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Welcome to the podcast where you find all the very best information on how to buy and sell businesses and become a successful dealmaker. In Business Buying Strategies podcast #17, you’ll hear:

• Peter Kiddle, businessturnaround expert and the Chairman of Business Transfer Agent Ltd., answering questions from our Mastermind group. Peter now divides his time between consulting on company turnarounds and selling training companies for clients.
• Jonathan Jay, founder of The Dealmaker’s Academy, explaining where and how to find good businesses to buy.
• Jonathan Jay sharing more crucial negotiating skills you’ll need to be a successful dealmaker.

Listen to find out:

• Which part of the acquisition and selling process Peter Kiddle handles
• How Peter Kiddle manages his team
• What you should do if members of your team fail
• The key factor Peter Kiddle looks for in a target company
• What advice Peter Kiddle has for anyone starting their dealmaking career
• The one thing that stops people from making deals
• Why you should assign a codename to every deal you do
• Why you should find out which solicitor a target company will use
• Why you should ask what accountants the target company intends to use
• Why you mustn’t allow a target company to set a deadline
• Why you should be the one to set a deadline
• How to handle concessions in negotiations
• Why you should only concedeif you are going to get something in return
• What to say if the other party suggests something you don’t like
• Jonathan Jay’s four-stepformula for buying and selling successful businesses
• How Jonathan Jay sources businesses to buy
• The benefit of buying complementary businesses
• What many business owners actuallywant
• What you need to know before buying a distressed business
• Why you should not think of buying a business as buying a job
• The mindset you need to have to be a successful dealmaker
• What you get when you buy an established business

Subscribe …

      

Podcast: Play in new window | Download

Welcome to the podcast where you find all the very best information on how to buy and sell businesses, seek out businesses for sale and become a successful dealmaker. In Business Buying Strategies podcast #16, you’ll hear:

• Bill Morrow, the co-founder of the online investment platform Angels Den and who has been described as “the most influential person in alternative finance in the UK today”, revealing the three things that make companies irresistible to investors.
• Jonathan Jay, founder of The Dealmaker’s Academy, sharing more crucial negotiating skills you’ll need to be a successful dealmaker.
• Peter Kiddle, businessturnaround expert and the Chairman of Business Transfer Agent Ltd., explaining the process he uses to source deals. Peter now divides his time between consulting on company turnarounds and selling training companies for clients.

Listen to find out:

• Why any business must have sales
• Why angel investors will take a larger share of a company that doesn’t have sales
• Why a business needs an unfair advantage that is protectedin some way
• Why you should have an IP lawyer on board
• Why an owner’s mindset is so crucial to investors
• What to do if you’re not passionate about your business but need investment
• How speed funding works
• What investors look for in business owners
• Why people who need certainty shouldn’t become entrepreneurs
• Why you should consider offering a seller a balloon payment
• Why the offer of a royalty payment might persuade a seller to choose you
• How a lawyer can hold up your deal or even make it falter
• Why you should consider paying the seller’s professional fees
• Why taking on the seller’s liabilities may clinch the deal for you
• Why your email subject lines to sellers must state subject to contract and due diligence
• What to do if your new business goes pear-shaped
• Why you should feel no guilt for avoiding the stress of managing a business
• Why Peter Kiddle uses the Companies House website to check out prospective target businesses
• The two factors Peter considers when researching prospective businesses
• How Peter calculates a company’s annual revenue based on client fees
• The time-effective process Peter uses to source deals
• Why Peter sends letters to owners’ home address
• Why you shouldn’t use the same approach for every dealyou do

Subscribe …

      

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’ll find all the very best information on how to buy and sell businesses and become a dealmaker.

Welcome to Episode 16. In this week’s episode we’ll be hearing again from Bill Morrow, City AM’s most influential in alternative finance in the UK today. In this episode Bill discusses the three things that make a company irresistibly investable. We’ll also hear again from serial dealmaker Peter Kiddle.

This week Peter describes just how simple the process is to find companies to purchase and how anyone can do it and as usual, I’ll be teaching more of the key negotiating skills you’ll need as an effective dealmaker. So if you’re ready, let’s get started. So last week we heard Bill explain how early mistakes eventually led him to understand what investors are looking for and what motivates them to invest. This week Bill discusses the three things that make a company irresistibly investable.

Here’s what he had to say.

If you don’t have sales in your business, I would strongly recommend that you do get sales.

Has everybody got sales here? I don’t know what kind of level you guys are at. You kind of look like you’ve all got sales and businesses that are up and running, yes? Yes, yes? Cool, that’s great. Of the 126 business lines we see in a day, I would say 70/80 of them don’t have sales.

I have a word for them, they’re called ‘ideas’. They haven’t proven their business model, ‘It’s an awesome idea. I mean wow, that is incredible, wow.

That is so good. Is there any business attached to that?’ ‘Oh no, no.

You don’t understand, I need the money so I can set up the business.’ I’m going, ‘Yes, that’s cool. Yes, get out.’ I mean it’s cruel but all I am is arbiter for the largest collection of high-net-worths probably in the world but who cares. You get the drift. I can talk with authority about what it is that they’re looking at. Why are they not interested in sales because when you do sales, when you do the… It’s easy for a muppet like me to stand up here and go, ‘Oh yes, you need sales, yes.’ Getting your first sale to someone who’s not your mum, the most difficult thing you’ll ever do. The most difficult thing. Oh my God, finance – getting the finance is easy. Easy, simple, go on Crowd Cube. There’s more money on there than you could ever, ever, ever want to spend but you’ll be missing the point.

You need to get – you don’t need to. You kind of look like clever people, you go I don’t need any more money. I don’t need any more clever people in my board or helping me or whatever.

That’s cool. Without sales – just covering it off quickly if everybody says they’ve got sales. I’m sure there must be some people that don’t have sales. So the point being that if you don’t have sales then it’s much riskier.

If it’s much riskier then they will take a larger proportion of your company to de-risk it for them.

Not difficult, well it’s not difficult, we all get that.

I mean that’s an easy bit. So to have sales would be a really good idea. The second thing that you need to set up a business is that you need to have some unfair advantage, a competitive advantage protected in some way.

If you do not have a competitive advantage that is protected in some way a patent, a trademark, a copyright, some intellectual level – perhaps first mover or second mover advantage that has then been cemented with a proven marketing strategy, that would work.

There are outliers of course, but on the whole, if you don’t have that, there is nothing – in fact it is incumbent on the shareholders of Google to come in to your marketplace and kill you. Incumbent.

Thank you so much for spending all that time and energy proving that marketplace and now we’re Google and we’re going to come in and – cheers, thanks very much.

It’s difficult. Get an IP lawyer on board. Words I never thought I’d hear myself saying. Something that actually differentiates you from somebody else in the marketplace otherwise, you know, people go, ‘Oh I haven’t got any competitors,’ well you soon will have. You soon will have if you don’t do it. I’m sending my product off to China.

I’ll tell you what, four days’ later you’ll have competitors coming out of China. Alibaba will be filled full of your product – four days.

We’ve seen it over 100 times. People go, ‘Oh it’s so much cheaper to manufacturer in China.’ There’s a reason for that. Perhaps the biggest thing that you need – you need sales, you need some unfair advantage.

The third one, those are binary. Have you got sales – yes/no? Have you got a competitive advantage that has accrued – yes/no? The third one, more difficult. Are you passionate about what it is that you do?

Are you in the right mindset?

Do you understand that you deserve the riches that are about to come your way?

Imposter syndrome, it’s real. One in every 11 deals that we get funded, someone’s asking for a hundred, we give them a hundred, all signed and sealed, then they go dark. They go away on holiday. They don’t answer emails because we’ve called their bluff.

Fuck, didn’t actually think you were going to get me the money, this is really bad. I’ve actually got to move out of my comfort zone now.

I get it, it’s really irritating but I get it. I truly understand it but also, if you’re not passionate about what it is that you do, two bits of advice. Get somebody on-board who is and, secondly, do not expect an investor to be passionate about what it is that you do. I’m not saying you have to be bouncing and dynamic and, you know, I’m not talking about [?wowing and zowing 0:06:30].

I wouldn’t use PowerPoint because why not? We don’t allow PowerPoint in our pitches. We did 5300 pitches last year across the world, not one PowerPoint. Why?

Because PowerPoint detracts from you. It’s about you as the founder. I said earlier, I lied to you earlier that it’s all about the business.

That’s what we’re looking to invest into, it’s not. It’s truly you. So with some – I mean we’ve tried 17 ways of pitching you in front of our investors, 17.

Two ways work equally but the one that’s most fun and it’s kind of messed-up as you can probably imagine as you stand, sit before me, is what we call speed funding. Imagine this is the table, there are one, two, three investors, no more, otherwise they all start showing off in front of each other. You sit down and you have four minutes to pitch your business.

Some people go, ‘No, you don’t understand. My business is…’ ‘Sorry, get out.’ Four minutes is a long time. Do you want to pitch your business or do you want to show off your ego and actually just show me a PowerPoint and show me how great it is? Oh it’s dazzling, is that the new Mac? That’s so cool, that’s like wow.

Bang – I just want it, it works. Some of our investors have invested in over 100 deals at what we call speed funding. So you pitch for four minutes and then you move to the next table, move to the next table, move to the next table, move to the next table. We never have more than eight people there because actually it’s really tiring for the angels.

Why’s it really tiring for the angels? They can’t pretend they’re interested. They can’t pretend, like you guys are doing right now, that you’re listening to what it is that I am saying, drifting off, checking Twitter – they’re there.

They’re actually this far away from you. Some of our investors have invested in over 100 deals. What they say is to a huge extent they have made their minds up about the business within, as you’re walking towards them. As you’re walking towards them.
We super-curate the deals. You have to be the best of the best. One out of 155 deals. So we then gather in – and that’s difficult.

So they all should get funded but we’ll fund 70/80 per cent of them, that’s all.

People want to invest in people that are kind of like them. Rather than what return are you going to show me in my investment in six years?

It is do you like lager or real ale?

Are you a craft beer person? Is it red wine or white wine? It is just as important. Why is it just as important? Because I show my learned colleagues back to the number one reason I spit on floors. The number one reason they’re looking to invest because they are looking for stimulation. Really hard to get stimulation from someone who’s kind of not like you. It’s not about your product.

It’s very much about your business but do you understand your business?

Do you understand your business sufficiently that you understand the drivers?

Which of your three products is the one that makes the greatest return on marketing? Do you know which of the 17 marketing strands that you should be using, which are the top three? Why are you not using the other 14? Absolutely agree with that.

The motivation of people looking to invest. For them, they’ve made their money. In our 11 years, in ten countries. Of all the deals that we funded 92.4 per cent of them are still growing.

For me success is not getting you the money. For me success is still being in business in four years and five years and six years. It’s going to rocky.

It’s not all going to go where you planned, that’s for sure but that’s kind of half the fun. That’s what being an entrepreneur’s about. If you want certainty, get a job in a bank.

We’ll be hearing more from specialist investors and brokers like Bill in future episodes. For several weeks we’ve been considering the negotiating skills that every dealmaker needs to have in order to purchase a business from its owner. Here are some more skills and tactics that will improve your negotiating position.

You could have a balloon payment at the end, say, ‘Look, we’ll pay you £1,000 a month for the next three years and then, on month 37 there’s a balloon payment of £25,000.’ You get that often with car finance, don’t you?

So a balloon payment at the end. A payment holiday, ‘Look, if we give you the £5,000 on day one and we’re paying you £1,000 a month, we’d need to have a little bit of compromise on this.

We wouldn’t pay you the £1,000 a month for the first five months.’ So basically you’re getting the first five months’ money up at the front-end.’ Does that make sense? Now if the business has got some money in the bank or it’s got some money about to come in, you could say that that initial consideration is going to actually be paid within 30 days of completion.

So again the customers pay it. You get someone on the phone chasing all the debtors saying, ‘We’re the new owners, pay up.’ That’s where that money comes from. Again, it doesn’t have to come from your own pocket.

You could do a royalty deal depending on what the product or the service – well probably the product, what the product might be.

Say, ‘Look, we’ve worked out the margins, you know the margins, why don’t we pay you £1 every time we sell one of these products in the shops for the next five years or the next ten years.’ Or you could be really bullish and say, ‘For the rest of your life.’

Then, when you come to actually draft the agreement, you have a clause that permits you to accelerate those payments with maybe a one-off payment of £100,000.

So let’s say you’re now in the position of selling the business, the buyer says, ‘Hang on, you’ve got to pay this woman.’ ‘Who is this woman?’ ‘She’s the woman who started the company.’ You’re paying her a pound every time you sell a product for the rest of her life.

Oh yes but if you look at the next clause it says, ‘We can pay her off with a £100,000 and part of the consideration that you’ll be paying us will be used terminating the royalty arrangement.’ For some people a royalty arrangement, if they’ll telling you that, ‘This is going to be…’ Selling you and telling you, keep getting confused in my head. If we’re going to be telling you.

If we’re going to be telling you.

If you’re telling us that this is going to sell like hot cakes once you’ve got the distribution in Harrods, well in fact a royalty deal is probably the better deal for you.

If you’re telling me that once this gets into B&Q, everyone’s going to be buying it then actually a royalty deal could actually be the better deal for you.

I must admit, it’s a deal we could do a handshake on today, which is better for you, as well, because you get the certainty that we can do something quickly and consultancy fees, actually we’ve already mentioned.

You could offer to pay their professional fees. Sellers who are with a broker have already paid the broker.

They’ve already forked out £10,000, £15,000, £20,000, £30,000. So paying their…

Then they realise, it dawns on them they’ve got to pay a lawyer. Now the annoying thing about deals is the other side’s lawyer.

If you’ve got a good lawyer on your side, you get a sensible deal done. You get a silly lawyer on the other side who just procrastinates or is very busy or it’s out of their comfort zone in terms of skill set, then you find the deal will falter.

You say, ‘Look, I don’t know what your legal fees are going to be but there’s a few firms that I’ve heard of that are very good and we have no connection with them whatsoever. Use one of those firms and we’ll pay your legal fees up to £5,000. That means now you’re selling the business, you won’t be out-of-pocket.’

It’s a great sweetener for a no money down deal.

So hang on, you’re not going to give me any money on day one but I’ve got a legal bill on day one. ‘No, we’ll take care of that for you.’ Who do they send it to? The company that you’re buying. Who pays it?

The company that you’re buying but you ring fence it in a certain level.

I’ve done that. I’ve paid the other side’s legal fees because I knew that they hated paying legal fees so I thought I can get them over the line by saying, ‘Look, we’ll pay your…’ In this case it was up to £10,000, ‘We’ll pay your legal fees up to £10,000.’ Surprise surprise the legal fees were £10,000. I don’t’ know how that worked but anyway, amazing coincidence.

A contingent element can really make up the numbers. So this is very similar to the performance-related. So contingent upon you bringing that NHS contract over-the-line.

Contingent upon 80 per cent of the customers still being here in 12 months’ time because I don’t want an exodus. I don’t want all these customers leaving.

As long as 80 per cent of the customer list and don’t forget the customer list is attached to the sale and purchase agreement as a schedule, so we know who the customers are on day one.

As long as 80 per cent are still paying customers in 12 months’ time, £100,000. Write it down on the thing.

You might want to take on their liabilities.

Say, ‘Look, you do realise if we’re buying the assets of your business and your business is a sole trader, you personally are responsible for the NI and PAYE that you haven’t paid for last month.’ ‘How much is it?’ ‘£4,000.’ ‘Okay, well look we’ll take over that but we need to add it into the pie,’ and you put £4,000 on the list.

So this is all the elements of the deal. It might be the VAT bill, the £60,000 VAT bill.

Well if we’re going to be paying that, we need to put that in as well. So you take on their liabilities. Do you see how we…? I mean I haven’t been adding these numbers up, I doubt if anyone has but you see how we’re really adding numbers up here massively?

M: About £650,000 at the moment.

We’re at £650,000. Oh really, they wanted £300,000.

You’re actually now offering them a deal that, if all the things that they say are going to happen, happen, could be worth £650,000.

It’s starting to stack really nicely and it’s multifaceted.

You see when I talk to people who’ve never done anything like this before, they say, ‘But don’t you just buy a business by going to the bank, borrowing the money and giving them the money?’ That’s the only way they know how to do it but when you’ve got all these tools up your sleeve, you’ve got all these different options available to you to make up the components of the deal where it’s not all about getting money from the bank.

Are there any legal situations you can solve by buying the shares?

Now they have to disclose this and they warrant that they have disclosed any legal situations. Let’s say they’re being sued by a customer and it’s really got nasty, it’s got personal.

Let’s say there’s £5,000 at stake. Say, ‘Look, if we buy this business we’ll sort this out.’

What you do, you go and meet the customer and say, ‘Look, I realise that you have been knocking heads with Geoff. I’m the new guy, I don’t really know anything about it. I’m sure there’s fault attributed to both sides, there usually is, isn’t there?’ ‘Oh no it’s all Geoff’s fault.’ ‘Okay, fine, look I just don’t know.

I’m here to do a handshake deal, to settle this and I know what I can authorise. What would you accept right now for us to part as friends and not have this acrimonious situation that I’m sure is very stressful for you?

The £5,000 is the top-line figure, how can we meet in the middle?’ ‘£2,500.’ ‘Well [sic] look if we can say, £2,000, look we’ll shake hands now, I’ve got a full and final settlement agreement, you just sign that.

I’ll transfer the money on my phone to your account right now and we’ll have another coffee while it makes its way through the internet into your bank, how does that sound?’

So you can take on the situations that they can’t get out of and you can solve them. Everything that you say of course is subject to contract and due diligence.

All your emails say ‘Subject to contract and due diligence’ in the headline.

We’ll be discussing some more negotiating skills and tactics next week. So last week we heard from serial investment and broker, Peter Kiddle.

This week Peter describes how he sources deals himself. How simple the process is to find companies to purchase and how anyone can do it. Here’s what he had to say.

Why wouldn’t you do it. I can’t think of any reason to not do it. If you put a million quid of your own money into something, I can think of lots of reasons why you couldn’t do it.

But if you’re structuring deals like 20 per cent sharing in profit or whatever it might be, you’ve got nothing to lose and these people, sometimes stupidly, go for these deals.

You might have to pitch for three or four before you get one but why wouldn’t you? If it all goes pear-shaped, you just close it down.

I, by the way, have never closed a business down but it’s the backdrop, it’s a limited company, provided you haven’t traded whilst you’re not able to meet your obligations, provided you’ve done the right sort of things legally.

If your business, you buy something and it all collapses, because it’s very easy to collapse. Let’s say for example the seller knew that that big client that represents 60 per cent of their turnover was going elsewhere next month and you’ve gone in and not realised and it all goes horribly wrong, you just close it.

You don’t lose any money, you just close it down. So why wouldn’t you do it? Why haven’t you done it? Will you be doing it tomorrow? If you don’t you’re mad.

My parents, my father worked – he’s 90 but my father worked in a factory all his life making refrigerator cabinets. He worked so hard and he’s okay but he hasn’t got any money and he’s worked really hard for it.

What do I do now? I sit at home as the chairman of five companies wondering who I’ll give a call next and maybe I’ll go for a walk.

I’m not operational anymore. I did it the hard way to start with, running a business and you all know it’s damn hard but you don’t have to do it the hard way and I don’t understand why you all haven’t done it already.

Do you think sometimes it’s guilt because when you’re starting a business, you’re expected to work long hours and every business start-up book tells you you’ve got to put the effort in.

When there’s a better way of doing things like this, it almost feels like cheating. It almost feels like you’re taking a shortcut rather than burning out. Is it guilt do you think?

I don’t know. For me, with this new group that’s being created and with the company that was losing a million quid a year, the finance director was a brilliant guy. The MD went but the finance director was a brilliant guy.

I’m giving him a cut in the business, without him having to pay for it, a small cut but a cut in the business and I can completely trust him.

I’ve coached him through. I have regular meetings with him but he can run that business and he works incredibly long hours but no, I don’t feel guilty but why should I, I just like the cheques coming in. So, if you do feel guilty, get rid of it.

The only barrier to your success is you and when I was running that smaller, five/six-million-pound company and managing it, running it, I worked all the hours that there were, you know, got through two wives.

Never saw my children, I mean, madness. I feel guilty about that because perhaps I needn’t have got through so many wives. I’m on number four now but… I would’ve liked to have seen my children a bit more, that would’ve been nice.

So do I feel guilty about being an owner-manager that works all the hours? Yes, I do. Do I feel guilty about not having to do all that stuff and popping over to see my daughter who just gave me my second grandchild yesterday and not worrying about the businesses and what’s going to happen to them? No, I don’t feel guilty about that at all.

Talk to us about deal sourcing. So how did you find these opportunities?

I’m quite well-known in my sector. So I do get people ringing me up or just letting me know. Most of the sourcing is done through the websites that you all know of.

Okay, let’s turn that on its head.

There’s lots of businesses advertised by these different brokers.

They come through, you see them and they say EBITDA blah, blah, blah – asking price, sometimes they state it, sometimes they don’t but what they’ve done is they’ve done the adjustments, haven’t they? They try to make it seem that the profit before tax figure is much better than it really is.

So for example, they’ll take out the MD costs. Well it’s nonsense.

You’ve got to put somebody in to replace them, why would they do that? It just inflates the profitability. It makes it seem like the sale price should be higher than it really is.

So I ignore all that stuff and what I do is I go straight to Companies House for any prospects that I’ve identified.

Now there are certain publications like ‘Plimsoll’ and all that sort of stuff that you can look at the performance of businesses and ‘Plimsoll’ only have the data that Companies House have.

So if it’s a small business, you don’t have to publish the turnover, you just have to publish the abbreviated accounts.

What I do when I’m prospecting is I perhaps look at ‘Plimsoll’. Perhaps look at some of the other competitors that I’m anxious about and I’ll go and look at Companies House. As you know it’s free to look at Companies House.

You look at the Beta version, you can go in, put the company name in and it brings up all their accounts, all their people and everything. So I look at the accounts but there’s nothing much in there. So I look at two things.

First of all, have they got in their accounts a corporation tax bill outstanding? If they’ve made any profit, they will have and they have to put that in their abbreviated accounts.

If there’s no – nothing there about the corporation tax being due, it sort of says, ‘They haven’t made any money.

This is a £1 deal coming up.’ I then look at how much they’re owed by their customers because again you can’t get turnover figures or anything and I assume that that figure that’s owed by customers is six-weeks’ revenue. Very quickly you can work out then roughly what their turnover might be.

If it turns out that that turnover’s only actually £100,000, for me, I’m not interested so I move on. I’ve not even contacted the prospect. I’ve just done desk research.

If my desk research suggests that they’re not performing very well and their turnover’s a couple of million quid, that’s a good prospect for me and then I will start making direct contact.

So I use the broker-type information that comes through, I use publications, I use contacts and I encourage people to let me know what’s going on out there and that’s how I find all of my deals. I keep my time to the minimum by doing that desk research. Otherwise, you can send a letter. Let’s say, for example, you sent out 300 letters and you got 33 responses.

I don’t know why I picked those figures. If you’ve done that and you’ve got your 33 responses that could be quite a lot of work, if you then start meeting all these people. So I try to narrow it down and focus and then my time commitment is wisely used. I do prefer targeted, focussed, checked first and then a full-on approach. I sent a letter to one owner – no, I tell a lie. I sent about five or six emails because I wanted this one.

This was about six months ago – no response. Wouldn’t take phone calls. I wrote a letter, didn’t respond. Stupidly, if you look at Companies House and you look at the history of the documents that have been filed at Companies House, us directors always used to put down our home addresses.

You don’t now because you have a service address now and that’s the company’s accountants or your office address. If you go down deep enough, you can usually find the owner’s home address.

Very often, what I do is do a letter to them directly at home and that’s the best response rate I ever get. So I try to be creative in all things that I do but the most important thing is, when you do get face-to-face is that you understand what’s going to turn them on. Don’t do the same thing for every deal because you don’t know whether it’s going to work or not and any one of you here that’s in a sales role will understand.

You’ve got to ask questions.

You’ve got to shut up and listen and once you know what’s going to turn them on, that’s what the deal looks like and you’ve got to think a bit on your feet as to how you’re going to structure that deal but there’s no limit to the types of deals that you can structure.

Next week, Peter will be answering questions from a live audience from a recent Mastermind group event.

So that about wraps it up for this week and remember to visit our website at www.thedealmakersacademy.com.

Have a good week and see you next time.

Podcast: Play in new window | Download

Welcome to Jonathan Jay’s podcast where you find all the very best information on how to buy and sell businesses and become a successful dealmaker. In Business Buying Strategies podcast #15, you’ll hear:

• Bill Morrow, the co-founder of the online investment platform Angels Den and who has been described as “the most influential person in alternative finance in the UK today”, explaining how early mistakes eventually led him to understand what investors are looking for and what motivates them to invest.
• Jonathan Jay, founder of The Dealmaker’s Academy, sharing more key negotiating skills you’ll need to be an effective dealmaker
• Peter Kiddle, businessturnaround expert and the Chairman of Business Transfer Agent Ltd., discussing the deal he successfully brokered to sell one of Jonathan’s businesses and what made it unusual.Peter now divides his time between consulting on company turnarounds and selling training companies for clients.

Listen to find out:

• Why a shareholders’ agreement is absolutely
• What really motivates investors
• Why it’s a mistake to assume investors are interested in your projections
• The real reasons angel investors agree to invest
• Why women make fantastic investors
• Why you should consider offering a seller an anti-embarrassment payment
• How to persuade a seller to work as a consultant for the target business
• How to sweeten a deal to get sellers onside
• Why you should offer a deferred period of five years and work backwards
• How to avoid arguments about the value of the business
• How Peter Kiddle secured a buyer for one of Jonathan Jay’s businesses
• How Peter found a replacement MD then introduced him to venture capitalists who funded the deal
• How to win over an owner-manager to buy the business
• Why Peter bought a business that had just lost £1 million
• Why you should consider buying a business with problems
• How Peter turned the loss-making business around in 12 months, so it made £350,000 profit
• How Peter constructs deals
• How he expects to achieve his goal of making £15 million in three years

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Read the transcript here:

Hello and welcome, this is Jonathan Jay for the Dealmaker’s Academy and welcome to Business Buying Strategies, the podcast where you’ll find all the very best information on how to buy and sell businesses and become a dealmaker.

Welcome to episode 15, in this week’s episode we’ll be hearing again from Bill Morrow who you will remember that CITY AM described as the most influential person in alternative finance in the UK today.

In this episode Bill explains how early mistakes eventually led him to understand what investors are looking for and what motivates them to invest. We’ll also hear again from serial dealmaker Peter Kiddle, this week Peter will discuss the deal he put together when he successfully brokered the deal that led to my own company’s sale a few years ago, and what made it unusual.

I’ll be teaching some more key negotiating skills that you’ll find as an effective dealmaker, so if you’re ready, let’s get started. Last week heard from Bill Morrow who CITY AM newspaper described as the most influential person in alternative finance in the UK today. Bill explained how his business works and how he introduces people looking for finance to people who want to invest.

This week Bill explains how early mistakes eventually led him to understand what investors are really looking for and what motivates them to invest.

For 17 months we got it wrong, for 17 months we assumed why angel investors – do we understand what angel investors do? They give you a sum of money in exchange for some of your equity, yes.

The documentation is absolutely key, once again you’ve never done it that way, probably you haven’t done this before, but the shareholders agreement is crucial, as with a marriage contract, a prenuptial, a house sale, crucial, and things will be wrong and then you will need it and it’s only then that you’ll understand the value.

Seventeen months we assumed that investors were investing to make money as their primary reason, and we presented deals in terms of MPVs, IRRs, [?DOCFs 0:02:29.8], whatever, and they were going, kind of like you, they were going, ‘Ah, whatever, really, this is really boring.’

It actually comes in at number three, so today we take, we got an external company to go away and talk to the investors, because the moment I lose the reason that these people are looking to invest, and we now have 21, no we don’t, 22,000 of them, 22,000 investors with an average €360,000, don’t ask, to invest.

I told you I was a bad accountant, it’s a nonsense number, 22,000 times 360, you get the drift, it’s more than enough to fund everybody in this room and all the 126 that we see every day.

The sadness is however that we need to see 155 businesses to find one good enough to pitch and I will tell you what those are. Back to what the enemy demands of you, why are they looking to invest? It’s important for you guys, if you just go, ‘My business is going to make 11 times money and I’m going to return you 23 per cent,’ what does that immediately tell them? That you’re a fool.

You have no idea, no idea how much money your business is going to make. If you think you have an idea of how much money your business is going to make, you’re stupid, there’s no way. People that go, ‘Oh yes, that’s great, could you give me your three-year cashflow projection?’ are muppets.

We see 400, 412 angels a day on average, how many of them bother to look at the numbers? They don’t even look at the numbers, don’t even look at the numbers, why? Your numbers are bullshit, absolute nonsense. Anybody disagree? I mean, there must be an accountant in the room who disagrees!

A little bit of disagreement?

They don’t even bother looking, they look at it later on to have a laugh, to justify your ridiculous evaluation, they will look at it then, I’m not saying that, but they don’t even bother looking at it now because it’s not about the numbers.

Making money comes in at number three, we were kind of like weirded out by this, I mean – then we did something deviously clever which allows me to stand up and spout, I’ve got 11 speeches this week.

We did something deviously clever to find out what the rationale for angels investing was, we asked them.

I know, I know, that’s the kind of intellectual giant that you’re standing before!

Yes, we asked them, we asked them, ‘Why are you looking to invest?’ Number two was they want to give something back, they want to help other people not make the mistakes that they have because nine, no, 87 per cent of them are men, it’s ego, ‘You see that thing there, I’ve invested in that, you see that, that’s me.’

Female investors are not that stupid, they’re not into ego, if you can get a female investor onboard get a female investor onboard, guys are stupid. If you’re looking to raise money and you haven’t got a woman onboard, newsflash, they make up 51 per cent of the population. If you haven’t got a woman onboard, that tells me something. You’re a one-man band, two-man band, three-man band, four-man band and you haven’t got a woman onboard? You’re stupid again, stupid.

Woman are more intelligent, more emotionally intelligent, more collaborative, they make up 70 something per cent of the buying decisions in the marketplace, they give you another way of looking at it, testosterone has got us into a lot of trouble and is a lot of – anyway, I’m starting to rant, you get the drift, that’s number two.

Number one by far and away, number one, bigger than two and three combined, there’s a major reason these people are looking to invest their hard-earned cash is that they, yes, they’re bored, they’re looking for some stimulation.

Now don’t get me wrong, they’re not philanthropists, they’re not looking to give the money away, but they want something that is going to challenge them, something that is going to be interesting, something that interests them, that is by far and away the most interesting thing that you could do.

It takes them on average 14 months to come to this realisation, they have what my private banking friends call an equity event, it’s a great term.

They get some cash, so they’ve been made redundant, they retire, they sell their business, they do whatever, they have the holidays, they play the golf, they buy the toys, by 14 months they’re starting to go, ‘There’s only so much golf you can play, trust me.

I bought a house on a beach and a golf course, I never want to play golf again, so bored playing golf,’ they’re just going crazy.

A lot of people die two years after having an equity event, it’s a very stressful thing, all your life you’ve been chasing money, after 11, 12, 13 months you actually then begin to realise there is more to life than making money. These little things, what are they called?

F: [?Children 0:08:11.7]

Children, children, so I’ve thousands of them and whilst I was still working I missed out on some really formative years because I prostituted my life away, and I regret it, totally, totally and utterly, it’s utterly wrong.

Without getting into the morality of why people get money and what they should be doing with it, that is a really important thing. What you’re looking to do is to connect with them, I said I was going to tell you what the three things are that you need and I shall run past that and then cleverly segue into the very first reason that they are looking to invest.

We’ll be hearing more from Bill next week. For some time now we’ve been considering many of the negotiation skills that every dealmaker needs to have in order to purchase a business from its owner. Here are some more skills and tactics that will improve your negotiating position.

Anti-embarrassment payments, I’ve had this, someone says, ‘Look, you buy this business from me, you might turn it into a huge success and sell it in 12 months and make a fortune.’ Now the correct answer is, ‘Yes, so what? Because if I do that I’ve done the work, right? That’s my right to do that.

Once I own your company, if I choose to close it the next day or sell it the next day that’s my right,’ but you say, ‘You know what, that’s an interesting thought,’ or you could even put that thought in their head.

Let’s build in an anti-embarrassment payment, if we sell the business in the next 12 months, because they might say, ‘I know what you’re going to do, you’re just going to sell – I know that you buy and sell businesses, you’re just going to sell it to someone else, you’re going to flip this business,’ ‘If I do we could, we’ll pay you an anti-embarrassment payment of, I don’t know, what do you think is a fair amount? Fifty-thousand? Okay, we’ll put that down as well, there’s £50,000 there,’ so now we’re building up the components of the deal slice by slice.

Success triggers, I know you told me that you’re going to get this big NHS contract, I get that, the thing is we don’t know it’s going to happen. Now I know the big NHS contract is worth a lot of money, I know it’s worth a million pounds over the next two years, I know it’s a lot of money, it’s a wonderful contract, ‘Why don’t you help us get that contract and we’ll pay you a success fee of £100,000?’ let’s write £100,000 down on the pad, okay, so we’re building up the value. Now if they do get you that contract and it’s worth a million pounds and you know that you can afford £100,000 out of that million because the margin is there, then suddenly we’re going to be paying them another £100,000, well that’s fair.

If it doesn’t happen because they were BS-ing you, then you’ll see it on their face when you write it down. Performance related payments, if they’ve worked with a broker, the broker has asked them to produce three years of forecasts.

Now we all know, because we’ve done it for our own businesses, that forecasts are the world of fantasy, aren’t they?

If everything’s lined up with a fair wind these are the numbers that we’re going to hit.

No, no, no, they’ve put them down in writing, remember when we put something down in writing we legitimise it, they have legitimised their forecast, said, ‘Look, if we hit these forecasts then we’ll pay you these extra amounts, what do you think is a fair amount?

Fifty-thousand-pounds per year for hitting this forecast, okay, so that’s three years, £150,000.’ Now the questions in some people’s minds might be, they would say, ‘Well, I don’t have any control over hitting those forecasts because I’m no longer running the business,’ which is a fair point and if I was on the other side that’s exactly what I would say.

Your answer to that is, ‘Yes, but you’re going to be a consultant, right? Why don’t we put in the consultancy agreement if we don’t follow your advice then that’s our fault, but we want you to be a consultant because we’re really impressed with what you’ve done with the business over the last ten years.

We think that with a little bit of extra impetus from us we can lift it up to the next level.’ Are there any assets, such as a car? This actually came up yesterday, we were looking at the assets of the business and there was a car that had a value in it of one and a half thousand pounds.

We said, ‘You know what this woman’s doing, she’s let the company buy her – that’s her personal vehicle, she doesn’t need the car for the business, it’s a nursery, she doesn’t need a car.

She’s driving that to and from work, she’s using it at the weekends, if she sells that as part of the business, which she should do because it’s an asset of the business, she won’t have a car. Why don’t we sweeten the deal and say you know what, you can keep the car,’ it’s worth more to her than one and a half thousand because she’s got to buy a new car which will cost more.

Let’s put the car in there, what do you think the car’s worth? Now people don’t read their own balance sheets and their own, they don’t look at their own financials, so she’s forgotten that her accountant’s depreciated it to one and a half thousand.

She’ll take a stab at it and say, ‘It’s probably worth about £5000,’ ‘Great, well let’s put that down in there as well.’ Now we’re building up all these elements that contribute to the value, there’s a deferred period obviously, so let’s say we pay you X, let’s say £100,000 over a three-year period, so the deferred period term, start with the longest possible term, like five years and work backwards.

You can’t say three years and they go, ‘Yes,’ and then go, ‘Actually I’ve changed my mind and I want it to be five years,’ start with five years and work backwards.

I had a woman at a seminar last Thursday who has actually joined Mastermind and she sold a Harley Street Dental Practice, so I don’t know what the numbers are but you’d imagine they’re quite decent, and she sold it completely on a deferred consideration basis over three years.

She stuck her hand up in the audience and said,’ I sold my business like that and I was really happy,’ she said, ‘I’m still getting the money now, it’s brilliant,’ and she plays golf and just enjoys herself in the day time, but she’s receiving the money.

The amount paid at the beginning, say, ‘Look, if we’re going to do all this it means, because you’ve told me that we need to invest in a new website and we need to bring in some more sales people, you realise that has the impact of reducing the initial consideration?’ so the amount paid at the beginning might be a very, very low amount, it might be, ‘Look, we’re starting to know each other a little bit here, what do you need right now to meet your immediate financial requirements?’ ‘Well, I’ve got a £5000 credit card bill that I really want to get rid of, I don’t want that hanging over my head,’ ‘Okay, let’s put down £5000 initial consideration.’

Yes, all of these things are negotiable later but what we’re doing, instead of arguing with them over the valuation of the business, we’re building up the value with all these different layers.

We’ll be discussing some more negotiating skills and tactics next week. Last week I introduced you to a remarkable serial investor, Peter Kiddle.

This week Peter turns broker and explains how he went about securing a buyer for a business that I owned several years ago. His concern was that my business was too closely identified with me personally, so here he describes how he went about answering the objections that a potential buyer was likely to raise.

I’ve done many deals as a broker including selling Jonathan’s company, he couldn’t get it sold via an alternative broker, it was clear that to sell Jonathan’s company was going to be a bit of a challenge because he was so key.

Most acquirers would not be interested in buying a business when the key person was not going to be there in the future.

Being innovative in the way in which I do broker-type deals, I went out and found a Jonathan replacement who wanted to run the business. I then introduced the new MD with a Venture Capitalist firm, [?our capital 0:17:15.4], put the two of them together, the funding came from our capital, the expertise came from Jonathan’s replacement and we sold the business fairly quickly for what I must say was a fantastic price.

I’ve done many deals, probably about 20 of that type, all of them were slightly different, the process is always the same and that is that the seller, and this is something that you’re going to experience a lot of, becomes very emotionally involved in that business. They can’t see reality, they want to make sure that their people are all going to be looked after, it’s all about emotion but they say it’s about money, but it isn’t.

If you’re looking to buy a business that is an owner manager-type business, play on it, work it, make sure that you’ve met the people within their business, make sure that they love you to death, make sure that it feels it’s going to be warm and cuddly and everything’s going to be wonderful, and they’re all going to have a lovely time with their new boss.

If you can make that happen the chances of you being successful in acquiring that business, whether it’s for a pound or a larger consideration, you will possibly be competing with others and it will be an emotional decision that’s made by the seller.

I’ve played around with buying and selling, I’ve played around with being a broker and then I hit 62 years of age a few months ago and thought, do you know, I think I’m going to retire at 65 but I’m going to just do one more deal, one more big deal, just to prove to myself that I can actually do it.

The criteria I gave myself is I want to make £15 million in three years and I’m not going to spend any money, that’s my challenge.

A year ago, April last year I hunted and found a training business that was turning over two and a half million quid.

In April when I went to see them last year they just finished their accounts and they’d lost a million pounds in that previous year.

Now that’s quite something really, to turnover two and a half million and lose a million, you’ve got to work at it!

They were at the point of trying to make a decision, do we close it down, because they were getting so close to that dodgy bit of trading whilst in solvent, because as you know if you can’t afford to meet your obligations and you continue trading, you break the law, a very serious matter.

They were very anxious about this breaking the law bit, they couldn’t decide whether to close it down and they’d sort of come to the conclusion that nobody’s going to buy a business losing a million quid, why would you with such a small turnover?

Again, the advice I would always give you is look for the opportunities, don’t take it on face value, look for those opportunities.

Every member of staff earning over £100,000 a year, premises £350,000 a year, it’s all bonkers and it’s all common sense.

Like with that first deal with the Guardian Newspaper Group, I negotiated with the landlord to let us off the hook.

The deal I did was we’ll take one of their serviced offices instead, otherwise we’re going to go bust and you will lose the lot.

We went from, oh, I don’t know, I don’t know how many thousands of square feet, it was probably six or eight times this room here, and we went to a small serviced office that could take eight people.

Wiped out all that office-type cost, made redundancies galore, these people were so flipping lazy, they had no idea of the real world and I was delighted that they could go, and just kept the good people.

That was a year ago, so we started last April with that £80,000 a month loss continuing through.

The year end, which ended a month ago, in our first year of trading under my help and guidance we’ve just recorded a £350,000 profit.

This year we’ve already doubled the turnover compared with last year and kept the overheads at the same level.

Again, it’s about thinking around the problems, not accepting those problems that are there but making bold decisions to make things happen.

That’s not going to get me my £15 million, so the next stage of logic is to build a group by multiple additional acquisitions and that has now started.

Six months ago I bought a leadership development company that had a very unique level of accreditation with professional bodies, not straightforward to get and certainly not good if you haven’t got credentials to achieve it.

This was a very different deal, one that’s actually quite unusual, two owners wanted to retire but the business wasn’t really making enough money to give them the income from the sale that they wanted.

I’ve done a deal, ‘I buy your shares for £1 and you get 20 per cent of profit before tax for the next few years, I get 80 per cent but then I’m doing all the work,’ they retire.

Now if I do what I plan to do with this business that 20 per cent to them is going to be worth a lot of money, if it doesn’t work it hasn’t cost me a penny.

Deals in my view are all about understanding what the seller wants and then constructing something that works for all parties.

This group that’s being built has now got two companies in it, the third one is launched next week and I’m very hopeful that that will achieve my goal of £15 million by the time I’m 65, in three years time, and it won’t have cost me any money at all.

We’ll be hearing more from Peter next week. That much about wraps it up for this week, next week we’ll be hearing more from Bill and more from Peter.

Remember to visit our website at www.thedealmakersacademy.com, have a good week and see you next time.

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Welcome to the business flipping podcast where you find all the very best information on how to buy and sell businesses and become a dealmaker. In Business Buying Strategiespodcast #14, you’ll hear:

• Crucial advice for making your first deal from business investor Paul Green including two key insider secrets that every new dealmaker should know.
• Bill Morrow, who City AM describes as “the most influential person in alternative finance in the UK today”, explaining how his company acts as an introduction agency for people seeking finance and people looking for investment opportunities. Bill is the co-founder of the online investment platform Angels Den.
• Jonathan Jay, founder of The Dealmaker’s Academy, describing more key negotiating skills you’ll need to be a successful dealmaker.
• Peter Kiddle, businessturnaround expert and the Chairman of Business Transfer Agent Ltd., revealing how he put his first deals together and about how his business evolved. Peter now divides his time between consulting on company turnarounds and selling training companies for clients.

Listen to find out:

• Why you must discover a seller’s real reason for placing their business on the market
• How sellers tend to hide the real reason for selling initially and why it is so crucial you discover what it is
• How a seller’s business partner can unintentionally help you to uncover the seller’s real motivation for selling the business—if you ask the right questions and listen carefully
• How business brokers and business owners use the same sales techniques as real estate agents and how to see through what they present
• Why you should always be prepared to walk away from a deal, no matter how good it seems on paper
• How a business transfer agent works
• Why Bill Morrow’s business venture works so well
• The biggest mistake people seeking funding make
• What business investors reallywant to know
• The three reasons alternative investors will provide funding
• The biggest value that an investor can provide (and it’s not funding)
• Why so many crowdfunded companies fail within two years
• The three things you should look for in an alternative funding source
• Why you should always allow the other party to raise the issue of pricing
• Why so many sellers have such low aspirations for their business
• The key difference between a business operator and a business investor
• Why you should never denigrate a seller’s business (no matter how poorly it’s been run)
• How to drive a wedge between a seller and his or her broker (without appearing to)
• The key question to ask a seller about their valuation
• What you should do when sellers describe the grounds for their valuation
• Why you should ask who valued the business
• Why you can immediately reduce a broker’s valuation
• How to get the seller onside just by asking questions
• How to make the idea of a consultancy more appealing to a seller
• How changing tactics helped propel business turnaround expert Peter Kiddle towards huge success
• The signs that a business is struggling
• Why you should never let a business owner know that you’re aware of how the business is in difficulty or badly run
• How slashing overheads helped Peter remove hundreds of thousands of pounds in costs
• How merging back-office functions with his existing business helped take one company from a £3 million turnover with negligible profits to a £5 million turnover and £1.5 million profits
• Why it took Peter two years to sell his business for £5 million
• How the mistakes Peter made helped him to create a business brokerage
• Why he bought back a company he’d sold three years earlier
• How to come out on top when dealing with administrators

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Read the transcript here:

Hello and welcome, this is Jonathan Jay for the Dealmaker’s 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 14, in this week’s episode we’ll be hearing for the final time for serial dealmaker Paul Green.

Last week we heard Paul talk about the importance of psychology when buying a business and also about looking at a deal from the viewpoint of the business seller.

In this final session Paul gives his advice to anyone about to make their very first deal. I’ll be introducing you to Bill Morrow who CITY AM described as the most influential person in alternative finance in the UK today.

Bill introduces business people looking for finance to business people looking to invest, and he’ll be explaining how his business works.

Later in the episode I’ll be teaching more of the key negotiation skills that you’ll need as an effective dealmaker and I’ll introduce you to Peter Kiddle, another serial dealmaker who having built up and sold his business successfully bought it back from the new owners barely a year later.

He’s also a superb business broker and Peter was the person I relied on to sell my own business a few years ago.

Peter explained how his business evolved and how his first business deals were achieved. If you’re ready, let’s get started.

Last week we heard Paul Green talk about the importance of psychology when buying a business, and also about looking at a deal from the viewpoint of the business seller.

In this final session Paul gives his advice to anyone about to make their very first deal, here’s what he had to say.

If there is one sort of sentence, something to summarise, what piece of advice would you give people who haven’t yet bought the first company or haven’t yet done the first deal?

Get out, talk to – okay, no, actually if it was one piece, one is to look for the real reasons for the sale, so sometimes it’s a – you know you see retirement sale or my favourite one is the owners have other businesses they want to focus on, which it’s all bullshit, so you have to look at – it’s like with estate agents, spacious and airy, ignores the fact there are lorries going that far from the window or whatsoever.

There’s a lot of dressing up that’s going on and I think the, you’ve got to look for what are the real reasons.

Sometimes it’s genuinely they want out, it’s like the vets at the moment, vets are selling because it’s, the market will never be like this ever again and they can get two million instead of a million.

Why wouldn’t you do that? I think for any other thing you’ve got to look at what’s really motivating them, and as you said it doesn’t come from talking to brokers and advisors, you’ve got to get the seller and preferably their partner, and I don’t mean their business partner, their life partner, get them into – in fact, the best conversations I’ve had is when someone’s brought along their other half, their wife or their husband as it’s been [unclear word 0:03:06.5], because the wife or the husband isn’t on message.

They’ll sit there and they’ll say, you’ll say things like, ‘Tell me about your work life balance,’ and the owner will go, ‘Yes, absolutely, so I work six or seven hours a day,’ and the wife will go, ‘You bloody don’t, you’re never home before eight o’clock at night,’ and then they’ll have a little argument. It’s great because you really start to get into the crux of it.

Some of the IT support companies, because I have a pipeline already of people that’s only been held back by having an operations person to run that business for me. From the pipeline and the conversations I’ve had, it’s exactly the same conversations of – they’re no different to vets, they’re exactly the same with vets except they fix computers, not dogs.

There’s no one doing a lot of acquisitions in that particular sector currently and that makes it actually a buyer’s market, not a seller’s market, which is awesome.

I think getting to understand the seller’s motivations is one thing, if I could add a second one is that they’re, if the deal isn’t absolutely great, walk away because there’s another deal.

We had loads of vets that were pushing us for better deals and high-levels of EBITDA and we just played it straight down the line, ‘Look, this is the offer because this is what can get funded, if we do a complicated deal with you, word gets out, it’s off.’ The same with some of the IT support companies, I’ve had people saying they want ridiculous amounts of money and this and that and overvaluing it.

I’ve got a great accountant working on, doing not quite as good as your due diligence pack, although that’s going to, I’m going to up my game on that one having seen that.

You’ve got to trust your advisor if they say, ‘This is the situation, this is that,’ if it looks and feels like a good deal and you’ve got to do it because it will never come along, no, that’s not the case at all, there’s always another deal.

You can do the, whether it’s letters, phone calls, emails, Facebook, whatsoever, there are thousands and thousands of people out there that would sell their business like that if the right buyer came along.

We’ll be hearing from more successful dealmakers in future episodes.

Let me introduce you to Bill Morrow who CITY AM described as the most influential person in alternative finance in the UK today.

Bill introduces business people looking for finance to business people looking to invest, and here he is explaining how his business works.

I spent tens of thousands of pounds with these people, tens of thousands of pounds to get not a sniff.

I thought to myself here I am, if I am getting ripped off what the hell is it like for people who want to minimise the amount of time they spend with freaks of nature like me who like numbers and balance sheets, even if they don’t balance, and really just when to do it.

We came up with a name and the concept is simplicity itself, we sit in the middle and we introduce people who are looking for money to people who have got money.

Imagine my surprise and your surprise about five and a half minutes of listening to me talk that today it is Europe and Asia’s largest [?angel 0:06:13.8] network.

Nine years ago we opened in Singapore, eight years ago in Hong Kong, we got a pretend office, somebody sitting in their bedroom in Malaysia, we’re sponsored by the Qatari Government, we’re in Kuwait, Abu Dhabi, Tel Aviv and hopefully moving into Kuwait, got four offices in Mexico, two offices in – you get the drift.

I think its success is twofold, the success is based on its simplicity, the simplicity is that we translate what it is the investors are saying to these people looking for money, and we translate what the people looking for money say to the others because they speak very different languages, very different languages.

In fact, I had a course on last night where people were presenting their businesses, and what people do when they present the businesses is they present them very badly.

What people do, the biggest mistake they make in terms of presenting is they present the product.

When people are looking to invest into your business they don’t want particularly to know about your product, guess what they want to know?

Yes, well they want to know numbers, but they want to know about your business.

You’ve got a great product, great, well done, the idea is the really easy bit, not easy but it’s the real easy bit, actually understanding the nature of what it is that you’re talking to, the person doesn’t want to buy your product, he wants to buy the business behind the product.

What I’m going to do this morning is I’m going to tell you the three reasons that investors invest, and that took us 17 months to figure out, yes, that’s how stupid I am, and the three things that you need to have, in my humble opinion, in terms of having a chance, no, not having a chance, if you want to be successful and also I shall define success.

We see 126 business plans every day, every single day, so we have interns from MIT and Harvard who would pay me, and actually I would take their money, to come and work for us because they’re going, ‘Where the hell else in the world would I see 126 different business models?’ they go through them, it doesn’t actually take that much time, but we see 126.

The number one problem that we have with the 99 per cent of them is that they come to us and they ask us for the wrong thing, they ask us for money, whereas what I think and I can prove it, the real value that comes from an investor is not money.

If you just want money every day of 126, we see 17, not 16, not 18, every day it’s 17 and they are 29-year-old, they’re all wearing skinny jeans, they’re all male and they probably all live in Shoreditch.

They are God’s chosen people because they know everything already, we’re going, ‘Wow, dude, that’s incredible,’ ‘Really?’ ‘Yes, absolutely,’ ‘We know everything already’, ‘Okay, that’s great. Is there any -‘ ‘Ssh, ssh, ssh, you’re wasting my time, can you just give us the money?’ I go, ‘Tell you what, we’re not going to waste your time any more, what you must do is go to Crowdcube or Seedrs and your dreams will come true, but be very careful what you wish for.’ Crowdcube and Seedrs for people that don’t know, they’re crowdfunding websites, so rather than getting a bulk of money from one person you get 300 people to give you smaller amount of money and you get the money.

My board says, ‘Are you sure that we should be sending 17 people to people who we might think of as competitors?’ I’m saying, ‘Absolutely not, no problem at all, just wait and see.’ We are the biggest introducer to equity crowd funding platforms, nobody sends them more deals than us, [unclear words 0:10:37.8] be very careful what you ask for. Off the companies that we send, a high proportion of them go and get funding and they come back and go, ‘Got funded,’ I’m going, ‘Dude, that’s fantastic, well done,’ they go, ‘Yes, ha-ha-ha,’ I’m going, ‘Oh.’

Not one of them has got beyond 14 months, not one of them. Inherent within their arrogance, no, it’s not arrogance, it’s just they don’t understand because people haven’t told them what it is that they need to know.

The things that you really need for an investor, money I would say comes in at number four, number one by far in the way is their mentorship, is the value of their experience in that marketplace, what they know, their wisdom.

They don’t necessarily need to come from a car charging environment for you to be able to get some value out of it.

How should I raise my next round of money?

I’m now looking to raise £2.7 million, well I’ve got people that can actually help you with that, or I can help you exit the business, or I can set it up so that you can do whatever.

Mentoring is by far in the way the biggest thing, the second thing is their experience just in particular sectors.

If you’re lucky enough to actually find somebody who actually understands your sector then that is going to be really, well I would have thought that was kind of important and experience once again has proven that it’s true.

The third thing which probably, well hardly anybody ever asks us for, but it is in my humble opinion once again probably the most important thing that you actually get are the contacts that people come with.

It’s their mentorship, it’s their experience, it’s their contacts and then it’s the money. The inherent flaw that will bring about to their own demise in terms of crowd funding is that you just get the money.

I’ve given you £300 now, £300 you’re probably not going to say, ‘You know what, I was in Tesco the other day and your stock was running a little bit low,’ you’re going to go, ‘I can’t even remember if I invested in that company,’ you’re not emotionally tied to it. You put £200,000 into a business you’re emotionally tied to it, you kind of want to help the business, yes?

Kind of makes sense.

We’ll be hearing more from Bill next week.

For some time now we have been considering many of the negotiation skills that every dealmaker needs in order to purchase a business from its owner.

Here are some more skills and tactics that will improve your negotiating position.

Always let them make the first move on price because you might be surprised how low their aspirations are, they might think my God, who would ever buy this business?

It’s not worth anything, it’s not worth anything, because, it doesn’t mean that it isn’t worth anything, what it means is that all they see are problems because they are an operator, not an investor and all they have is, ‘I’ve always got a customer complaining, I’ve always got a supplier who doesn’t deliver, I’ve always got a member of staff who is going off sick.’

This business is a nightmare, who would want to buy this? They’ve lowered the value in their own minds, so let’s hear what they think the value is. Stroke their ego, ‘You’ve got a wonderful business here, no, I know you said all those things but I think it’s a fantastic business,’ you can’t tell them their business is rubbish first of all because it’s insulting and secondly why do you want to buy a business that’s so rubbish?

If it’s so terrible why are you interested in buying it?

You’ve got to tell them what a great job they’ve done, I say, ‘Well, yes, but I think the premise is, I think we need to improve the quality of the premises.

You know what, you’ve run it a long time, I know these things get a little bit rough around the edges over the years, I think you’ve done a great job, I think you’ve done a fantastic job.

You’ve said you’ve had difficult circumstances recently with the family, I get that, I think you’ve done a wonderful job.’

Help me understand. You’ve told me that the figure that you want is £300,000,’ Columbo moment, ‘Help me understand how that evaluation’s reached, help me understand it.’

Then you just shut up, get your pen and poise the pen over your pad and wait for them to explain it to you. Why?

Because they can’t do it, because it is, because they’ve worked out that the holiday home is going to cost this, and they’ve got some credit cards that they need to pay off as a – that’s the number that they want.

In fact, it bares no relation to the business that they’re selling or they’ve plucked some, they’ve read something on the internet and they said, ‘I think we can get a multiple of eight times profit,’ yes right, yes, maybe 15 years ago, not going to happen now.

Here’s a good question, was this your evaluation or someone else’s? If there’s a broker involved it’s probably the broker’s, which means instantly it’s been inflated.

The broker knows that, so as soon as you hear the evaluation was the broker’s you know you can immediately slice a huge number right off the top.

Here’s how the conversation would go, so, ‘Was this your evaluation or someone else’s?’ ‘It was the broker’s,’ ‘Interesting. Do you know how they arrived at that evaluation?’ ‘I don’t, well they did something and they – I don’t really understand numbers, and they came back to me and they said this is what it should be,’ I say, ‘That’s interesting.

When you saw that number what did you think? Did you think it was more or less?’ now it’s never going to be less clearly, so the only option is it can be, ‘About the same as I thought it was going to be or more,’ so they go, ‘Well actually we thought really it was going to be less, so we were quite surprised when they came back with this number,’ ‘How much less did you think it was going to be?

I think you’re right, how long has it been on the market for?

A year, well I think that’s just proven that you’re right.’ You’re stroking their ego and you’re also bringing them around your side of the table so that the broker is now being pushed out a little bit and their advice isn’t going to be listened to so much.

Now there are times when you want the broker to be on your side and we will cover that at some point.

Three-hundred-thousand, interesting number, if we were to reach that evaluation what are the factors that contribute, what are the elements that contribute?

Now this is an interesting way of looking at evaluation, just because the number’s 300, it doesn’t mean that that’s £300,000 day one cash, we get that now, we understand that.

What are the elements that contribute?

Here are the components of a deal. They might get equity in their new company, now interestingly if you’re buying day nurseries and you’re buying the assets of a day nursery and putting the assets into a new co, you lose your Ofsted accreditation.

You need the previous owner, in fact actually you need them to have equity in the new co. You might say that that equity, let’s say it’s 15 or ten or 20 per cent, has a value, so your £300,000, if you think of it as a pie chart, now has a slice of it as 20 per cent equity, so we’ve just chopped the 300 down by maybe £75,000.

They’re all sort of arbitrary numbers but then the £300,000 was an arbitrary number in the first place. Instead of me saying, ‘I don’t think it’s 300, I think it’s 200, you think it’s 275, I think it’s 225,’ and you do that horse trading thing, it’s like so how do we reach the number?

How do we reach the number that you want?

Let’s say there’s consultancy fees where we pay you £500 a day and we pay you for a day a month over the next three years, well that’s £18,000, so that’s 18, let’s put £18,000, so that’s £18,000 contributes to the 300, you put that in there.

Obviously the bigger the number, you know what, I’d go for a bigger number on that, make it a little bit more exciting.

Don’t forget you’re not obligated to use the consultancy, you’re not obligated to use them as a consultant.

It’s a consultancy agreement that can be terminated by either side, it’s not unfair, it’s not only turn it one side and turn it on a – let’s say, let’s get a little bit more exciting, let’s say it’s £2000 a day and it’s a day, I’m going to say it’s 24 times three, times three years, that’s roughly £75,000, £75,000 of our £300,000 is going to be consultancy fees.

We’re getting there, we’re getting there, so we’re looking at all the elements that can help us reach this arbitrary figure that the broker’s come up with.

We’ll be discussing some more negotiating skills and tactics next week. Now we’re going to hear from someone quite remarkable, meet Peter Kiddle.

Not only did Peter build an enviable business and sell it for a handsome sum, but when the new owners struggled to make a decent fist of running their newly acquired business, he was even prepared to buy it back again.

Peter is also a first class business broker and he was the business I relied on to sell a business of mine several years ago. I asked him how it all started and here’s what he said to say. Peter, how did it all start? Tell us a little bit of background.

I failed my 11 plus, some of you will recognise what that means.

I wanted to be a policeman, I was too short, but I did become a forensic officer with the Metropolitan Police and hated it and decided I’d go into the commercial world to learn what business was all about, and did that for a few years with larger organisations such as Philips.

I then thought oh, do you know what, I can do this business stuff, I don’t need to work for somebody else.

It took me to the age of 34 to decide that I’d start up my own business on my own, serviced office above the Midland Blank in Frimley, petrified, credit cards maxed to the absolute limit, borrowed money from everyone I could find and was panicking like hell, but I took the plunge. I also had a large mortgage and two young children, which didn’t help.

The business was successful, it took a long time for me to build the business but I did it the hard way.

If I’d known at that time what I know now I would have done it completely differently, but I did build up the business, I got it to 120 staff, I got it to a five, £6 million turnover every year and it was damn hard work.

I was working 12, 18 hours a day, I’m sure many of you that have your own businesses currently will recognise this, absolute exhaustion, I did it definitely the hard way.

Got the business to about £3 million turnover and started to realise that there must be something in this acquisition thing that would work for me, so I started playing around with acquisitions and spent far too much.

If you think about it, typically in the marketplace businesses sell for a, in my sector, around about four times profit before tax.

What I was doing, I was buying businesses at four times profit before tax and it was taking me four years before I got my money back, crazy.

Once those four years have gone by of course, okay, I was starting to reap the benefits, but it just took too long. I made those mistakes and bought those companies for far too much and then decided I ought to change tactics a little bit.

Along the lines of the sorts of things that you’ve been discussing in this group, I started to try and hunt for businesses that might be keen to get rid of them but at a price that’s fairly reasonable. I started doing my research by talking to, there wasn’t so much internet stuff then, by talking to people within the industry to find those businesses that seemed to be struggling.

A core sign is they start paying people a bit late or they start giving you stories in the marketplace about why they’re not expanding quite as they should do. I was running a management training business, turning over £3 million and I found a company called Guardian Business Services, it’s the Guardian newspaper group’s training company.

Turning over about two and a half million, struggling, so I wrote a letter to the MD and said, ‘I would like to talk to you about buying your really, really successful business.’ The last thing I found in my experience is to go into these discussions giving them the impression that you know that they’re on dodgy ground and struggling, they don’t tend to come through so easily if they think they’re going to get a duff deal.

I did this letter, I went to see the MD in Farringdon in Fleet Street and sure enough they were just about breaking even, they had the most ridiculous overheads, utterly ridiculous and I could see that there was some potential here.

A business making no money isn’t really worth very much, they knew that, I made sure they knew that, but I spent about four hours, maybe five, looking at their accounts, looking at their overheads, looking at the way in which they worked.

It was so easy, I could see straightaway that their office accommodation in Fleet Street was ridiculous.

I mean, the MD’s office was probably half the size of this room, the staff were so laid back and they were all doing things that were ridiculous, there was 20 of them in this office.

The opportunity was clear to me and because of that enormous opportunity I didn’t do the normal type of due diligence that you would do on the basis of, well, if it doesn’t work I’ll close it down.

The MD was keen to get out, he was 66, he was knackered, he just didn’t want to know any more and it was quite an easy sell, to purchase that business for £1.

The £1, I actually paid him with a proper piece of money, the business turned over two and a half million, I sold, we got rid of the offices straightaway.

I think the lesson I learnt there was, the lease had five years still to go, most people go, ‘Well, we’re stuck, we’ve got to stay in this ridiculous sized office,’ well, I approached the landlord, said, ‘Look, we’ve got two choices here, we’re going to go bust and you’ll get absolutely nothing or you let us off the hook and I’ll give you a few bob,’ they said, ‘Yes,’ it wasn’t much of an issue.

I took £450,000 out of cost immediately, I then looked at the staff and this was quite some time ago, all drastically overpaid and, yes, I had to be ruthless and let half of them go.

That business was very quickly producing a £1 million a year for me, because all the back office functions were handled by my existing business.

That quite quickly moved me from a £3 million turnover business to a £5 million business producing one, one and a half million pounds a year profit for me, it cost me £1 plus a lot of hard effort getting my core business to the point where it was.

That’s the point I thought really it’s time to sell, £5 million, a million, million and a half, the bottom line, an attractive little business.

Sold it for £5 million, it took me two years to sell that business, I was so arrogant.

I interviewed a load of brokers, I’m the good guy remember, they’re the bad guys, I interviewed these bad guys and they didn’t understand my business at all and I thought I can do it, I don’t need help. I went out and I made every single mistake in the book for two years and that’s why it took so long.

I learnt that you have to validate that the potential buyers have got the cash, that they’re serious, that their due diligence is just not playing a game, because we know what corporate people are like, they keep themselves busy by doing stupid things.

All that stuff that I learnt I used when I set up my broking company to help companies in the same sector as me to sell this businesses.

Just to go back to the business I sold, they put an MD, they didn’t want me to stay, I didn’t want to stay, put an MD in who was pretty useless this really.

It was a venture catalyst firm that put the money up, staff would ring me at home, because by then I was just sitting with my feet up, playing golf, they would say, ‘He’s useless, he’s just sitting reading the newspaper all day,’ oh, the stories.

Anyway, three years later it went bust and that’s the difference between entrepreneurial management and normal operational type management I believe.

I was in the know and new the people there, I liaised with the administrator that was handling the closing of the business and he wanted to negotiate a price for me to purchase this business back.

He knew what I got for it, that’s where he started, no chance. In the end if you do your research and you’ve got enough ammunition you can beat up administrators really easily.

For example, in the training industry the key people in the business are those freelance trainers that deliver your service, without them there really isn’t much of a business.

All of them were owed a fortune because the company hadn’t been paying their debts, most of them were owed about 20, £25,000 each, but these are one-man bands with mortgages, with children, a bit desperate really.

I said to the administrator, ‘To start with I’ll have to pay these freelance people to keep them, so there’s £800,000 that I’ve got to spend anyway.’

I started to build up this story as to why buying this company for anything more than very little would be crazy, because they don’t understand every business they eventually agreed with me.

I bought a £5 million turnover business which had dropped to about four and a half for £60,000 in the end.

Turned it around fairly quickly and sold it again for £5 million, so you’ve got to have your ammunition, you’ve got to – when you go to talk to anybody, administrators, anybody, you’ve got to have done your homework and be ready for the arguments.

We’ll be hearing more from Peter next week. That much about wraps it up for this week, next week we’ll be hearing more from Bill Morrow and Peter. Remember to visit our website at www.thedealmakersacadamy.com, have a great week and I’ll see you next time.

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Welcome to the podcast where you find all the very best information on business investing, how to buy and sell businesses and become a dealmaker. In Business Buying Strategies podcast #13, Jonathan Jay from The Dealmaker’s Academy covers:

• Business investing entrepreneur Paul Green reveals the importance of psychology when buying a business
• Andy Gwynn explains how to get the best from LinkedIn search functionality
• Our HR expert Kelly answers questions from our Mastermind Programme members
• More key negotiating skills that you’ll need to become a successful dealmaker

Listen to find out:

• How to identify motivated sellers
• Why cash is not always an owner’s motivation to sell a business
• Why buying someone’s business can help them to achieve a better life
• Why time could be so crucial in your negotiations
• Why dealing with an owner directly will help you to identify their pain points
• Why you should meet with owners of businesses you have no intention of buying
• How to avoid divulging too much information to private equity investors if you’re selling your business
• How a conversation with a seller will help you to identify what you need to do to make the deal work for them
• How to use LinkedIn to find the business owners you want to connect with
• Why it’s not a good idea to have more than one LinkedIn profile
• What to do if the business you are acquiring has people doing similar roles to your existing business
• How to deal with a collective redundancy process fairly
• How to stagger redundancy payments to longstanding employees
• How to make the offer of staggered redundancy payments appealing to employees
• What to say to employees when the business does not have the funds to pay them immediately
• How to use a document wallet to gain a psychological advantage when meeting a seller
• Why you should prepare an agenda for a meeting with a seller and distribute copies of it
• The phrase you should use when the other party says something you disagree with
• When to suggest calling in an expert third-party

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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 13.

This week business investing entrepreneur, Paul Green, talks about the importance of psychology when buying a business and looks at a deal from the viewpoint of the business seller.

We’ll be hearing, for the last time, from LinkedIn, Andy Gwinn and looking at how to get the very best from LinkedIn search functionality. He’ll also be answering a great question from a member of our live audience.

My HR specialist Kelly will answer three questions from our Mastermind group, earlier this month and I’ll be teaching you a few more negotiating skills that you’ll need as an effective dealmaker.

So let’s get started.

Last week we heard from serial dealmaker Paul Green, talk about how he went about raising funds to buy a series of independent veterinary practices, with the aim of creating a single, sizeable group.

This week, Paul talks about the importance of psychology when buying a business and looks at the deal from the viewpoint of the business seller.

It’s all about – I mean many marketing is putting yourself in their shoes and this is really hard for us to do as people. We’re very good at looking through our own eyes and judging the world as we see it – and we forget that… Just turn and look at the people sitting with you at the table.

Turn now and have look at them. They’re a lovely bunch, aren’t they? Aren’t they gorgeous? There’s a lot of blue shirts in the room, I notice that but a bunch of very interesting – very gorgeous looking people. Every single person round this table thinks differently than you.

They know different things than you. They have a different experience from you. Someone on your table is potentially going through a divorce or has potentially got someone that’s ill in their family or is just tired or is distressed or he’s got that thing that’s worrying them or can’t sleep because of this.

Or they just don’t give a shit about anything anymore and they’re in a completely different, totally different emotional state to the one that you’re in.

All good marketing is about looking at the world – trying to look at the world through that person’s eyes and I think identifying motivated sellers is exactly the same thing.

It’s about looking at someone and asking the right questions and probing lots of different things to find what it is. With the vets that we talk to, the number one factor that would make them sell their business to us was time.

They wanted more holidays, it was never about the cash. Cash was a factor but it was never the factor.

They wanted more holidays, they wanted more time with their other half and they wanted – most of them, and this is quite sad, their kids had grown up without them and those of you with young children and I mean by young, the sort of pre-teens – although my seven-year-old has turned into a teenager just like that.

How the hell did that happen? She’s a nightmare. They do grow up so quickly and I think for these professionals, especially any business owner that’s been in something for 20 years and their kids have grown up without them.

They’ve missed the sports days, they’ve missed the pantos, they’ve missed all of that.

They realise too late and they almost realise their own mortality and you can actually free someone and give them a better life by buying their business off them and doing something different with it.

Even if they continue to work there, they can address the work-life balance in a way that they simply never could have done, if they continued to own it, because of the mental burden of owning the business.

This is why sometimes it’s difficult when you go via a broker because you get that shield and you don’t see the pain in the eyes of the owner?

Exactly yes, because the broker tells them, ‘Don’t show that emotion.’ They walk into the broker and they sit their crying saying, ‘Oh my kids have grown up. It’s terrible. This is awful, we’re losing this.

This person’s going to sue me,’ and the broker’s like, ‘Yes, let’s forget all of that and let’s look at the positive. So what’s the forecast for the next three years? What initiatives have you got to boost this and…?’ That’s what the broker presents and it’s… You must look at listings of businesses for sale, perhaps obsessively, because I know I do. It’s become the toilet of activity of choice.

It’s like, ‘Right let’s have a look and see what we’ve got.’ Its’ really interesting to look at something and I would suggest, as a habit as part of this training, if you don’t already recommend this – don’t look worried, it’s a good thing.

It’s just to contact businesses that are on sale, where you have no intention of buying them and just talk to the business owner and go meet with them, take them out for a cup of tea and just probe them.

Ask them really good open questions. It should be a case of your talking for a minute for every 50 minutes they’re talking and just try and understand – because you’re not going to buy this business, so who cares about the financials and stuff. Just ask them about stuff.

I did a series of doing that. I haven’t done it for a while but I did it for about a year. I went out and met the café owner who’s got a £40,000 turnover and the guy’s sitting there, every five minutes, trying to concentrate on this guy, hopes he’s going to buy his business but what he really wants to do is get back because the lunchtime rush is going to start.

Well that’s revealing. It’s revealing from a business you don’t want, for a start, but it’s revealing about how he thinks. I took a guy out who owned a company that’s rented fitness machines into your home and over about a two-hour meeting in Starbucks, he told me his whole business model and how he shipped in these machines from China and like bought them for £10 and was renting them out at like £100 a month.

It seemed like a really good business and the more questions I asked him it turns out that it was an 18-hour a day business and people trashed the machines and all of this kind of stuff.

Which is why the brokers don’t want you to get too close to the owners because they know that the owner will reveal all of this information and the clever private equity people dress it up a little bit.

They say, ‘Let me take you to a beautiful restaurant,’ and you google the restaurant and you think, ‘Oh that looks lovely. Look at that, oh that looks fantastic.’ You can’t wait to go there and then they want to pour you more and more wine and the trick is you never drink because they want you to show the pain because as soon as they’ve seen the weakness, they know exactly where to strike.

Where when you’ve got the corporate finance house or the broker in the middle that your restricted from seeing all of that. So if you’re the buyer, the closer you get to the seller the better it is because you understand exactly what you need to do to make the deal work for them and the broker doesn’t want you to know that.

No, exactly.

We’ll be hearing from Paul one final time, next week. In last week’s episode LinkedIn guru, Andy Gwinn talked about the importance of featured content, as well as skills, endorsements and testimonials.

This week he talks about how to get the best use from LinkedIn search functionality.

I want you to play around with this search function. I’m not sure who you might be looking for but I’m going to – I should’ve put my glasses on – purchasing.

I’m going to put purchasing manager just because we were talking printing and I’m guessing it might be purchasing managers you might want. LinkedIn keep changing stuff, remember, if I click on people there and let it re-load, it now says that there is 407,000 – just under 408,000 results.

Now that’s first, second, third-tier. So here’s the search. I said that there’s 407,000. You can then search by location, look. Let’s just go into the UK and apply, 29,500.

We can narrow it down, you could go by town. Point I want to make, this is search my profiles for profiles with the word purchasing manager in.

That first one, Harriet Butlin it says she’s a second-tier connection and there’s the six shared connections we have. I have a bunch of choices, I could click connect and send her a message, ‘Hey Harriet, I’m looking to connect with purchasing managers in the…’

You might need to drill down and find out the town and where she’s at and what sort of business type but I can also click on those six connections.

What if there’s one of them I know really well? I don’t message my connections and say, ‘Hey Koshi, I came across Joe’s profile, could you introduce me?’ I tend to just connect and say, ‘Hey Jackie, I came across your profile. I see you’re looking at buying business.

I notice we also share a bunch of mutual connections, some very close friends of mine, I hoped we could connect.’ I don’t need to get Koshi to introduce her, I don’t really, I can jump that.

But what if I know somebody really well? Then I ring up, ‘Hey Koshi, how well do you know Harriet?’ ‘Oh I know her really well, here’s her mobile number and when you speak with her, ask her how her husband is, he was ill.’ ‘Hey Harriet, I hope you don’t mind me calling, a close connection of ours, Koshi, gave me your number, said you wouldn’t mind, said you might be interested in talking about how I can get you top dollar for your business.’ Fine, connect and…

F: Engage.

…engage. Who’s going to go and play with that? Go and search. One of the things as a franchisor, I’m looking for people who want to go into business. I search for ‘looking for opportunities’. Thousands come up on LinkedIn. I messaged someone, what sort of opportunities? ‘I’ve got a franchise,’ ‘Oh no, not that opportunity.’ Well why the bloody hell didn’t you say in your profile, save us both a bit of time. Go play with that search. Go search for the type of people you want. I know you could certainly find deals from third-party strategic alliances. I mentioned insolvency practitioners, you know who else. I’m guessing accountants, business owners who want to sell their business, as well as people direct. If John you’re looking to buy physiotherapy practices, go search for physiotherapists on there.

Before Andy wrapped-up a member of our audience asked him whether it’s a good idea to separate business interests by using more than one LinkedIn profile? Here’s what he said in reply.

Great question, no. I get it from property investors. They’re schizophrenic. They have their property investing and they’ve got their contracting or they’ve got their employment. Why, you do not want two profiles.

First of all LinkedIn will shut it down if they find out but more importantly you’ll create confusion for yourself. If I come across you, who do I connect with, which one? What you need to do is you need to position – there’s the word to write down, both in the summary and then especially split your experience sections to talk about both. ‘Hey, I’m looking to buy businesses in this area and this is what I can do for you,’ and the next one physio centre business, ‘I run a physio practice and we do this, this, this and this.’ Position it both.

The great things for you, you’re like my property investors.

Everybody out there or every business own out there at some level, not just business owners, people who know business owners.

My father’s a retired doctor, he knows a business owner, they may know somebody, at some point who’s talked about being stressed out and wishing they could get out their business or who’s looking to retire or sell their business for whatever other reasons you know about.

So the great thing with you, like property investors, tell everybody what you’re doing and this is the great thing with LinkedIn is you can tell everybody what you’re doing.

So you’ve just got to think strategically.

This is what I said about your strategic call, if you want a strategy call is to talk about because there may be people in the room without a business, you may be looking at it.

It’s all about how we position it but then what the strategy is, so it’s a great question. No, you want to keep one profile because it’s all about the three degrees of separation, remember. Who do you know that might want to sell their business.

I hope you agree how valuable Andy’s advice and suggestions have been over the past few weeks and I encourage you to put more effort into your own LinkedIn profile to get maximum value from it.

We will hear more from experts like Andy in future episodes. Last week my HR specialist Kelly talked about what to do if you find yourself having to negotiate redundancy payoffs when the business doesn’t have the funds to settle them.

This week it’s over to our live audience and Kelly was asked what steps to take when the company you have acquired has many roles duplicated with another business that you already own? How do you justify who is best for each role in a way that is demonstrable and fair to everybody?

Here’s her answer.

So if you’ve got people coming in doing the same or similar roles as those you’ve already go. You have to put them all into one pot and effectively you are going through the redundancy process as a collective, not just the people that have come in. So you do have – and there’s a selection process.

So it’s an opportunity. Let’s say you’re combining a new business with your existing company, it’s your opportunity if you’re making a redundancy to get rid of some of the people in your own company that you might want to move on as well?

Yes, and you might may well go through an interview process also as part of it, so that you can… The same when you’re recruiting somebody so that you can ascertain their skills and their competency, then you would have that. So you would have what it says on their CV, so qualifications, experience, et cetera, but do an interview as well and that means interviewing the people that you’ve probably known for the last ten, 15, 50 years.

Okay, so we could create a skills matrix, and we cold tick lots of boxes and we could use that as our evidence because we kind of know who we want to keep and who we don’t want. I mean, we know that. We’ve just got to evidence it in some way. So are you saying that that evidence could be the interview?

As well as.

As well as. So you’ve got your skills matrix, you know they can do this, they can do this but they can’t do these things but then it’s just that some people interview better than others, don’t they?

They do.

When they apply for a job, but here, effectively, you’re interviewing them to see – some people might… You might decide that this interview, you know, they are perfect for the role and this person here isn’t, based upon the interview and your notes afterwards.

Well you could do but you’d have a scoring process. So you’d ultimately have a score at the bottom which would take into consideration other factors other than just what’s within the interview. Also, if you’re planning that well and you’re doing this at the point of purchasing the business, for example, you could even involve the transferring company in the process and get their input on the person’s…

Oh so the seller’s input?

Yes, the transferor’s, yes.

So if the seller’s input has said to you, like you said earlier, there are two or three people here who aren’t that great, then that would be part of the decision-making process, the scoring system?

Just don’t put, he said they’re not that great.

F: That’s terrible.

Requires improvement. Another member of our audience asked Kelly how to handle the purchase of a small business when some of the workers are also existing directors or even shareholders?

They will have their shareholder agreements and their director agreements and we’d have to look at what’s written in those but you would be looking at the terms and conditions of their employment along with everybody else’s but you’d really be looking at that scenario separately and, on a case-by-case basis.

You put in the sale and purchase agreement that upon completion, their directorships are terminated. They resigned as directors and they resigned as employees and there are no additional benefits, basically the money stops at that moment. So that is part of your negotiation?

Yes.

Yes, so they can’t sell you the company and then come back with an employment claim afterwards. So basically, you’re drawing a line in the sand upon completion?

An IR35 is to do with when you’re contracting. Again, it’s to do with the wording of the agreement and the work that they’re doing and how the work’s provided and if anyone can do the work on their behalf, et cetera, there’s a whole raft of tick boxes to establish whether IR35…

But if HMRC determines that they are actually your employees, it’s you that’s liable. It doesn’t fall back on them at all, it’s you that has to pay the National Insurance, going back years.

And they are looking, I believe, they’re putting it into the private sector also, which is just going to be – oh that’s another session.

And finally, Kelly was asked how whether it is possible to stage payments to longstanding employees if you need to make them redundant following an acquisition?

So ordinarily and I know we talked about how we did do some stage payments. Ordinarily they would receive that money either within their last pay packet or within a certain amount of time.

Now if it is a substantial amount of money then if you sit down and talk to them you could have a settlement agreement and a part of that is that you will receive x amount on this date. X amount on that date and some people might like that because actually it’s a bit of a regular money rather than receiving a full amount.

If you don’t pay it to them then that’s an unlawful deduction and they can take you to a court and tribunal to get that money anyway but if you just, say, explain to them and say, ‘It’s not that, we just haven’t got it at this moment. You realise we’re going through a huge process.

We’ve got a lot of people we’ve got to pay, so this is what we would like to do and you will get…’ They’re going to get it and it may even straddle over two pay years, so that actually it’s tax-efficient for you.

A good selling point, yes, I like that.

So that’s, if it works that way then it… Because you could, potentially, they could be getting a large lump sum within one tax year and therefore paying more tax or if you get another lot, in the next tax year then you’ll be paying slightly less tax. It could move them into the 40 per cent bracket or whatever, it could be beneficial to them. It’s talking to them.

And a key thing to remember, it’s not your fault. You say the bank account hasn’t got much in it because of the way Jeff was running the business, he didn’t really have his eye on the ball in the last couple of years, you know, you know that. That’s why we’re here. It’s not your mess-up that they’re suffering because of, it’s the previous boss and people do get that. They realise, you’ve only just arrived on the scene.

We did have this conversation. We did say, ‘If we don’t do this, you won’t get any money because there’s nothing. There’s no money.’ So, really, this is in everybody’s interests to do it this way because otherwise we’ve just got to close the company and the company won’t exist any longer. Quite blunt but it’s just having that conversation with them and being a bit honest.

As I hope Kelly’s input has shown, these past few weeks, I cannot stress enough the importance of having a trusted team of qualified experts, like her, around you when you are buying or selling a business, it can save you a fortune. So by now you’ll know that each week we’ve discussed many of the key negotiating skills you’ll need as an effective dealmaker. Here’s me discussing a few more earlier this month.

So here’s an interesting strategy, which is when you go for the meeting, whether you are – the seller’s accompanied by a broker or not, it doesn’t really make too much difference.

You get out your – you get your case out on to the table and you’re still standing up at this stage and they’re sitting down and you’re making the pleasantries about the journey in the snow and that sort of thing.

You get out of your case the – I don’t know what they’re called, like the document wallets, the multi-coloured wallets, the file wallets with the flap. You get out of your case half a dozen and each one has a label on it and it’s Project Wokefield, for example, labelled on one.

They’ve got some papers in them and you shuffle through them and say, ‘Yours is in here somewhere,’ and you go, ‘Oh, there it is,’ and you put those back in your bag. What signal does that send?

M: Multiple deals.

Multiple deals, they’re not the only one. You’re doing other things you are a professional and we’ll talk about the code name in a minute but having files on other deals and really, you should have files on other deals if you’re doing what we’re saying. Take them with you to the meeting and pull them out and go, ‘Yours is here somewhere.’ Oh it’s always going to be the last one, isn’t it – ‘Oh there it is, yes.’ So what you’re doing is you’re positioning a situation, your reversing the tables so what was happening was that they were saying to you, ‘We’ve got other buyers interested,’ you’re now saying, ‘I’ve got other deals.’ Again it’s the psychological advantage of you are not desperate.

You don’t need to make this happen. Have an agenda for the meeting, oh this is a surprise, this is a good one because you sit down with the seller and maybe the broker, depending on the size of the deal, the broker’s accompanied them – the bigger deals the broker will be there, the smaller ones they can’t be bothered because they don’t think they’re going to sell it anyway and you say, ‘I prepared an agenda for the meeting.

Here’s a copy for you, a copy for you, a copy for me.’ Again you have multiple copies so you don’t run out of copies and it’s like, ‘Oh well shall we get it copied, shall we get it photocopied?

Oh you two can share. No, have mine or we can sit like this.’ None of that so you’ve got more than you’re ever going to need and you have an agenda for the meeting.

The first point is vendor explains business background and then it’s just a logical progression through what a meeting like this would involve, you have an agenda. Now what does that do when you produce an agenda from your case?

M: Puts you in charge.

Puts you in charge.

It also, actually, it keeps the meeting on track, doesn’t it? It puts you in charge of a meeting that is now going to run on track and you could even set a timeline for the meeting.

I don’t think that meeting should really be longer than 90 minutes because you start to get a little bit tired. Everyone gets a little jaded. You start to forget things, 90 minutes is sharp and it goes past quickly. So let’s say you’re meeting at 11 o’clock, so you say 11 o’clock open, 12:30 pm close and you can put in any other business in the last 15 minutes if you want to but you have produced an agenda for the meeting.

It says you’re professional, it says you’re in control. It says you’ve done it before. It all adds to the personal credibility. Here’s a great phrase to use. ‘It’s our policy…’ So if they say something that you don’t like the sound of you say, ‘Well, it’s our policy. It’s our policy that we review the last five years accounts rather than the last three years accounts.’ Now to be fair there’s probably absolutely no reason going back five years, but it’s not bad to have a few policies.

So now they’re playing the game your way because you’re setting the rules. ‘It’s our policy that when we get to commercial due diligence, we speak to six clients of yours and we select off an anonymised list, who those six clients are and we’ll do it in your presence and you will phone me and introduce me as a colleague.

We’ll agree what the questions are in advance.’ ‘It’s our policy that we always have a 12-week exclusivity from signing the Heads of Terms.’

So, it’s our policy is a very, very strong phrase because it’s very hard to argue with someone else’s policy. Again it puts you in that stronger position. Let’s say you’re talking about numbers, or talking about anything really – it’s usually numbers – and they’re saying, ‘Well we think the profit is this, even though the stat accounts say it’s that, we think it’s this.’ I say, ‘Well, in fairness, we can really only base the information on what has been filed at Companies House, rather than your internal management accounts, simply because Companies House accounts trump management accounts.’ They say, ‘Well, no, because there’s some cash in the business and we don’t…’ ‘Well, really, I’m not sure, do I need to hear this? I’m not sure if I want to hear this. So let’s get an expert’s opinion.

So let’s bring in an accountant. Let’s bring in an expert. Would you be prepared to split the cost of the expert to determine this?’

Now they’re selling the business and now you’re telling them they’ve got to incur additional fees. So we’re now in an interesting situation here because we can’t agree. You say, ‘Well okay, well the easiest way is to… Let’s call in an expert.

Would you be prepared to split their fees?’ Suddenly they start to cave because they don’t want to delay matters and they don’t want a bill. ‘But I think it’s fair, look if you and I can’t agree, well let’s call in… You’re not an accountant, I’m not an accountant, well let’s call in an expert to determine.

Now there’ll be a fee involved, would you be prepared to split the fee 50/50? I think that would be fair.’ They don’t want, it’s the last thing they want because really what you’re saying also, this is going to delay things for another month and you know that they want to move to Mauritius as quickly as possible.

And I’ll be giving you some more negotiating tools and techniques in future episodes. So that about wraps it up for this week. Remember to visit our website at www.thedealmakersacademy.com. Have a great week and see you next time.

Podcast: Play in new window | Download

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

Subscribe …

      

 

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?

M: Martin.

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?

Yes.

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…?

M: Tom.

…Tom and I’m not, they’re first-tier, Tom and I are second-tier, makes sense? If Tom’s connected to…?

F: Jackie.

…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.

Fifteen hundred.

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?

Ten thousand.

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…

M: Engage.

…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.

No.

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…’

Exactly, yes.

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.