Selling a business - some advice please

[cakeboy]

Looking for some advice and pointers please.....

I am now looking at selling my online advertising business. Turnover £1.1m, EBITDA £680k.

I know there are a million questions I need answering but here's some starters;
How do I go about marketing my business, and finding potential buyers?
How do I keep this quiet from employees and our competitors ?
What type of advisors do I need for such a sale? and what fees would I be looking at?

Plus the million dollar question can anyone give me any pointers as to what the business might be valued at?

Any help you can supply would be greatly appreciated.

Cakeboy

 

[vvaannmmaann]

From that turnover,what is pure profit?

 

[IANL]

Looking for some advice and pointers please.....

I am now looking at selling my online advertising business. Turnover £1.1m, EBITDA £680k.

I know there are a million questions I need answering but here's some starters;
How do I go about marketing my business, and finding potential buyers?
How do I keep this quiet from employees and our competitors ?
What type of advisors do I need for such a sale? and what fees would I be looking at?

Plus the million dollar question can anyone give me any pointers as to what the business might be valued at?

Any help you can supply would be greatly appreciated.

Cakeboy

If you have that kind of business you should be talking to some professional advisors.

I would assume with that level of EBITDA you're a service business. This will then depend on the histroy of those profits and if they can be maintained. Any on-going contracts.

Put it this way I have seen businesses have offers from £500k to £6m for the exact same business. It will depend on who the buyer is and what their motive is for the purchase.

They are many advisors out there. BCMS is a good one but expensive. Do not go to a listing agent. Beer Mergers is another.

You need an advisor to work with you and they will shortlist potential buyers and then invite offer. All under an NDA. The advisor can handle all enquiries and keep the staff from getting any idea of what might be going on.

 

[Billmccallum]

Looking for some advice and pointers please.....

I am now looking at selling my online advertising business. Turnover £1.1m, EBITDA £680k.

I know there are a million questions I need answering but here's some starters;
How do I go about marketing my business, and finding potential buyers?
How do I keep this quiet from employees and our competitors ?
What type of advisors do I need for such a sale? and what fees would I be looking at?

Plus the million dollar question can anyone give me any pointers as to what the business might be valued at?

Any help you can supply would be greatly appreciated.

Cakeboy

Far too many questions have to be asked before advise can be offered.

What is the net profit?
What debts does the business have?
What does the balance sheet look like?
What are the forward projections?
Is there room to reduce costs through merger with a like business?

As already stated, it can vary wildly depending on a range of factors, could be less than £500K, could be millions.

 

[cgwpublishing]

Rather than getting bogged down in the financials, I will address your other question; how to keep it from employees and competitors?

Devil's advocate - why would you? Your competitors are your most likely purchasers, and your employees potentially need to know your plans now, because it would then be in their best interests to support you. If you don't tell them, they're more likely to leave because of mistrust than fear for their jobs.

However, I would say that the best way to keep it quiet is to go an agent who will anonymise your company. However, they will approach your competitors, who will essentially be buying your order book and goodwill, and they will quickly guess who you are anyway.

If a competitor acquires you, there will be some economies and therefore job losses. Better to allow your staff to manage that with you, once negotiations are seriously underway, rather than receive surprise redundancy notices from the new owner.

If I were buying the business, I would be very interested in the quality of staff and the way in which they had been managed through the sale. If you kept that from them, what are you keeping from me?

Christopher

 

[Billmccallum]

Rather than getting bogged down in the financials, I will address your other question; how to keep it from employees and competitors?

Devil's advocate - why would you? Your competitors are your most likely purchasers, and your employees potentially need to know your plans now, because it would then be in their best interests to support you. If you don't tell them, they're more likely to leave because of mistrust than fear for their jobs.

However, I would say that the best way to keep it quiet is to go an agent who will anonymise your company. However, they will approach your competitors, who will essentially be buying your order book and goodwill, and they will quickly guess who you are anyway.

If a competitor acquires you, there will be some economies and therefore job losses. Better to allow your staff to manage that with you, once negotiations are seriously underway, rather than receive surprise redundancy notices from the new owner.

If I were buying the business, I would be very interested in the quality of staff and the way in which they had been managed through the sale. If you kept that from them, what are you keeping from me?

Christopher

Adding to Christophers reply, your staff could well be buyers of the business...

 

[Chris Ashdown]

Can the business survive without you in the driving seat

 

[cakeboy]

thanks to all for your replies so far.

Im actually most interested in the 'how do I market it' and what advisros/how much they cost. so any further thoughts on that.

I fully understand that the price could be wildly different by buyer.

To answer some of the questions above;

yes the business could run without me.

there si no debt (other than outstanding running costs invoices)

forward revenue streams are a round £20-£30k per month 'regular' with th rest sold by month.

relating to staff, no they couldnt be buyers - not got the nous, money or desire to do it. My concern is if I tell them then any sale falls through they get the jitters. My own view is wait till its a done deal then tell them. Would thsi be wrong? Ecomomies of scale could lead to job losses if a comparable company bought it.

If we approch competitors whats to stop them a) poking through our business then saying 'no thanks' plus what message does it give the industry/clients if we then dont sell?

 

[WHUK]

Looking for some advice and pointers please.....

I am now looking at selling my online advertising business. Turnover £1.1m, EBITDA £680k.

I know there are a million questions I need answering but here's some starters;
How do I go about marketing my business, and finding potential buyers?
How do I keep this quiet from employees and our competitors ?
What type of advisors do I need for such a sale? and what fees would I be looking at?

Plus the million dollar question can anyone give me any pointers as to what the business might be valued at?

Any help you can supply would be greatly appreciated.

Cakeboy

Your business has a good turnover and thereby you might be having a good customer base. I think you must concentrate on the online marketing of your business. This will prove to be an efficient way of marketing your online business. Blogging, article writing and maintaining a good presence on the social networking website will prove beneficial in terms of connecting with your customers.

 

[vvaannmmaann]

WHUK,how does that answer the OP's original question?

 

[IANL]

thanks to all for your replies so far.

Im actually most interested in the 'how do I market it' and what advisros/how much they cost. so any further thoughts on that.

I fully understand that the price could be wildly different by buyer.

We were answering one of your original questions.

Plus the million dollar question can anyone give me any pointers as to what the business might be valued at?

forward revenue streams are a round £20-£30k per month 'regular' with th rest sold by month.

Just so we are all clear what EBITDA is, I am not suggesting you don't but there are many that don't understand.

Revenue (net of VAT)
Less Direct Costs
Less Indirect Costs
Less Overheads (inc all salaries)

Profit before Tax, Depreciation and Interest

30k per month = £ 360k revenue + you other revenue before you take of your direct costs and overheads. Is you figure still £ 680K?

relating to staff, no they couldnt be buyers - not got the nous,
money or desire to do it.

You have said the business will run without you yet your statement above indicates they are not managers and self motivated. I wouldn't underestimate your staff.

My concern is if I tell them then any sale falls through they get the jitters. My own view is wait till its a done deal then tell them. Would thsi be wrong? Ecomomies of scale could lead to job losses if a comparable company bought it.

I would keep as much to yourself as possible for as long as possible. When you hear rumours tell them as much as they need to know and reassure them that's it's a positive step. If any deal takes along time or the employees don't like the prospective buyer they may look elsewhere or a competitor may pick them up. When these things happen you'll find peole start to worry about job security and you'll end up managing their concerns rather than driving the business.

If we approch competitors whats to stop them a) poking through our business then saying 'no thanks' plus what message does it give the industry/clients if we then dont sell?

The stage of prospective buyers looking through the business is pretty close to the deal being finalised. Get a good advisor ( a retained one) Get a good prospectus and drive for more business and let the advisor do the sales handling.

BCMS quoted me £ 36,000 + a commission. Others will be less.

BCMS will market your business actively and invite initial offers based on the prospectus inc past figures and future projections.

You need to pick someone that understand the sales process, you'll also need to get a good accountant to mitigate and CGT that may happen.

 

[jim_price]

Some very useful tips from IANL.

The management issue could be a thorny one for you as there seem to be mixed messages about their skills set. One of the key value drivers on an exit will be the quality of the staff that any buyer is inheriting. You might consider addressing any skills gaps before marketing the business.

Turning to marketing the businesses, any professional in this arena will spend a good deal of time researching the market place for potential buyers. These could be competitors, players higher or lower in the supply chain or indeed private equity houses. The key is to put yourself in the buyers shoes and think to whom does this acquisition make most strategic sense. That is how you will get the maximum price for the business.

 

[tomsmith2010]

Do what you love. You’re going to devote a lot of time and energy to starting a business and building it into a successful enterprise, so it’s really important that you truly deeply enjoy what you do, whether it be running fishing charters, creating pottery or providing financial advice.

 

[sellmybusinessonline]

Judging by your headline financials, you’ve got a great business that will generate lots of interest – particularly if not reliant on the owner operator and forward visibility of earnings. Some of our thoughts below;


1. 1. Don’t overlook the absolute importance of good preparation. Good preparation plays a key role in driving up value. Make sure all financial information is up to date and ideally, start marketing your business for sale, close too or just after your year end. Clear up loose ends – settle any litigation or employee disputes, sell of any non-performing assets etc. Present your business to market in the best shape possible. Good buyers are tough to find and easy to lose.

2. 2. Discussing a sale process with employees is fraught with risk and not ideal – particularly during the initial stages of a sale process. It could unsettle key employees and create the potential of market leakage. With a business your size you’ll be dealing with relatively sophisticated buyers who will understand your need to be circumspect.

3. 3. Best price is likely to be driven from strategic buyers and that may include your competitors. Handling competitor enquiries is delicate and involves a strict control of confidentiality and both when and how to release key information. This is where using a good quality advisor is recommended as they have the experience and process to initially protect your anonymity and then control the flow of information in a way that best protects your interests.

4. 4. Using a good quality advisor is not just about finding a buyer and driving up the price it’s also about protecting your value through the process. Getting a deal to completion is rarely an easy process and can involve many twists, turns and potential deaths. No matter what price is agreed in heads of terms there is still a huge amount to play for in getting the deal through to money in the bank. That’s where a good advisor really earns their corn.

5. 5. How do you choose a good advisor? Reputation, recommendations, experience, qualifications, testimonials and just as importantly, can you work with them? Do they make you feel comfortable? Selling a business is an immensely emotional process and will often have some sharp and frustrating twists and turns. Can your advisor provide the quality and experience to support you through the process in a way that enhances and protects the value of your business?


6. 6. Pre-market valuations are sometimes difficult to judge and often pointless to provide. It's a true cliche that price is always dictated by what it’s worth to the buyer. Prepare well and get in front of as many buyers as possible, preferably strategic. Then you’ll find out the potential value of your business.

 

[tmears]

Hi

I presently work for a corporate finance business (Knight Corporate Finance) predominately working in the Telecoms and IT industry and as a business we have completed 29 transactions in the past 2 years, so if you have any questions, )not matter if you think they are sill) please do not hesitate in contacting me, and i will be more than happy to assist in any way i can

Kind Regards

Tim