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Selling a small business

Startups, marketing and more
88V8
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Selling a small business

#293128

Postby 88V8 » March 22nd, 2020, 10:13 am

The owner of the small garage I have used for eight years, wishes to sell up and retire.
Small = four staff, two ramps, MOTs, servicing. Rented premises.

Thriving business, long-established, but he has been trying to sell for three years. Buyers with suitable experience seem unable to come up with the readies.

From my selfish pov, I would like things to continue, as they are classic-friendly and their MOT testers have always been decent chaps, but I feel sorry for the proprietor who wishes to get on with his post-work life.

What is the best way to market such a business? And would one hope for a one-off payment, or would it usually be spread depending on the outcome of ongoing trading?

V8

Spet0789
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Re: Selling a small business

#293136

Postby Spet0789 » March 22nd, 2020, 10:42 am

88V8 wrote:The owner of the small garage I have used for eight years, wishes to sell up and retire.
Small = four staff, two ramps, MOTs, servicing. Rented premises.

Thriving business, long-established, but he has been trying to sell for three years. Buyers with suitable experience seem unable to come up with the readies.

From my selfish pov, I would like things to continue, as they are classic-friendly and their MOT testers have always been decent chaps, but I feel sorry for the proprietor who wishes to get on with his post-work life.

What is the best way to market such a business? And would one hope for a one-off payment, or would it usually be spread depending on the outcome of ongoing trading?

V8


Given right now it’s tough to sell US Treasurys, I’d suggest the bid is zero. I’d shelve this discussion and ask the question in 3-6 months (perhaps longer).

When the time comes, I’d suggest selling for a small upfront amount with the rest due dependent on business performance is the way to go.

bungeejumper
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Re: Selling a small business

#293167

Postby bungeejumper » March 22nd, 2020, 12:49 pm

Spet0789 wrote:When the time comes, I’d suggest selling for a small upfront amount with the rest due dependent on business performance is the way to go.

Yes, but.....

Our local garage was run by a proper old-school spannerman who had taken a lot of care to stay up with modern engine designs, and we trusted him completely. And rightly so.

So when he retired, he sold the business to a middle-aged ex-rally driver who knew a lot about 1970s and 80s engines, but who simply didn't have a clue about anything post-millennial. This idiot was very keen and very pleasant, but he cost me thousands in faulty diagnoses before I sorrowfully dumped him. As did all his other customers. Six months later he was out of business.

Now, imagine he'd been buying the business on the terms proposed here (small upfront amount with the rest due dependent on business performance). He'd have got the garage cheap and then screwed up the ongoing turnover, so the original owner would have been badly short-changed for his life's work.

The part-payment idea works well for financial advisers and solicitors, where the customer base isn't likely to "walk" quite so quickly, but I don't see it being risk-free for a quick-turn-around business like a garage. Does that make sense?

BJ

johnhemming
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Re: Selling a small business

#293176

Postby johnhemming » March 22nd, 2020, 1:16 pm

The problem in selling a business without a moat is that people won't pay that much.

dealtn
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Re: Selling a small business

#293186

Postby dealtn » March 22nd, 2020, 2:21 pm

Doesn't look like it has any assets, and without knowing more the main worth of the business may be the skill set of the person selling. There will be intangible assets in the loyalty of the customer base, but hard to quantify what value you would place on that.

What makes you think there is a business with much value here?

bungeejumper
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Re: Selling a small business

#293199

Postby bungeejumper » March 22nd, 2020, 3:47 pm

dealtn wrote:Doesn't look like it has any assets, and without knowing more the main worth of the business may be the skill set of the person selling. There will be intangible assets in the loyalty of the customer base, but hard to quantify what value you would place on that.

Location, premises, equipment, reputation, customer base, and of course customer inertia. Plus, perhaps, a couple of staff who make the switch? Not that much, I'll grant you, but it ought to give the new owner a decent running start which he'd struggle to replicate if he wasn't taking over an established business.

As to how long that customer loyalty could be expected to last, it's anybody's guess!

BJ


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