To make bad matters worse there are hundreds of business brokers who offer free valuations.
On behalf of a foreign investor, I was speaking with a well known national business broker about a business they are selling.
I requested a copy of the valuation, I wanted to know how they had arrived at their figure.
This was like drawing blood from a stone. First the guy who did the valuation was "on holiday". Then he was "no more with the company".
But I kept pressing them for their logic / calculation.
I got an answer, finally.
It took the better part of a month and about 20 emails back and forth. And the answer is, drum roll: "The figure represents the seller's aspirational price."
In other words, they asked the seller, "What is the dream figure you'd like to get for your business?"
And they put that number down as their professional valuation.
You couldn't make this sh*t up! :)