S
Steve Roberts
- Original Poster
- #6
Alpha said:Hi Steve and welcome to the forums
I'd be interested in learning more about your company and its activities.
please tell us more
I employ about 80 people and we primarily sell companies on behalf of the owner - taking a commission of the final sale price, plus a retainer.
In summary, we:
Carry out extensive desk research locating a reasonable number (circa 300) of potential strategic buyers - both in The UK and overseas.
Contact the decision maker in each of the companies, putting the proposal to them verbally.
Those that are interested are asked to sign non-disclosure-agreements.
Those that sign NDAs are sent an Information Memorandum - which is produced by us.
The prospects are given a short while to digest the information, following which we talk to them. If still interested we organise a meeting. If not, we ask them to return the information.
We meet each prospect and do a presentation to them, with the vendor (our client).
We invite the prospects to make an offer for the business.
Because we have, in effect, "created a market", by talking with multi-bidders, by negotiation we leverage the price as high as possible.
We work with the client all through due-diligence to completion, following which we get our commission.
In paralell with the above, we train the vendors on how to present their business, we prepare long-term business plans and assist in the preperation for sale.
We currently sell about 50 companies per year.
To a lesser degree, we also act for buyers who are looking to acquire companies. However, this activity is just 8% of our revenue.
Upvote
0
S
Steve Roberts
- Original Poster
- #8
Jayne said:Are you a bit like a business tranfer agent then?
Jayne
No, they tend to be reactive - a bit like estate agents.
We're into "actively marketing" companies and then directly negotiating with all the buyers in order to achieve the maximum possible price. We're generally more expensive, but achieve far higher prices (typically double) so the vendor will get his money back many times over.
Upvote
0
S
Steve Roberts
- Original Poster
- #13
webit said:
The sort of things which effect company valuation are many and varied, and include:
Profit - the higher the better.
Scarcity value - the scarcer the better.
Reliance on the owner - the less the better.
The sector - certain sectors generate higher prices.
Number of bidders - the more the better.
Commercial risk - the less the better.
Future potential - the greater the better.
And loads of other things!
In answer to your question about general / targetted. If I've got the time I'll try and assist people on a tailored basis. It depends how busy I am!
Upvote
0
Upvote
0
Hello Steve,
Welcome to these forums, interestingly your entrance here has clearly generated some interest from everyone here.
I've had a number of offers on my business but nothing has interested me as of yet, plus I've no idea on the value of my business anyway so don't know if I've had good or bad offers.
Welcome to these forums, interestingly your entrance here has clearly generated some interest from everyone here.
I've had a number of offers on my business but nothing has interested me as of yet
, plus I've no idea on the value of my business anyway so don't know if I've had good or bad offers.
Upvote
0
S
Steve Roberts
- Original Poster
- #17
SillyJokes said:
Absolutely - acquiring companies represents about 8% of our activity. However, as mentioned above our deal values are typically £0.5m - £10m+. As such, if the likely value is going to be less than £500k we're probably not the tight people for you. Email me if you want more info.
Upvote
0
S
Steve Roberts
- Original Poster
- #19
Ozzy said:Hello Steve,
Welcome to these forums, interestingly your entrance here has clearly generated some interest from everyone here.
I've had a number of offers on my business but nothing has interested me as of yet
Clearly the offers haven't been sufficiently high to cause you to act on them.
Something to bear in mind though, is that the current Tax legislation makes it a highly attractive time to sell a company. In short, a shareholder / partner can get 75% CGT relief on the diposal of their company. CGT is currently 40%, so a 75% tax relienf means the seller will only pay 10% tax on the capital gain. As such, when analysing an offer the "post - tax" figures need assessing. Let me give an example:
You own a small company making, say, £100k profit pa (including your emoluments). Someone comes along and offers you 5 times your profit (£500k) to buy your business - which is a modest amount of money.
The following sums need to be done: (1) What is my £100k pa worth in the real world. (2) What is the £500k worth in the real world.
(1) £100k profit give you, probably, this:
a/ you couldn't take it all out because you need working capital, so the most you could take is, say, £70k.
b/ The Tax man gonna screw you for NI, employs NI and income Tax (high rate) on your salary. Plus he's gonna make you pay Corp Tax (and / or Tax on any Dividend you pay yourself).
So, when you factor all of these numbers on a £100k profit you are left with probably about £35k in your back pocket.
(2) If the company is sold for £500k, you actually walk away with £450k in your back pocket.
The question then becomes, how many years would you have to work, making £100k pa, to earn the same amount in your back pocket: 450k / 35k = 13 years (of working Vs 13 years of not working).
Upvote
0
Upvote
0
There is also the intrinsic value of a business based on its potential earnings, business model and other items that are of value to an acquirer.
An example would be these forums...
I could have setup the an equivalent UK Business Forums for next to zero cost, after all the software itself is free and I have the technical knowledge to install and setup myself if I wanted to.
However I decided to part with some cash and buy these forums from someone else earlier this year rather than start a forum from scratch, because these were already running and had some activity.
There were not and still are not making a profit, I'd estimate that I am still about £4,000 down on the costs to date, but I am looking more long term and know eventually I'll recover these costs.
The same goes for many businesses that are acquired, hence I do not believe the profit is the most important aspect in high value purchases. Just think Freeserve
An example would be these forums...
I could have setup the an equivalent UK Business Forums for next to zero cost, after all the software itself is free and I have the technical knowledge to install and setup myself if I wanted to.
However I decided to part with some cash and buy these forums from someone else earlier this year rather than start a forum from scratch, because these were already running and had some activity.
There were not and still are not making a profit, I'd estimate that I am still about £4,000 down on the costs to date, but I am looking more long term and know eventually I'll recover these costs.
The same goes for many businesses that are acquired, hence I do not believe the profit is the most important aspect in high value purchases. Just think Freeserve
Upvote
0
S
Steve Roberts
- Original Poster
- #24
Ozzy said:There is also the intrinsic value of a business based on its potential earnings, business model and other items that are of value to an acquirer.
An example would be these forums...
I could have setup the an equivalent UK Business Forums for next to zero cost, after all the software itself is free and I have the technical knowledge to install and setup myself if I wanted to.
However I decided to part with some cash and buy these forums from someone else earlier this year rather than start a forum from scratch, because these were already running and had some activity.
There were not and still are not making a profit, I'd estimate that I am still about £4,000 down on the costs to date, but I am looking more long term and know eventually I'll recover these costs.
The same goes for many businesses that are acquired, hence I do not believe the profit is the most important aspect in high value purchases. Just think Freeserve
Profit is 'a' factor, along with many, many other things. What I was illustrating is that if someone offers, say, 5 times pre-tax profit the knee-jerk reaction may be "no way - I can earn that much in five years!". In reality, one has to factor in the (horrendous) Tax which the Goverment imposes on successful companies, coupled with the, comparatively, generous Tax breaks when a company is sold. Incidentally, there are (reliable) rumours afoot that the Chancellor is going to end this Tax break. Personally, I think it's a matter of "when" not "if" he does this.
Upvote
0
S
Steve Roberts
- Original Poster
- #25
SillyJokes said:
Indeed, but another point of view might be the company in question may not exist in, say, 13 years time. Can you say with certainty that your company will still be in existence, and highly profitable, in the year 2018? It's a matter of commercial judgement, personal circumstances and life choices.
I've built my company up over 15 years and have put in place highly competent managers, who are on a decent profit bonus. As such, because I have put in place VERY detailed KPI measurements I know how the company is performing at any point in time. This enables me to not have to do any work! My point is, selling it is one option but I've elected to hold onto it as a long-term, and growing, income stream.
Upvote
0
S
Steve Roberts
- Original Poster
- #29
Top Hat said:
We were successful before Tax relief was introduced so I don't think it will make much difference. In any event, the reason people sell their business is not usually Tax driven. Typically the reasons are / include:
Retirement
Fed up of red-tape
Want to focus on another business
Personal reasons (emigration, etc)
Don't enjoy the work anymore
Etc.. etc..
Upvote
0
O
onthedottyping
- Original Poster
- #30
Hi Steve
Welcome to UK Business Forums. If you have any ideas on boosting our virtual company by all means contact us www.onthedottyping.co.uk - you can email me on [email protected]
Welcome to UK Business Forums. If you have any ideas on boosting our virtual company by all means contact us www.onthedottyping.co.uk - you can email me on [email protected]
Upvote
0
Latest Articles
-
Andy Burnham's Manifesto for Small Business, and How It Stacks Up Against Count BinfaceIf all goes to plan (or rather, to Labour's timetable), Andy Burnham...
- Ozzy
- Updated:
-
SEO in the Age of AI: What UK Small Businesses Actually Need to KnowTL;DR Search has shifted from "ten blue links" to answer engines, and...
- Ozzy
- Updated:
-
What Carphone Warehouse, Microsoft and Uber Have in Common: They Started in a DownturnThere's a comforting myth that you need a booming economy to start...
- Ozzy
- Updated:
-
What Makes a Small Business Actually Sellable?There's a question that a lot of small business owners never think to...
- Ozzy
- Updated:
-
Why Your Team Keeps Asking the Same Questions (And What to Actually Do About It)Every small business owner knows the moment. You're halfway through...
- Ozzy
- Updated:
