Selling or Buying a Small Business

[Denise Goodfellow]

Try a dedicated business agent, it’ll cost but you can always put the price up to cover it..

We tried to sell a business a couple of years ago. It turned over £100k and made huge profits. Materials £5, sell for £30. Took 2 minutes to make. Based on figures from other businesses we thought it would be worth £50k. We couldn’t sell it, a few tyre kickers etc. In the end it was sold for £12k, to a friend and we gave him 12 months to pay us.

He paid us back in 3 months.

I’ve search and search for how to value a business for sale, got a few different answers, some only sell for the equipment costs sadly.

Today you can become a signmaker for £400, so some folk can’t see the point of buying a business for lots more…

Try Facebook, advertise in a category that might relate to the business. Eg. Car forum if it’s stickers or number plates.

[David Hammond]

As Denise says, small businesses are pretty worthless. They often rely on the owner to keep it running, so selling up comes with some risk, and devalues to goodwill.

Unlike service providers we’re unlikely to have customers tied into contracts. The assets aren’t worth much either.

Have a look at the UK business forums, there’s lots of discussions on there about this. In essence it’s worth what someone is willing to pay. There is no formular or rule to valuing a business.

[Billy Wright]

quote James Bateman:

I’ve tried Gumtree and Ebay.

They’re the 2 lower end, blast it out, selling my dining room business ones. Mainly OK for assets, but useless for ‘the business’ unless your pushing people to your listing (like posting on here, and saying see it on eBay). Have a look at any of the business for sale categories on eBay, then search the ‘completed listings’ and you’ll see very little sells.

However, plotters, vinyl off cuts, tools, presses etc etc sell well. Not mega money, but they sell.

https://uk.businessforsale.com/ is always worth a look, as is https://www.daltonsbusiness.com/

But like David and Denise say, trying to sell a ‘one man band’ is a nightmare. However, it is, as they say, a buyers market. Try marketing as a ‘bolt on’ business if you can, and contact other businesses in the area, who do similar, who may be interested in expanding into a different area.

[Hugh Potter]

I agree, this is a very difficult thing to do. We looked at relocating last year and decided that it may be better to sell rather than try to move a business 200miles away.

Our GP back then was around £65k with a NP after wages etc being around £20k (my dividend on top of my basic salary), so we knew the business as it was made around £32-35k, however, trying to sell as a whole is not so easy, the equipment still has some finance left on it and many prospective buyers may not want the equipment / debt, we rent a building so there’s no assets other than the £20-30k of equipment and stock.

The only way we could see a value was by looking to sell to an existing local sign co, an accountant I know who’d brokered a couple of deals in the past for print businesses said the best way was this… look at your sales figures alone, deduct all your material costs and you have a net sales profit of say £40-45k from the gross sales figure (i’m guessing figures there), then approach a larger or similar sized competitor who can take on the extra work and has staff who can deal with the work without having to expand premesis or necessarily take on extra staff, you’d have to include the trading name, customer lists, website, facebook page and so on to ensure all your custom and enquiries went through to them. That way the sales figures / profit would be a good estimate of what they could expect to make from your sale to them. upon sale and deposit being received, you clear all / any finance / debts. This way they are adding an estimated value of sales that they can cope with, without the need to extra spending, it would effectively be an extra £40k of sales without doing anything expensive to gain it.. that is the theory.

In reality you’d be lucky to get 50-75% of that annual sales profit figure. You would also have all your equipment and stock (paid for now) and some capital, you could relocate and start again somewhere, or sell on.

Our plans never went ahead, we’re still here and busier than ever – though we are now looking to relocate to larger / more practical premesis again!

The difficulty really is that you’ll struggle to find a local company to take this on, if you simply close they’ll get a % of the work drift in anyway!

[David Hammond]

The other thing is how sales are structured.

My uncle sold his print busiess with a view to retiring years ago. The deal was done, he was employed as a consultant for a few years, paid a nominal amount, thr balance 12 months later.

Trouble was the new owner scuppered the company before he got paid for it, the owner tried to keep the clients & contracts but failed.

It is not always plain sailing.

[Jack Mackenzie]

Alot of the small businesses are just a unit lease and printer these days and they guy values it at far to much.

[Steff Davison]

quote James Bateman:

Hi Guys, I need some advice:

Does anyone have experience from selling (or buying) a small business?

I’ve tried Gumtree and Ebay, but you mostly get tyre kickers and people that don’t quite get what it takes to be an owner/manager to run a small business.

Any advice or examples/experiences that you know about would be greatly appreciated.

Cheers,

James.

Be careful, there are many sharks out there who "specialise" in selling businesses. They will tell you they have clients waiting to buy a business like yours for more money than you think its worth etc. many are just scam merchants.

How you sell and who you use to help you sell, will depend primarily on how much turnover your business generates, sub £1million is considered too small to be of interest to professional business sales advisers (the good ones) who will add value to your business sale.

As has been suggested, read up on the subject. If you are a smaller business (sub £1million) then learn how to prepare your business for sale yourself. As for valuation, THERE IS NO FORMULA…its worth what the market will pay.

Oh and dont sell potential its not worth a bean.

Steff

[Phill Fenton]

A couple of weeks ago I received an unsolicited email from a company that specialises in the sale of businesses. They have a website that you can enter details about your company turnover and profit and it returns an estimated value for your business. Out of interest I entered my business details and was astonished at the high value it rated it at. Even the lower range was many multiples higher than I personally would have valued it. This was followed up a few days later by a phonecall offering me a more thorough free evaluation. I must admit I was tempted to take up their offer, but after some discussion with Alison we decided to decline their offer. A few days later I had another call and explained to them I was not currently looking to sell and did not wish to waste their time.

Having since read Steffs comments above I decided to google this company only to discover a lot of negative feedback and complaints just as Steff has described. I can see how easy it would be to be tempted into taking up their offer of a free valuation only to be sucked into a situation whereby you end up saddled with fees when you try to pull out.

I think I may have managed to dodge a bullet, not because I was smart (I was really taken in) but simply because I was not actually looking to sell and felt I would be wasting their time. I suspect if I had taken up their offer I would have been seduced with tales of an easy sale at high value whereas in fact they are simply looking to land me with a hefty fee when I eventually decided to pull out of the arrangement after a non sale.

Take Steffs advice onboard. :thumbsup:

I would be very carefull who you use if looking to sell. Probably best to speak to your own accountant in the first instance.

Actually a similar thing happens with SIPPS (Private pensions). Once you sign up with a SIPP provider you will find they will charge hefty fees should you decide to go elsewhere. It’s a problem that needs to be
addressed.

[Pane Talev]

Like some advice above on this thread, my personal few words on this matter.
If you are looking to sell – build up the business well first.
I was selling and was not able to sell for the money I wanted.
One band businesses are valued 0£. I do not agree but that is a reality.
You are the business I was told. You are gone – there is no business.
Although my numbers looked pretty good.

[Simon Worrall]

IMHO a business only becomes viable for sale if it can run independently of any input by the owner, and provides a positive income on top.
Anything short of this and you are only selling a job, some tools, and some stock.