It may be that the HR sector lends itself to meticulous detail and record keeping, or it may just have been the nature of the founder of this business, but there was so much that was right about this business it might just have been a perfect business sale.
Firstly, some background
- First contact with client was early 2019
- Client researched the broker market and how we operate by making a number of enquiries on existing business sales with multiple brokers
- After instruction, data gathering and preparation, the business came to market in early Autumn of 2019.
- More than 90 unique enquiries were generated for the business sale
- 3 put forward serious, considered offers
- By January 2020 one offer had been formally accepted
- Despite the first pandemic lockdown causing delays and dropping everyone into a new, remote way of working, the sale completed in the summer of 2020
- Deal structure, 85% paid on completion with one final payment in 6 months
The HR business
What made this particular business unique was that the owner still ran their HR consultancy business, but had franchised the operation with a number of franchisees across the UK replicating that business success under one brand.
This made it just a little bit different from other HR consultancies on the market at the time.
Procedures, procedures, procedures
Like we said at the start, the HR sector might lend itself to being procedurally heavy compared to others. If you are advising employers on employment factors there has to be documentary evidence of everything in case of a future claim. However, the procedures and documentation of this business were exemplary and credit has to be given to the founder who instilled that discipline from the very start.
So not only were there clearly documented procedures for working with clients, there was an entirely different and detailed set of procedures which went from the vetting and selection of new franchisees, franchisee onboarding and right down to specific pricing for each service offered.
What other business sectors might see as an overload of company bureaucracy, was hugely beneficial because it gave;
- proof of work for compliance purposes
- a step by step process to follow for new franchisees as they found their feet as business owners
- continuity across all departments and all franchise offices
Just as important, in terms of selling the business, it was evidence that could be presented to a buyer which demonstrated exactly how the business should be operated and grown. It also demonstrated how clients were recruited and in which niche markets they operated as well as the whole process for finding and adding franchisees. Simply a proven plan for growth.
Extra recurring revenue model
Undoubtedly, what elevated this business above others being sold at the time was the franchise aspect. Some potential buyers just didn’t want to go down this route, but those who were curious appreciated the fact that every month, each franchisee would drop their monthly franchise fee in to the company bank account.
Regular, recurring revenue streams are the goal for every business. It’s cash that comes in every month, often by direct debit, which you can rely on receiving for ongoing services that are provided. In this business, they not only had defined their customer packages to be sold as ongoing retainers, but they also had the franchisees paying their monthly license fees into central funds. Two recurring revenue models.
The result was the same. Steady, reliable payments into the business that a buyer can predict as ongoing cashflow and profits. That’s attractive to any buyer in any industry.
Perfect buyer
The systemised, process driven model this business had established made it a simple acquisition for a trade buyer to bolt on to their operation. And that is exactly the profile of the successful buyer.
They essentially bought this business to acquire the expertise for the niche in which it operated and that they wanted to get into. They saw the benefit of acquiring the expert employees and franchisees combined with well defined processes making it incredibly simple for them to cross train their own staff after the merger.
Was this the perfect business sale?
If we had run this business through one of our Value Builder Surveys at the start, it would have scored highly and any improvements that could still have been made would have been minor ones with little impact on sale value. So the role of Uscita in this sale was much more one of;
- guidance through the sale process
- vetting the 90 enquirers to a short list of those who had the expertise, willingness and funds to purchase
- negotiating the best offer price
- managing the sale process to a successful outcome for all parties
The timeframe from start to finish was good, especially considering Covid19 hit part way through. The business generated a lot of interest, which included a number who could have purchased the business and whilst there are always a few hiccups or teething problems in any sale, none where insurmountable.
Was this the perfect business sale? It came close and our job was certainly made easier, but I think we’re still looking for pure perfection.
If you’d like to delve more into creating standard operating procedures for your business, why not download our free guide. If you’d rather set some time aside to speak with us about your business and your plans for selling, please do get in touch.
