For Ecommerce or Online Businesses, Details of Web Traffic, Size of Customer / Subscriber Database, Google (or similar) Analytics. Social Media details.
The thing with online businesses is that all data provided to prospective buyers needs to demonstrate the presence of that business. A high-street shop has the bricks and mortar premises and footfall can be measured, whereas even the best designed website needs to demonstrate this by the accumulation of relevant data.
The best tool for this of course is Google Analytics although most sites have a back-office system with traffic and sales data available in all types of format, tables, graphs. pie-charts etc.
Ecommerce sites have a valuable resource in their customer databases. These can be used for e-shots with special offers, new products, new seasonal collections or just general chatter designed to build up a customer relationship. Sites which make money via subscription or similar revenue models will also have a database which can be used for marketing in the same way.
Social media is also a vital tool for online businesses and can be used in several ways for marketing and to increase the presence of the business.
So, when presenting an online business for sale, whilst it may need all of the usual business information such as accounts, assets and so on, the business model also has its own specific evidential requirements as outlined above.
If you are considering selling an online or ecommerce company please CLICK to get in touch for our Ecommerce Fact Find and Questionnaire which enables you to provide all of the necessary information via a simple-to-follow Q & A form.
December 11th 2014
Continuing my exploration of the items needed to prepare and present a business sale file I now come to item 3 on the checklist, an asset inventory.
Buyers will expect a business to come with all assets necessary to continue the business as a going concern. By preparing and presenting a list of fixtures, fittings, equipment and assets early in the sale this can be clarified and quantified. It may also assist both buyer and seller if anything is to be excluded from the sale. e.g. a personal vehicle or computer.
These days one would expect there to be some element of intellectual property (IP) in any sale, at the very least most businesses will have a website and a domain name or names. Then there may be specialist software and licences depending on the business concerned.
In general, with most SME businesses it shouldn't take too long to prepare an asset list. It should be made clear that the assets included in a disposal are subject to contract and it may be necessary to complete a far more detailed list for contract purposes. Things may change anyway with items being replaced, disposed of, updated etc. As our focus is on the marketing and sale it isn't necessary to be too detailed. For example, for a cleaning business you would not be expected to count every mop and bucket but more expensive items like vans, floor cleaners, ladders, vacuum cleaners, window-cleaning pole systems etc. should be included.
It is essential to note where any assets are leased, rented or on finance. A buyer would ask about this in due diligence but knowing this in advance will save time. A shiny new Ford Transit van may look good on an asset list but if the buyer has to take over financing of £300 per month he/she would wish to know.
So, compile a list, and like Santa in the well-known song, check it twice. One client forgot to put his telephone system on his list. It is reasonable to assume it was included in the sale but, of course, telephone systems are often leased and the lease may need to be transferred to the new owner.
November 12th 2014
In my last blog post I wrote about Preparing a Business for Sale. Now I am going to delve into that in more detail.
Below is a copy of a Checklist I send to prospective new clients and over the next few posts I'll expand on the information needed to successfully market and sell a business.
INFORMATION COLLATION CHECKLIST - BUSINESS VALUATION & DISPOSAL
This checklist outlines most of the information needed to compile a business sale file.
PREPARATION PREPARATION PREPARATION
As we are now into the new Tax Year and for many many businesses the financial year ended on 31st March you may be thinking of selling your business, or obtaining a business valuation.
The key to a successful sale or a meaningful valuation is of course, preparation. It may be too soon to have the 31st March Accounts finished but certainly these should be put in hand as soon as possible. Also get your Sage or other management systems closed down for the year end. Accurate and timely accounting information is key to achieving a sale and will give your adviser the up-to-date data he or she needs to value your business.
Next, in respect of a sale you should be checking all other business records, agreements contracts etc. are fully up to date and compliant with current legislation. If your business has premises, whether leasehold or freehold you will need an EPC, Energy Performance Certificate. If you have staff they should all have contracts of employment. Wherever possible it will assist a sale if you can secure contractual work with your customers. You may not wish to tell your suppliers or customers you are thinking of selling so any approach to secure work or supply of goods/services will need to be carefully made.
Of course any blog article pertaining to preparation for a business or company sale can only scratch the surface so please take advice from the experts and do not rush. Shortcuts in preparation will inevitably catch you out in due diligence or during contract negotiations, leaving you with possibly a heftier than necessary legal bill and/or worse could be a dealbreaker.
As always I will try to assist prospective clients and, as a first run through for preparation I have produced a simple 1 page Checklist available HERE.
I offer free advice, no obligation and am willing to answer any questions, Please get in touch on 01256 770907 or via the CONTACT form.
About 2 years ago I valued a small business at about £60,000. The client was a little disappointed and said could we ask £80,000 so I agreed. After all there is no "right" price for a business and the vendor did have fantastic premises on a really low rent through the local council so I thought we might get some extra valaue there.
I took instructions to sell the business and we had a few viewings but no real interest or offers were forthcoming.
So, about 6 months or so later my client was tele-canvassed by a major business broker. Something along the lines of ... "do you want to sell your business? We're the biggest, we're the best, come talk to us" My client was seduced by their big talk and met one of their valuers who valued the business at ... wait for it .....£99,950. So he says "we'll sell this, no problem, blah, blah, blah". She was convinced and signed up there and then, handing over a cheque for their big fat upfront fee as well.
She called me to tell me what she'd done. "Oh dear, oh dear, oh dear" says I. "These guys are pretty useless, can you cancel the agreement?" It turned out she couldn't and decided to give them a go, especially as she had signed up for a 12 month agreement. She did ask them to drop the price a bit though.
I told her I would continue to market the business (at the new price) and, guess what, I got an offer of £80k. Well, to cut a long story short the offer didn't go ahead. The buyer was good for the money and wanted to proceed but my client felt he was going to make too many changes and wouldn't give her assurances that staff jobs were safe. But I got an offer. And there was also another buyer who wnated the business but couldn't raise the funds.
Meanwhile the other broker seemed to be doing nothing apart from posting a gushing advert on their website. You know the sort of thing..... best business in town, fantastic opportunity etc. etc. blah etc.
So, 12 months later here we are. The other broker didn't get a single viewing, offer or interest and my client has terminated her agreement with them. I'm sure they are not too sorry as they are also charging her an exit fee on top of the initial fee she has already paid. (We don't charge exit fees).
Although she never really left me as a client she is coming back on with Anderson Moore as sole agent. Watch this space.
Partner - Anderson Moore
I valued a nice family business, established many years and with a good level of profitable turnover (turnover nudging £400k).
Having run through the usual fact find, obtained accounts information, raised queries etc. I reckoned the business had a value circa £125,000 to £150,000. Of course, any business valuation is a matter of opinion and the old cliche is, it's worth what somebody is prepared to pay. But, knowing that any vendor wants maximum value for their business I tend to run on optimistic principles but try to add a touch of reality. If this client had asked me to advertise at (say) £175,000 I would have been quite happy to do so.
Anyway, after discussion the prospective clients decided that they would prefer to continue running the business for a year or two longer. Although they were approaching retirement age they felt they had the energy and drive to continue for a while - no problem there.
So, today, looking through www.businessesforsale.com I find the business advertised by another broker for £255,000. Now I don't have a problem with competition and if the client preferred the other broker then fair enough. Also, the broker may have found value in the business that I simply didn't find. But I doubt it.
All too often I see businesses blatantly over-valued to get the instruction, usually to get the big fat upfront fee also and to lock the vendor into an unfathomable lengthy selling agreement as well!
I sincerely hope that isn't the case here and that the vendors achieve a sale at a good price. Maybe I'll give them a call and see how it's going.
Have we lost the ability to negotiate? In the last week I have spoken to two prospective business buyers about two very different types of business. Both of them said they were very interested in my clients' business but neither were prepared to put in an offer.
In both cases they considered the business to be overpriced (although one lady hadn't even completed an NDA nor had she requested the accounts, psychic maybe?). Fair enough...........but surely you expect the price to be a moveable feast and open to negotiation don't you?
I go to some trouble to advise my clients as to what I see to be the right price for their business. In 90% of cases we always set the price at a higher level for two reasons:
1. to give negotiating headroom.
2. as all businesses continue to trade and develop whilst on the market it may be that the valuation does actually improve: setting the price at a higher level than perhaps a current-day valuation leaves a cushion to allow for this.
Maybe I have got it wrong but surely one should consider whether the business is of interest then go about discussing the price. Why pull out before getting to price negotiations? Especially if the business is suitable in every other way.
Keith Green - Partner, Anderson Moore
What do buyers and sellers expect from the broker or agent selling a business?
For the buyer you surely expect the broker to have a reasonable factfile on the business and to obtain much of the pertinent data to explore the business prior to offer and due diligence etc.
For the seller you would also want your business to be effectively marketed and presented, would you not?
Why then do so many businesses find themselves represented by volume brokers with little or no interest on any individual client? I occasionally work for buyers and have recently completed an NDA to obtain details of a small Printing Business for a good quality, cash buyer. Despite chasing the broker (a large national name) I have had no response and no information. My client has given up and moved on.
Our businesses are well-represented and I would usually have, as a minimum:
3 years Accounts
Latest management or trading figures
A recent statistic sent to me by a guy who has worked for a major M & A firm (he got the data from Coutts and Co.) is that only 7% of UK SME businesses marketed for sale last year were actually sold. Our success rate is 60%. I wonder if the Print Business in my story above has been sold yet?
Keith Green - Partner, Anderson Moore
Keith Green - selling businesses and advising SME business owners since 1997 and still enjoying it.