This article was originally published on the 8th of July 2017.
We’re delighted and proud to celebrate 15 years in business this month. 15 years of supporting and helping clients with the sale of their business. Help in searching for new acquisitions. Help with valuations and help to ensure these businesses were fit for the sale market.
Boy, we look young here. No grey hair back then (not so much at least).
What’s changed over 15 years of business
It’s important to remember that the world we started operating in 15 years ago was very different. We were very much on the cusp of a technology revolution.
2005 saw the launch of Google Maps. The Nintendo Wii revolutionised gaming. YouTube launched that same year with Facebook and Twitter quickly following in 2006.
The first iPhone didn’t arrive until 2007 since when they got smaller, then bigger and then miniaturised into watches.
We are contactless for payment, Zooming for global connectivity and Grannies and Grandpa’s all over the globe are one of the fastest growing groups of online users.
We embraced flash drives after waving goodbye to CDs only to now store everything in the cloud.
So what effect has it had on the role of a Business Broker?
Reflecting on our first clients
The first client we took to market, and also the first we sold, was a care business supplying staff into private homes. The business matched the care needs of clients to the qualified staff on its books and placed them accordingly. We have represented a number of care businesses since including Olive Tree.
Like so many clients in those early years, we were helping a business owner to retire. Retirement is still a key demographic for our clients now.
How the profile of an entrepreneur has changed
Looking back, entrepreneurship in 2005 was about to change, radically. Back then building your own business was a lifetime commitment to create a legacy.
Driven by fast-pace emerging technologies and the companies that supported them, the average age of an entrepreneur startup is now 40, according to Forbes. A mid-life crisis perhaps. Gone was the lifetime legacy.
New entrepreneurs wanted to establish, build and then sell their business as soon as it was profitable. The ultimate 5 year plan. So our client profile of the 60+ retiree reduced by 15 years.
These people weren’t retiring any more, they were moving onto new challenges. A client with an IT business moved into acupuncture therapy. A few moved into property renovation whilst a client who sold a training business here set up again, but this time in New Zealand. We even had an accountant retraining in the legal field.
On the sell side of deals, we represent more female led businesses than before, but buyside is still male dominated.
New business sectors have emerged
If anything, a care business as our first client was unusual. The bulk of sales back then were retail. Convenience stores, newsagents, green grocers, florists, hair salons, clothing stores and cafes. It was very much centred around a typical high street.
Sadly, that high street was devastated by the 2008 recession. It also came up against online shopping and home delivery in a big way whilst struggling to recover. In the last few years there has been a bigger awareness in supporting local businesses and some buoyancy has finally returned. How it will bounce back after lockdown is yet to be seen.
Our own client base has shifted away from retail finding our stride for clients from manufacturing and engineering sectors. We then began to develop a niche for some sectors around technology.
Finally, we began to also get a reputation in understanding the market of professional service businesses. Businesses who provide HR, Accounting, Health & Safety, Employment, Training and other business support. This sector had also grown through the use of technology and the acceptance that home based businesses are no longer second class.
Saving time with online business research
In 2005, there was little choice in securing new clients. We met in person having known little but the name of the business until that point. Only a relatively small number of businesses had websites.
15 years have seen a lot of public data move online. Websites, Companies House, social media, rating sites. It is easy to see how a business presents itself and how customers perceive it.
That all means we are better prepared when we do speak with people. It focusses the conversation to the key points we need to know which aren’t in the public domain already.
How communication revolutionised the pace of business sales
Back in 2005 we had broadband speeds a snail could outrun. Rural areas were still using dial-up. Businesses were okay, but individuals couldn’t cope with large files or high volumes of traffic. We used Royal Mail.
We posted out paper copies of sales details, confidentiality agreements, accounts, contracts and more. It wasted 2-3 days to arrive the other end, then they had to respond. Looking back we must have lost weeks each year just waiting for paperwork to arrive.
Today we operate a secure online portal where clients have instant access to sales data and almost all communication is via email.
The clearest measure of this is the conclusion of a sales. The point at which an offer is accepted through to completion. It is this period when solicitors, accountants, buyers, sellers and us are all sharing documentation. Average completion times (where no complications arose) have reduced from 16 weeks to around 10 weeks, mostly thanks to modern communication practices.
There are always exceptions and only 2 years ago a client advised us that their file had made it out of the hallway of their solicitor where the overflow work was stored, was off the floor and was now on the desk. We could expect them to “dictate within the week”. Thankfully none of the solicitors we recommend operate this way.
There must be more stringent confidentiality and due diligence
The process of selling a business remains unchanged.
- run marketing
- engage with potential buyers
- manage offers
- drive deals through to completion.
What has changed is the level of scrutiny at each stage. Increased GDPR requirements, anti money laundering checks, expanding due diligence checks and information in the public domain. Whilst helpful in researching new clients, we have to be fully aware of anything detrimental that will harm a business sale, and prepare for it.
This was never more true then a fleet hire business we represented. One keen buyer talked a good game but turned out to have been struck off as a director in very dubious circumstances. Our client had no trust in anything they said after this.
Or the buyer who wanted to purchase a logistics business with an asking price of £150,000 by depositing £1m into the company, which would then be used to fund further UK acquisitions. The financial backers were from Canada and it all screamed of money laundering. So our client walked away.
And when a business rises and falls on its reputation, confidentiality is key. As soon as it gets out that a business is being sold staff, customers and suppliers can all start to get nervous. Whilst it once was word of mouth that spread this, one quick social media post and the whole county could now know. Our focus on confidentiality is far greater than it needed to be 15 years ago.
It keeps us on our toes.
Lessons learned from a recession which protect us in a pandemic
Coming out of the 2008 recession we consciously decided to focus on representing manufacturing, engineering and professional service businesses. We knew Uscita would be more sustainable if we moved our reliance away from high street retail businesses. A lot of other businesses were searching for the same redirection.
In 2012 we subscribed to the Value Builder method of building a sustainable business and in 2014/2015 became the first certified coaches in the UK. It was through this that we widened our service offering to include valuations, acquisition searches and a coaching program.
In looking at our own business through the Value Builder modelling we knew it was the missing link for our larger clients too. Our coaching service formalised and we began working with select clients to build value in their businesses as well as security for the future. We also focused our efforts more locally into Cheshire and Manchester. We like serving our local market.
In 2005 the majority of our client sales values were below £50,000. With the changes we have implemented, currently a quarter of our sale clients are valued between £1m – £10m. The majority of the rest have values above £100,000.
In this current global pandemic, where service businesses have relocated to work from home, we find the high street suffering most, again. Our shift of focus has certainly helped us to continue working, albeit at a lockdown pace, proving it’s the right decision, but who knows where we go next.
Covid-19 pandemic recovery
Change is a good thing, particularly if you can use it to your advantage and guard against difficult times to come. This pandemic has forced all good businesses to re-think.
Businesses thought they had embraced technology for work, when in reality, they hadn’t even touched the surface. Manufacturers produced PPE, demonstrating a flexibility and agility they didn’t think they had.
For business sales, we are seeing green shoots of revival already. Buyers who have been overly cautious in the past 3 years are now committing to purchase.
Brexit forced a ‘wait and see’ attitude across many sectors. Buyers were waiting to see what sanctions might be put in place on imports and exports before committing. Investors were waiting to see how interest rates reacted. The worst possible scenario of a global lockdown never looked likely.
The attitude change we are beginning to see from buyers and investors is that things can’t get any worse. Why not buy a business? There is nothing to loose.
The economy has maxed out its credit cards, unemployment is on the rise, savings rates are non-existent. Why not buy a business and make something happen for yourself.
So with that driving a confidence in entrepreneurship again (long may it continue), it has been an eventful, challenging and invigorating 15 years. As we start to see the easing of lockdown restrictions, if you are considering what changes your business needs to recover, thrive and survive the next hurdle, this summary of the 8 drivers of business value is a great place to start.