Business sale Advice required

[jackson67]

Hi All

I'm about to start the process of selling my newsagent/stationers after 16 years trading.

Went through a similar process about 5 years ago but took business off the market as my uncertainty over what to do next was too much! Had a buyer lined up as well but he strung me out for months, even though a price had been agreed, and it was during this time that I got 'cold feet'. However, as the agent had made the initial introduction and I pulled the plug I was still liable to pay the agents commission. Expensive lesson learnt there!

This time though my mind is made up and i will be sticking to it.

My biggest grumble though is selling through an agent again and having to pay their fees. Im seriously contemplating marketing the business myself to avoid this.

My question to you good people is... Does anyone have experience of selling a business privately? Any advice on the perils/pitfalls. Advantages/disadvantages?

Any advice would be gratefully received.

Cheers in advance.
J67

 

[KateCB]

Google the phrase 'selling a business' and there are many sites that come up where you can post your advert, free of charge.
Just make sure you have NDA forms (non Disclosure agreements) that potential purchasers have to sign before you release things like accounts; also don't release accounts until someone has been to see the shop, talked sensibly and is at least interested.....what I'm saying is don't send them out to anyone who simply expresses interest to start with.

I sold a business, and the amount of people interested was huge, the amount actually prepared to work at it was minimal and some seem quite taken aback at the idea of actually having to DO something, but they all asked for full accounts, which they do not need to decide if it is for them!

Good luck!

 

[art200380]

Hello

I buy between 40-60 businesses a year and I wouldn't get too hung up on NDA's/confidentiality's as they are very hard to enforce and IMHO aren't worth the paper they are written on.

Good luck with your future sale, hope you find a buyer soon!

Andy

 

[Rhodes100]

By all means dont use the agent you used before, however having said that I would have had a gripe with you if you had pulled out of a deal that I had worked on for months.

However I am not sure that the agents actually had a right to the commission. They were probably relying on a "ready willing and able" clause in the contract however if this buyer had not acted after a few months I would guess that he did not fit this description. I wonder whether a Judge would have agreed that the buyer was ready and willing, perhaps he could not even get the finance therefore was not ready and able.

Dont underestimate however how much work behind the scenes goes on selling a business. If you do not use an agent you will be spending hours and hours talking to timewasters who have no money at all.

As Kate said the number of people interested in her business was huge, I wonder exactly how much time she spent dealing with these enquiries.

Also whether she negotiated a much lower price than she would have acheived if she had used an agent. An agent is an expert in presenting businesses, a seller can be too close to his business to see the benefits and disadvantages of the your business.

What is your effective hourly rate? Multiply that by the number of hours spent and you get the cost of selling your business, of course add on any advertising costs, perhaps higher legal costs.

It is also a fact that deals without using an agent tend to collapse more, leaving you will a legal bill - why because buyer and seller get into arguments and without an agent to act as a calming influence emotion gets in the way of business.

I would recommend that you still use an agent, it is a false economy not using one.

 

[jackson67]

Thanks for the comments so far.

 

[quikshop]

I am trying to sell one of my retail businesses at the moment and to echo Kate's comments, have a simple to follow business summary that contains key information and headlines from the accounts for all enquirers, but don't open the doors to the vault unless they show willing to meet with you / visit your shop and can prove they have the funds available without borrowing.

So many dreamers out there

 

[Rhodes100]

Selling your business is the second most if not most important transaction you will have in your life, I can never understand why business owners thinks that they can do a better job of it than a business transfer agent, the specialists.

After all you have probably never sold a business before, an agent does it all day.

 

[quikshop]

Selling your business is the second most if not most important transaction you will have in your life, I can never understand why business owners thinks that they can do a better job of it than a business transfer agent, the specialists.

After all you have probably never sold a business before, an agent does it all day.

I've been buying and selling businesses for a decade and never yet had the urge to give a business broker £1000s commission for doing what any resourceful business owner can do themselves.

 

[Inspiredtoact]

i recently marketed and sold my own business recently and glad i didnt go through an agent, theres enough to pay with accoutnants and legal fees and any other bits and bobs too.

Things i did to assist the sale.

Got my house in order -
Tied up any loose ends, got my books in order, had management accounts drawn up, informed my solicitor and accountant of what i was ready to do an covered any tax legal issues and what ifs before hand.

- wrote the advert then re read it and re wrote it about 4 times, always putting myself in a potetntial buyers shoes.
I took the approach i do with everything else and was completely honest I know some peopel will say keep some stuff back till they come and see it - i did but i put the majority of good info into my advert. The reason for this is to save time and effort on pointless questions which arent confidential.

-When taking pictires of the premises, this will speak 1000 words, this is the image the potential buyer will go to bed with in their head at night. Its abit like selling a car, you give it a wash a clean and a wax and take pics of it in a nice location to have the best effeect on the potential buyer.

-Once putting the advert up, when someone contacts you, i made a list of who they were and what info i had sent them and what date they were going to view. I arranged as many viewings as close as possible because its a pitch to the seller and once your in a flow its much better.

-Be honest with the seller about anything regarding the business. its much easier to have it all out in the open from the beginning, can save you being sued later.

Once had a few interested buyers, gave them a date to make an offfer an reviewed - this will definitely weed out any weak ones. Proof of funds to purchase separates the bullsh*tters

Once i had chosen the buyer i wanted we had a meeting and drew up the heads of terms, i.e. what was involved for the price training etc. Once we had agreed all of this and were ready to move forward i forwarded the lsit ot the solicitor who drew up the contract in a few days and we signed.

The whole process took me 2 months from they day i put the advert up to the date i sold it. The agents that were coming to value my business had no clue about my business and had no interest in me.

I was able to meet the buyers in person from the off and this hugely affected my decision on who i sell to.

Once sold make sure you sort out your tax asap or have it put aside and that anty trainign or handover is completed as if you still owned the business.

sory about the order of this its more like brain dumping..

 

[jackson67]

Once had a few interested buyers, gave them a date to make an offfer an reviewed - this will definitely weed out any weak ones. Proof of funds to purchase separates the bullsh*tters

.

Thanks for that 'brain dump', some great pointers.

How were you able to get proof of funds to purchase?? My previous experience saw a prospective buyer make an offer, that was accepted, then strung along for a few weeks before a reduced offer was submitted as he couldn't raise the funds! This was through an agent too.

 

[art200380]

The business agents I deal with who insist on proof of funding, usually ask for a letter from your bank which states they are prepared to lend to £x level.

Andy

 

[Rhodes100]

i recently marketed and sold my own business recently and glad i didnt go through an agent, theres enough to pay with accoutnants and legal fees and any other bits and bobs too.

Just how many hours did you spend selling your business? Working on this rather than working on making a profit in your business.

Perhaps you now recognise what an agent does behind the scenes.

Also how much did you sell it for?

I have had plenty of clients instruct me wanting a certain figure only to sell it themselves later at a fraction of this amount. They think they have done a good job!

Any idiot can sell a product or service for less than it is actually worth.

 

[Inspiredtoact]

Thanks for that 'brain dump', some great pointers.

How were you able to get proof of funds to purchase?? My previous experience saw a prospective buyer make an offer, that was accepted, then strung along for a few weeks before a reduced offer was submitted as he couldn't raise the funds! This was through an agent too.

Most people gave the typical response 'money isnt a problem when i mentioned proof of funds to purchase' so to that i replied 'im guessing youve got an accountant or a bank manager involved in your decision to buy this business, i would need a letter from them confirming the funds are in place to make the purchase'.

I was honest with the potential buyers and asked politely please not to waste my time or theirs, so the proof of purchase is highly important to me.

Bear in mind someone cand transfer funds into a bank account to make it look like they have the money, and they can also transfer them back out, so a copy of a bank statement isnt enough for me.

Unfortunately there will always be timewasters, you have to trust your gut.

 

[Inspiredtoact]

Just how many hours did you spend selling your business? Working on this rather than working on making a profit in your business.

Perhaps you now recognise what an agent does behind the scenes.

Also how much did you sell it for?

I have had plenty of clients instruct me wanting a certain figure only to sell it themselves later at a fraction of this amount. They think they have done a good job!

Any idiot can sell a product or service for less than it is actually worth.

Hi Rhodes, i did spend a fair bit of time, but i did this out of business hours where posisble, though time was incredibly tight, i found it because i wanted to / had to.

I fully appreciate the work a good agent does behind the scenes, it just wasnt a route i wanted to go down.

I sold it for a good price on my knowledge of the industry and my past experiences, also comparing it to other similar businesses for sale and i took into account the price the agents recommended selling for. Usually i found the agents where over pricing, so i made an eduacted decision.

Im not trying to knock your profession if you are an agent, but i knew my business and my industry, my figures were all drawn up and backed up by an accountant, so i took alot into consideration.

In regards to any idiot can sell a product / service for less than its actually worth, but in some cases people get desperate. I didnt.

If you sell too soon you can lose out, if you sell too late you can lose out, i feel i sold my business at the right time and am happy with the price i got for it.

 

[KeithGreen]

Sound advice from many on here.

The DIY route may appeal especially if you have had your fingers burnt by using an agent before.

However we all have instances whereby we prefer to use an expert to act for us.

If you do want to use an agent to sell your business speak to two or three and get valuations and a copy of their terms and fees. I suggest you appoint an agent who only charges a fee based on a successful sale - sure it's irritating when a client changes their mind and withdraws from sale but hey, that's life. Some charge an upfront fee - nothing wrong with that if you know what it's for and what you're getting. Some don't charge upfront fees - some offer a choice.

Ask your accountant if he/she knows any agents. If you are in a shopping street ask your neighbours if they have bought/sold through an agent and their experiences.

 

[glbo]

If you have determined the value of your business , then fix two selling prices - the lower one to sell privately and the the higher one to cover the commission for the agent.

 

[KeithGreen]

If you have determined the value of your business , then fix two selling prices - the lower one to sell privately and the the higher one to cover the commission for the agent.

Great idea (not). What happens if you get an offer of £100k and your agent gets an offer of £150k? Are you going to pay £50k commission? I think not.

Anyway, some agents (not us) will have a clause in their agreement that says commission is due whether or not they find the buyer.

Also most agents (including us) will not want to be instructed if they know the client is also marketing him/herself.

If you want to use an agent (or broker), find one who has clear, fair terms and is totally trustworthy and let him/her get on with their job.

 

[Cobby]

Just how many hours did you spend selling your business? Working on this rather than working on making a profit in your business.

Perhaps you now recognise what an agent does behind the scenes.

Also how much did you sell it for?

I have had plenty of clients instruct me wanting a certain figure only to sell it themselves later at a fraction of this amount. They think they have done a good job!

Any idiot can sell a product or service for less than it is actually worth.

The first and last time I used an agent to try and sell my business cost me nearly a thousand pounds, maybe 80 hours of my own time and got me nowhere. Before you ask, they are a well known and respected agents.

The agent dealing with us was endlessly chauvinistic and patronising to my female partner, vastly overvalued the business, made a charge up front for extra listing which only got our specialist shop put in with the local newsagents and betting shops, he was almost completely unreachable by phone and left us to do almost all of the chasing up and bargaining with potential buyers. Over the weekend they had turned up and erected the most ghastly, enormous FOR SALE board and hung it on our railings which made the place look like it was closing down and our takings dropped by 10-15% over the following 10 weeks despite the fact we had taken it down almost immediately.

I can't imagine having to actually give them money for that after their pathetic attempt at selling my business. Business agents, like estate agents are little more than parasites.

It's unfair to judge all the people in a particular trade as arrogant and rude, but it's nice to see your post reinforcing my opinion.

 

[kulture]

Great idea (not). What happens if you get an offer of £100k and your agent gets an offer of £150k? Are you going to pay £50k commission? I think not.

Anyway, some agents (not us) will have a clause in their agreement that says commission is due whether or not they find the buyer.

Also most agents (including us) will not want to be instructed if they know the client is also marketing him/herself.

If you want to use an agent (or broker), find one who has clear, fair terms and is totally trustworthy and let him/her get on with their job.

I agree with you. The only point I will add is that when I sold a business previously I knew a potential buyer before I put the business up for sale and I made it clear and added it to the contract, that IF that one buyer purchased the business then no commission would be due. They agreed, worked extra hard, and found a better buyer themselves and earned their commission.

 

[glbo]

Originally Posted by glbo
If you have determined the value of your business , then fix two selling prices - the lower one to sell privately and the the higher one to cover the commission for the agent.

Your Comment :

Great idea (not). What happens if you get an offer of £100k and your agent gets an offer of £150k? Are you going to pay £50k commission? I think not.

Anyway, some agents (not us) will have a clause in their agreement that says commission is due whether or not they find the buyer.

Also most agents (including us) will not want to be instructed if they know the client is also marketing him/herself.

If you want to use an agent (or broker), find one who has clear, fair terms and is totally trustworthy and let him/her get on with their job.
__________________

Thanks - you have a point there Anderson Moore . co . uk

 

[Rhodes100]

Why as an agent would I want to compete again my own client who is going to undercut me on price! My considerable expeience is that it simply doesnt work and also is bound to get you into contractural trouble.

If you are advertising in the same places as I am, a buyer is bound to find both adverts. Neither of us will identify the business for sale so the buyer has to contact us both.

I will ask him to sign an acknowledgement of introduction so I have proof that I introduced him, later he will find out that you are advertising the business at a lower price and either will want to circumvent me or will argue for a lower price.

If you then bypass the agent, he will then ask for his commission as it is due for the introduction to a buyer.

You will be in other works working against yourself in reducing your own selling price but still owe the commission.

Some business owners have had bad experiences with certain agents. My advice is to research the market before you sign a contract, if you dont it is your own fault if you have a bad experience with a less than good agent.

 

[Cobby]

My advice is to research the market before you sign a contract, if you dont it is your own fault if you have a bad experience with a less than good agent.

And if the seller does their research and still gets ripped off? Whose fault is it then?

Research is always helpful but at the end of the day it's one of those sectors where you have to be a particular kind of person to work in it, so the potential is always there for a bad experience.

 

[Rhodes100]

And if the seller does their research and still gets ripped off? Whose fault is it then?

Research is always helpful but at the end of the day it's one of those sectors where you have to be a particular kind of person to work in it, so the potential is always there for a bad experience.

What kind of person are you talking about! One this is interested in making a lot of money for their clients I guess

 

[Cobby]

What kind of person are you talking about! One this is only interested in making a lot of money out of their clients I guess

Fixed that for you.

 

[Rhodes100]

Nothing wrong with making money out of a client. That is called business. Provided you provide a service and make more money for them. I have realised millions for my clients by finding buyers for their businesses.

 

[Cobby]

I think you missed the "only interested" bit and went straight to the bit about making money. But then that kind of proves my point doesn't it.