Welcome to the podcast where you find all the very best information on how to buy and sell businesses and become a dealmaker. In Business Buying Strategiespodcast #12, Jonathan Jay from The Dealmaker’s Academy covers:
- How business buyer Paul Green raised funds to acquire a number of small veterinary practices and roll them into a single parent company
- The importance of LinkedIn featured content, skills and endorsements
- The HR and people management issues you may face when you acquire a business
Listen to find out:
- Why Paul Green chose to focus on the veterinary sector
- Why Paul picked the size of businesses that he did
- How Paul overcame the disadvantage of operating in what was a seller’s market
- Why vendor finance wasn’t appealing to sellers
- The benefits of getting finance through family offices
- Why family offices like property investments
- The offer Paul made to veterinary owners
- The benefits of running a consolidated business versus a single practice
- How Paul’s business partner forged relationships with the owners of the veterinary practices
- How to deal with business owners’ chief concerns
- Why you should think of your LinkedIn skills as search terms that will help people to find you
- Why you need to get endorsements on your LinkedIn profile
- Why you need to keep asking for endorsements
- How to position yourself on LinkedIn so that people bring you deals
- How to get endorsements even if you haven’t bought or sold a business yet
- Why it pays to personalise your summary on LinkedIn
- Why you should aim to take LinkedIn conversations offline as soon as you can
- LinkedIn’s network tiers explained
- How to grow your LinkedIn network by 10,000 by simply connecting with one well-connected person
- How to personalise your LinkedIn message
- Why you should never use LinkedIn’s default message
- How to respond to a request to connect
- Where to find the money to fund redundancies in the coffers are empty
- How to handle redundancies for people on service agreements
- Why listening to employees’ grievances is so critical
- Why you should outsource the redundancy process
Read the transcript here:
Hello and welcome, this is Jonathan Jay from the Dealmakers Academy and welcome to Business Buying Strategies. The podcast where you find all the very best information on how to buy and sell businesses and become a dealmaker.
Welcome to episode 12. This week we’ll be hearing from more business investing entrepreneur Paul Green and about how he went about raising funds for the purchase of a number of small veterinary practices, to roll up into a single parent company.
We’ll be hearing more from Linked-in guru Andrew [?Gwinn 0:00:38] and looking at the importance of featured content as well as skills and endorsements and we will continue our short series on the HR and people management issues with my HR specialist Kelly.
So if you’re ready, let’s get started.
So last week we heard from serial dealmaker Paul Green and he explained the steps he took to sell his first business.
This week Paul talks about how he went about raising funds to buy a series of independent veterinary practices, with the aim of creating a single, sizeable group.
So tell us about – so that was the… Yes, so tell us about this fundraise that you did for the rollup? Tell us the thinking behind that and how that worked?
I took six months off after selling the business, which was another mistake because I got bored and my wife sent me back to work before I bought a sports car or had an affair and I’d been pondering…
The sector I enjoyed the most was veterinary. I’m not a vet but I like vets and get on very well with vets.
Vets are – they’re the brainiest people you’ll ever meet.
They’re also the hardest working people and my goodness they carry a lot of the burden.
If you’ve got an animal and you take it to a vet, it’s not the owners of the practice which take on the burden of the veterinary care, it’s the actual vets themselves, thanks to the outdated, 1960-something veterinary act which is obviously quite appealing if you’re going to own a business and veterinary’s going through an enormous amount of consolidation, so the consolidation that Optics went through in the late ’90s, which ended pretty much 9/11 killed that because it killed the flow of money into that sector, well that’s happening in veterinary right now and in fact we’re in the end game, where there’s been a number of things that have happened in veterinary in the last six months which have shown it will end with the Brexit recession or the Brecession.
Let me be the first to coin that phrase, by the way, when you hear that on telly in like a year’s time. The Brexit triggered recession will end the veterinary consolidation.
So what’s happening within veterinary is the market was de-regulated in 1999 and so as of the – whatever it was, the 30th of March, I think, 1999, you can own a veterinary practice whereas before you had to be a vet and a couple of little companies sprung up.
There’s one called CBS, which is now the second biggest player in the market and they started buying practices and then other companies and what happens is, over a period of time big money, VCs, all sorts of other companies start to see this opportunity to – hang on, well we can go and buy these practices that are churning out million pounds EBITDA here, million pounds EBITDA there, put them together, build our own supply chains and it’s that classic case of one plus one plus one equals ten and that’s exactly what’s happening within veterinary right now.
Because I’d worked very closely with a number of practice owners I could see all this activity happening at the top end but the two/three vet practices at the bottom end, knocking out £500,000 turnover, £50,000 to £100,000 of EBITDA, no one was buying them and it occurred to me that there was an opportunity to mop-up and do a small buy and build within that sector.
I put some plans together and started talking to some people and the complicating factor was because this was a seller’s market, I wanted to do it through vendor financing and it very quickly became apparent that in a seller’s market, you can’t vendor finance.
You can vendor finance a very, very distressed business but you can’t vendor finance a decent business and part of this roll-up, because I’m not a vet and don’t have veterinary expertise, part of this roll-up was we needed to keep the vets on-board to run their business for at last three years and you don’t want to buy a distressed business with a distressed business owner, if you’re going to have to work with them for three years.
So we went and raised some money and again I’m not going to name names but we – there is plenty of money out there for this sort of thing and I got to know a… I’ll call them a broker but they’re not a broker in the traditional sense that you pay them a fee and they find money.
They are, essentially, dealmakers and they… We went to them, pitched the idea of this roll-up, pitched them the veterinary sector which they didn’t know. We spent half a day with them getting to know their team and they said, ‘Look, we can find you this money. We’re going to go out to various different people that we’re building relationships with and we’ll find this money.’
Cut a long story short, a series of presentations, we ended up with a family office. Does anyone not know what a family office is and I’ll explain it? Okay, I’ll explain it anyway.
Explain it anyway.
Okay so when you’re in the mega-rich. We’re talking the multi, multi-millionaire, billionaire bracket, you don’t have invest- you have investment people that worked for you and you form what’s known as a family office and you, literally you give them 30 million or whatever and you say, ‘Invest this and in seven years’ time I want that to be worth 40 million or 50 million or whatsoever.’ So it’s private investment offices and these are great places to tap for buy and builds because when you’re doing a buy and build your risk factors are really low. You start a business from scratch and the r-, well we all know, what are the stats?
One in ten, only one in ten make it past x number of years. You doing a buy and build, you’re buying profit, you’re buying cash and even if you screwed up badly, there’s still going to be some core business in there.
So we did a family office which is, often they’re quite risk averse, they like property investments because you can de-risk that to a great extent. So we had a commitment of £6 million worth of funding and the model that we put together was to go to veterinary practices and offer them five times EBITDA – which sounds a lot, until you consider that the biggest transaction in UK veterinary was a 17 times EBITDA transaction, which was probably over-valued.
That was this big company buying this biggish company and it’s created the biggest veterinary company in Europe, if not the world and they’re all now retreating to lick their wounds and go off and try and make some money. Seventeen times EBITDA is enormous.
So we were offering five times EBITDA and that was our model and our funders agreed that five times EBITDA would work for them and the model we put together because we were trying to eek that six million out as much as we could. So the model we put together was 60 per cent on day one. So let’s say you – what’s you name sir?
Martin, you’re a vet and you’ve worked 30 years. You look very good on 30 years of hard veterinary work, I have to say. Martin’s worked 30 years, he’s tired. He’s knackered.
He’s in his 50s now. He’s worked ten-hour days, six days a week for 30 years. Had all these grand ambitions 30 years ago and now what he’s got is he’s got a nice Audi, he’s got a nice house, kids are in private school.
He’s made good money out of it but it isn’t the life he thought he would have and he’s tired and then I come along and I’ll say to him, ‘Martin, do three more years and let me take some of your…’ I’m going to swear, ‘…let me take some of your shit away from you Martin.
What do you like doing?’ ‘Well, I like putting needles in dogs, operating on cats…’ This is how they talk, seriously. ‘I like doing this to dogs, doing this to cats.
I don’t like dealing with staff, I don’t like dealing with finances. Don’t like dealing with that.’ ‘Here’s the deal Martin, you’re looking at £100,000 worth of EBITDA – don’t look so serious, I’m not actually going to buy your veterinary practice, okay. ‘You’re looking at £100,000 of EBITDA, I’m going to give you £500,000 for that business.
I’ll give you 60 per cent of that on day one, another 20 per cent a year on from there. Another 20 per cent a year on from there. Subject to you staying in that practice and running it, not mucking it up, not going insane. Not causing me too much trouble.
Obviously, there’s some legalese around that and then at the end of that two years, I’ll give you a bump and that bump will be based on how much we’ve increased the net profit of that business by because what I’m going to do is I’m going to take away all of your stress.
I’m going to deal with the staff. I’m going to deal with the legals. I’m going to deal with the computers. I’m going to deal with the energy switching, I’m going to deal with everything.
In fact I’m going to put a supply chain in there as well. So I’m going to build an infrastructure around this, but you just keep doing what you do.
So I do what I can do, you do what you can do and if together we can grow the net profits, we both benefit at the end.’
Our gamble was that we would buy – it was about 16 practices and we made up six million, eked out to about 16 practices with cashflow coming back in and we would then sell that. If we could sell it for seven times EBITDA or more, everyone would make money.
I can’t remember the exact percentage now but we also needed to grow the net profit by x.
This is working on the principle that a small operation, on its own, has a far lower value than lots of small operations under a holding company structure have as a group?
The larger business is not only larger it’s worth more because it’s larger than the individual ones down here are…?
Yes, exactly that. You have more buying power, you have more economies of scale. You can do things, like Martin can take a holiday for the first time in three years because actually we also own a practice 20 miles over there, so that guy over there can look after this practice here.
Which just doesn’t exist in the single site operations, so that was the plan. We got loads of vets to talk to, by sending letters. The gentleman that sent letters here – we just sent letters. It’s probably – do you supply a letter or is it just your own letter?
Yes, I have a letter, yes.
It won’t be as good as Jonathan’s letter. It was literally, I know you get letters…
This was it, how it went, ‘I know you get letters from everyone wanting to buy your practice, we’re a little bit different, this is what we do, we’d love to have a chat and I forget the numbers but we sent out 4000 of those to virtually every vet that we could find and I got quite a few back with abuse written on them, which was quite interesting but the same kind of thing.
We talked about this this morning as well is that you can’t be offended by the first piece of pushback that you get. Basically you just shrug it off.
Exactly, shrug it and shred it.
The same kind of thing, we’ve turned on the phone and there’s 12 voicemails and I had a colleague that I was working with and he just basically just went out on the road for a month, drove round, talked to people and, you know, it was pure relationship building because there was – they could’ve sold to other companies, you know, with comparative offers.
We just built relationships with people. Took them out to dinner, met their wives or husbands, looked round their – walked around some pretty scabby looking buildings going, ‘Oh wow, yes, you’ve got a really nice operation here,’ thinking, ‘That’s coming out.
That needs to be decorated, he’s fired.’ It was all that kind of stuff. So basically praise them. Promise them all – here are the things they were interested in.
Are you going to keep my staff? Too bloody right we are because we can’t do it on our own. Are you going to keep my name above the door?
Absolutely, I’m not interested in building a brand, I’m interested in building a chain that I can sell on and that was pretty much it actually.
Money was actually – for most of them was behind, ‘What’s happening to my staff and what’s happening to my brand?’
We’ll be hearing more from Paul next week. So last week LinkedIn guru Andy Gwinn discussed the content you should add to your profile and why you need to add it. This week he talks about the importance of featured content as well as skills, endorsements and testimonials.
You need to be thinking about value content in your profile under your summary, into your experience sections, that sort of thing. Here’s one that people – though I don’t like this – featured skills and endorsements.
Who’s been endorsed by people that you don’t even know them and they haven’t even worked with them.
I know, they’re doing it wrong but here’s my take on it. Think about those skills as search terms you want to be found for – I don’t know business vendor, business buying, business brokering, sale, entrepreneurship – not just your skills.
I have a skill in leadership, I don’t really put that up there I’ve got LinkedIn training, coaching, keynote speaking – whatever you want to be found for. I made that up but use it as search terms. You need to get some endorsements, just because it looks credible.
If you looked on there and there were no endorsements, you might wonder what I’ve been up to best way is go and endorse other people, they tend to endorse you back.
I don’t put a lot of value on that but it’s – remember if the function is there I want to use it to serve me so go and endorse the people you know and they will tend to endorse you back.
The next bit for me I think is really powerful because it’s unique with LinkedIn. I talked about recommendations I said who’s got testimonials from their clients? Third-party testimony sells.
If I stood up here and said, ‘You ought to listen to me, I’m a great LinkedIn trainer,’ you’d go, ‘Yes, right, beardy bloke with a strange accent.’
If Jonathan who’s got massive credibility stands up here and says, ‘I’ve chosen this guy out of everybody I know to come and talk about LinkedIn,’ you’re likely to listen, aren’t you? Third-party testimony sells, you can never do enough.
We can them testimonials, the Americans call them recommendations but what’s unique.
I have a very cynical lawyer brother who works for Travis Perkins and he says, ‘Yes, but you could fabricate your testimonials.’ ‘Not on here I can’t, my contacts have to go on my profile and write that.’ I have 135 of them.
By the way they dated – the last one was March the 12th 2018, if the last one was 22, what would you think? Ah, maybe he’s gone off the boil.
You need to collect testimonials.
There is an art to asking for them in the right way but I had someone the other day, he said, ‘How do I know you can help me?’ I said, ‘Have you had a look at any of the 135 recommendations and video testimonials I’ve got on there?’ He said, ‘No,’ I said, ‘Can you go do that and then come back and tell me how you think you want me to help you.’
I don’t really need to sell myself.
You can position yourselves so people are bringing you deals. It happens to my property investors for cash investors and deals it’s no different.
You want to be fed deals of people who are looking to sell businesses. So you want to build third-party testimony. Where else can you use those?
I was having some fun with the guys – I have a share in an audio-visual business so I knew how to put the mic on but my business partner lost a tender to Walsall Council.
Our process is we asked them why, because we want to get better? She said, ‘Do you know what, at the end of the day you quoted the same sort of price, same speed, you covered everything.
You just said if you wanted to see some testimonials from other people in your industry, from other councils we’ve dealt with, go one step smarter guys. Here’s some testimonials from other people whose businesses I’ve talked to or bought.
If you’ve got a little voice going, ‘But I haven’t bought a business yet,’ have you had any meetings with people who said, ‘I’d love to but the time’s not right.’ Go and get a testimonial from them as to why did they meet with you? What value did they get from the meeting? Get creative. She said, ‘The only thing was your competitor included the testimonials on the bottom of their proposal.
We couldn’t be bothered to call you.’ That’s how lazy business people are, okay. So you’ve got to keep them – guess what we do now. ‘Thanks for your tender, here’s some testimonials from similar charities or similar…’ Fortunately that was a £2,000 order we lost, not £20,000. So you get a proposal from me, guess what you get at the bottom.
Here’s what some of my other clients have achieved. I’ve got a beautiful video testimonial on there by a top author and property investor saying, ‘Here’s all the land deals I’ve found and all the cash I’ve found from cash investors,’ because of what Andy showed me. I can push that out in all sorts of media now.
Have I got the point over about testimonials? Who’s going to get some testimonials in the next week, on video? Cool.
I’m going to come on to the different strategies in a moment but if you think about it. If you look at your headline, your summary and your experience sections, that’s getting you found, you’ll stand out. I don’t believe in populating it just with a load of bullet pointed search terms, you want to write and engage.
By the way on your summary, make it personal. The moment I put on there, ‘Outside of work I’m a keen motorcyclist and scuba diver,’ I had people in the lunch queue coming up and it was always the women. Two women came up and said, ‘Do you ride bikes?’ I go, ‘Yes,’ they went, ‘So do I.’ Nobody asked me if I was a scuba diver because you didn’t know but the moment I put that up there, I had someone message me saying, I didn’t know you dived, where did you dive?’ ‘Oh, long story, let’s have a chat.’ What did I say the strategy was? To find, connect in the right way and engage.
The moment you’ve got in-bound, you’ve got engagement. Here’s my rule for LinkedIn. Think of it in two ways.
It’s an online networking tool, we’ve said that.
The way you network offline, the way you network online and secondly, my aim with LinkedIn is to get the conversation offline as soon as possible. Do not try and sell on it, do not try and argue with them. Do not try and discuss something because they’re just misinterpret it and it’s all back. I want to get it offline as quick as possible because then you can go and negotiate.
Great question, long answer.
It’s been a long while, do you fancy a chat? So you want to get it offline as soon as possible, make sense? So headline summary experience section, will get you found.
The value content, the documents, the videos you’re putting up there is getting the value. The endorsements and the recommendations, testimonials, that’s your credibility.
So then what I said is your strategy’s to be able to find, connect and engage with your ideal contact. Who’s played around with this search function on the top?
Only a few of you. Who’s scared of LinkedIn and IT and stuff? One or two – don’t – you can’t break it, this is fine, okay. Worst you can do is be really, really full of massive action and LinkedIn spit their dummy and lock you down for a month but we’ll work over that, we can get over that. You want to be building your network, have you heard your network is your net worth. It’s not just what I know but it’s who I know. Long gone is this protocol of, ‘I only connect with people I know.’ I heard someone say it the other day and I could shoot them because they’re just missing so much opportunity. Who’s connected with me at the moment? Right, that was quick. Koshi and I are classed as first-tier connections, we’re connected. If Koshi’s connected to…?
…Tom and I’m not, they’re first-tier, Tom and I are second-tier, makes sense? If Tom’s connected to…?
…Jackie, you’re first-tier, your second-tier through Tom, we’re third-tier – makes sense? I have at the moment 10,000 first-tier connections. Give me a number, who knows how many connections you’ve got, roughly?
M: Five thousand.
Five thousand, that’s awesome. Anybody got…?
M: About 1500.
There’s an average of about 500 to 1000, 1500, 5000, you guys have been on it a while and working it well. Let’s say you’ve got 1000 on average, how many second-tier connections do you have if everyone’s got a 1000? One million – woohoo.
If all my connections on average have a 1000, how many have I got? How many has he got? I have ten million, he has about five million. How many third-tier?
I don’t know and I don’t care. I don’t need to get to third-tier anymore. I had a singer-songwriter client one day on a downer and I said, ‘Luke, who do you want to get to?’ He said, ‘The Head of A&R for Sony Music,’ and I went, ‘Luke, his name’s such and such.
He lives in Miami, Florida and he’s a third-tier connection of mine,’ and Luke went, ‘How the f-, how have you done that?’ Oh and I’ve sent him a connection.
He didn’t respond, he didn’t have a photo, he didn’t have a profile. The point I make he’s Head of A&R for Sony, he probably doesn’t need to use it much but he was on there. So you need to be building your connections because it isn’t just about me and you connected, you may or may not be of value to me or relevant, it’s who are you connected to I can now get to.
So my Spanish lawyer and Spanish mortgage broker from last month, second tier connections. I went to Thailand, I went to Phuket last year, you know the island of Phuket.
I searched first-tier connections in Phuket, not just Thailand, none, zero. No ex-pats that I’m connected to. I searched second-tier, 133. I messaged 20 of them, ‘Would you be interested in doing a joint venture deal running a LinkedIn workshop when I come out there so I can make some Baht and pay for my holiday?’ I had three conversations within a week.
How do you want to get to the people you want to get to? So you need to be connecting with virtually everybody. You should be connecting, I guess, in the room. If you connect with me tomorrow, how much do you build your first-tier connections by? One. How much do you build your second-tier connections by?
If you don’t connect with me after today, Jonathan has permission to shoot you because do you think I might have some connections that might know somebody that might want to sell a business-like insolvency practitioners or accountants or whoever else you need to engage with, you need to be connecting all the time.
Here’s how you connect, you personalise the message, okay.
‘Hi Koshi, came across your profile. Always looking to connect with passionate business owners in the south-west.’ What’s he going to do? Go, ‘I’m not passionate.’ LinkedIn makes it easy, just clicks accept. So you need a personal – don’t send me that, ‘I’d like to add you to my professional network default message,’ it’s not professional. When someone connects with you, here’s what you do.
You look at their profile, just check that it’s bona fide, about 100,000 is. If they’ve populated their profile a bit and they’ve got a photo and they’ve got a few connections, I’ll accept and then here’s what I do. I copy and paste a message saying, ‘Thanks for your connection invite.
I’m just wondering what interested you to connect with me and how I can help?’ Eighteen out of 20 people probably go, ‘I don’t know. Somebody in Reading with their big beard said I should be on LinkedIn.’ I want the two that come back and go, ‘I can see you’re selling businesses, I’m thinking of retiring.’ Fine, connect and…
…engage. So you’re standard process when people ask to connect with you is you look at them, you accept and you send them that message. Makes sense, you personalise it all. It’s an online networking tool, it’s about a personal profile.
We will hear more from Andy next week. In recent episodes we’ve been hearing from Kelly my HR specialist that I’ve used for many of my own acquisitions and in this episode, Kelly discusses redundancy pay and where to find the money to pay it and what to do when the business doesn’t have it. Here’s what she had to say.
The question I get asked a lot at the introductory days that we do is where do you find that money to pay it and the glib answer is, ‘Well, you don’t have to find the money because the money’s there anyway because you’re paying them regardless.
They’re on the payroll,” and we said to every single person, we don’t have the money to give it to you today and if that’s what you want, you’re not going to get it – although I’m sure you said it in a more eloquent way but this is the message.
We’re going to pay it to you every single month for the next three months as if you were working here. The advantage to you is you don’t have to work here. No one created an issue, did they? That wasn’t an issue, I don’t believe it was an issue for anyone.
I think everyone…
Yes, no there wasn’t any issues, no.
Again, it’s communicating and being fair. I think in the end people realised this is what is going to happen regardless, so – and actually I’m getting quite a good deal out of this so let’s just go with it.
Okay. Now there are staff that are on PAYE standard employment contracts and then there are staff who are on different types of contracts, are there different…?
So like service agreements – often senior members of staff are on service agreements. Is there a difference legally?
When it comes to redundancy or do you mean…? Are we on contracts?
Redundancy I think.
Generally not, no.
You’ve got your statutory redundancy rules which apply to everybody that’s on a contract. Now a service agreement may have wording in it, so we’d have to check that out and it could be that there’s particular exit arrangements already agreed as part of the terms. There’s a golden handshake or something to exit but we’d have a look at that.
Okay and what if someone has a grievance because there’s always someone who says, ‘I’ve got a grievance,’ and it’s like, you know, they feel that this is going to protect them in some way.
Yes, because in the letters, all through the process you’re confirming what’s happened and there’s always you have the right to appeal and some people see that as an instruction and will appeal.
So you’ve got your grievance process, so you have to hear their grievance or their appeal, whichever the route that they’re going down.
Remember, when it comes to… Just going back to TUPE, people have the right to refuse to transfer, if they want to refuse. It classes then that their employment just stops and is terminated but then they could then potentially go on to say it was an unfair dismissal, et cetera, and that’s a whole, another line.
So they can refuse to transfer is what I’m going to say but you will get people who will complain about transferring and it’s, again, it’s listening to what their grievance is, listening to – or if they’re appealing against redundancy, what grounds are they appealing on?
You have to hear it. So you have to sit down and have a meeting with them and then decide what the outcome’s going to be.
Now if it’s a transfer under TUPE, you either want a job or you don’t really. I mean what is it that your grievance is? If it’s an appeal against redundancy, well they need to be appealing on the fact that why they’re being made redundant and if they feel that somebody else is being kept as opposed to them, what’s their grounds for that and why do they feel that they should be retained over somebody else?
But, it’s hearing them and if there’s no answer. If you can’t say, ‘Well yes actually you’re right,’ then you will just say, ‘Well sorry your appeal is unfounded,’ and continue with the process. Some people do appeal to delay the redundancy process because obviously they will then try and get another couple of weeks’ money and keep their job.
Maybe they’ve been through a redundancy process before and they realise they’re on to a good thing so they say, ‘Well let’s just keep on…’
You don’t want to be thinking about these things.
You want… This is a whole process to completely outsource.
It is not something that you do yourself.
You want to distance yourself from it in terms of time, in terms of effort, in terms of reputation. In terms of people saying, ‘Oh yes, they didn’t treat me well.’ No, get a professional and then when you get some smart Alec who’s got some – read something on the internet and thinks they’ve got you, well, no actually – and you don’t know the answer, don’t worry, you’ve got a professional who’s dealing with it for you, who does know the answer.
We’ll be hearing more from Kelly, one more time, next week when she answers some of the questions our live audience asked her. So that about wraps it up for this week.