Who's Best To Sell My Business?

angel-delight_5

Thinking of selling my business and have had two valuation (so far).
One by SBS from Bolton, the other by Dowling Kerr, however the valuations are vastly different. The cynic in me thinks that the higher valuation has been inflated in the hope of enticing me! Was wondering if any of you have used either of these companies, or if there are any recommendations for any other agents I could approach, also what are the pitfalls I need to look out for? I have a convenience retail store in the north west midlands. Thank you.

WHA

I am an accountant who has had many clients buying and selling businesses - typically small ones such as guest houses, shops etc.

Over and over again, the large specialist business sale firms (Manchester for example) come up with very high values - these encourage the gullible to sign up - often large non-refundable payments in advance to cover their advertising (or so they say). In my experience, very few viewers are found and the business stays on the market - for several months if not years.

By contrast, there are likely to be some local commercial estate agents, often selling workshops, shops, industrial land, etc., who in my opinion tend to be far more realistic about prices. They are more likely to give a value which they believe is likely to sell the business, and are more likely to work on a negotiable "no sale no fee" basis.

If your business is highly profitable, has a high turnover and is in a good location, then the larger agents may be better as they may have contacts with store chains (Spars, Tesco local, Co-Op etc) who may be interested. However, if it is just "making a living" for you, you may struggle to sell for much more than the bricks and mortar price, and a local agent may be a better option.

Over 10 years ago, our family tried to sell our corner shop which had been run by my parents for over 20 years. The Manchester agents came up with valuations of between £110k and £140k. Went with one for six months (over £1k up front costs) - only 3 viewers, no offers. After six months, changed to another - another six months and £1k costs - 2 viewings, no offers. Then to a more regional agent - 6 months, no fees, but few viewings and no offers either. Finally, 18 months later, went to a local town centre agent - a dozen viewings within the first 10 days, offer within 2 weeks, sold a month later. Manchester agents - £140k - regional specialist £100k - town centre firm £70k which was the eventual sale price almost 2 years later! Funny thing was that the town centre firm had originally suggested around £100k two years previously when the market was stronger - if we had gone with them then, we would have probably not waited for 2 years for £30k less!

There are other ways to get a realistic value of your business. Get a local estate to give you a value for the property only - i.e. bricks and mortar without any business - as an investment potential value. This gives the basic property value (assuming you hold the freehold). Then get your accountant to give you a valuation of the goodwill (i.e. the business itself, not the property or equipment). Your accountant should also be able to offer recommendations of agents from his local experience. Finally take an inventory of the equipment you will be selling at realistic current market second hand values. Add all three together and you come to a sensible "base" value for the business - you can then ask for that amount and a bit more to allow for negotiations.

Remember, at the end of the day, the value of the business is only what someone is willing to pay for it. I have seen businesses sold for well over their realistic value, and also good businesses sold for a pittance, just depending upon who happens to be looking at that time.

Take as much advice as you can. Good luck.

angel-delight_5

Thanks very much for your reply, you raised some interesting points, especially about the larger agents over-inflating the price. I'll continue to get more valuations and will speak to my accountant to see what advice he can offer. Thanks again.

monty_3

A very interesting but all too common scenario. I have recently purchased the UK/Irish master franchise rights to Sunbelt Business Advisors, the largest business brokerage firm in the world after going through exactly this type of situation myself when selling two pubs/restaurants. We now have a brokerage office in Covent Garden and have started selling franchises to some very capable and highly professional individuals, from South West London to Coventry. We expect to have about 6 or more offices open this year with a lot more to come. From my experiences to-date, and I must add we get a lot of business in our area as we definitely do not charge up-front fees, there is a natural tendency to want to give an owner a higher valuation. However where I find it stems from is the owners unwillingness to accept the reality of their business being worth a lot less. I try to tell people whom I think are way off the mark, and my reasons why, but in many cases they are not interested in listening and honestly feel they know best. Rather than upset them and end up without a listing, if they won't start off at a more realistic price I simply smile, take the listing and put it on the site. Invariably what happens is they phone me up after a while and ask how things are going and I have to tell them straight that XXX number of people have viewed the listing on the website but only x number have formally enquired and none have then asked to arrange a formal viewing and this is simply because the price is to high. Slowly, very slowly, the penny drops. It is hard work from my perspective but there is little one can do other than to walk away and not deal with them which is then a costly exercise. I find it better not to argue and go along with them. If I were going to charge an upfront fee then I would have an ethical duty to be very firm with them that XXX price is utterly unachievable. In fairness to SOME of the brokers that charge an upfront fee many are decent honest people and I am sure a percentage does go towards costs, however there are indeed many whom are really just living off these fees. Sunbelt charges 8 to 10% upon completion of the sale of a business and we handle all aspects of the sale, so while we charge more than most we are prepared to put in the time and effort to achieve the eventual sale with no financial commitment from the owners. It works for us and we have quickly picked up referrals from people looking for an honest broker with integrity. We hope to have an office near you soon and please feel free to take a look at our website https://www.sunbeltnetwork.com/uk we have nearly 400 offices in 11 countries and have been in business for over 25 year. Best wishes, Stuart D. Montgomery.

lifecoach_2

I used to be a business transfer agent, (hopefully regarded as an honest one!) and charged an upfront fee and hardly every cut my standard fees.

The value of a business is what someone is willing to pay, not what an agent suggests.

I would say beware if a valuation provided by an agent is much higher than any other, especially if the agent then wants a large upfront fee £500 - £1,000. There would be no incentive for them to sell the business.

Like anything, get a number of quotes, and compare not only the valuation, but upfront fees and commission based fees.

Generally you should not be expected to pay more than 5% for a leasehold or 3% for a freehold property.

If you do not totally trust the agent you may insist on an agreement without sole selling rights. That way you can use a couple of agents. But be aware of termination clauses in many agents agreements, you may end up paying a large figure even if an agent does not sell.

So do your homework.