We're all looking to leverage our time and make more money buying/selling businesses. I'm curious as to your personal cashflow cycle from business owners who have done it. Are you leveraging your new business to increase your personal cashflow up front? Paying yourself monthly salary, dividend or SIPP contributions straight away as an example. Or are you pushing it all back to the business to build with the potential to increase the value upon a sale? Appreciate it all depends but what's your approach?

That’s the value of four term sheets issued in the last two weeks for four deals - four different industries, a US deal, Ireland, UK and Australia. Two accepted with due diligence now under way. Two in negotiations . Term sheets are a great way to capture the core components of a deal and something that can be referred back to in the event of any disagreements later down the line. We generally present them after a formal presentation is gone through with the seller(s) that doesn’t just go through the financial and legal components of the deal but sells us a buyer (track record, future plans for the company etc). It’s a simple 4/5 page document - If anyone is interested in having a copy of the template we use like this post or comment and I’ll send it to you.

One of the common objections we get when affecting a leveraged buyout is valuation. Business owners in the SME space sometimes have the misconception that businesses trade at 5-10x multiple of profit. The reality from over 100 of our own deals, research from Harvard, various business sale experts and Kingston University is most don’t actually sell and those that do transact at an average multiple of 2.52x. One reason for this misconception is generally the deals you hear about tend to be very large companies (that do sell for higher multiples) and also brokers that to justify their fees will “value a business” at a higher price than reality . The challenge with SMEs even good ones is they are highly risky and lack liquidity in their shares as they are private. Larger companies tend to have diverse income streams and geographical coverage so if one area of a large company is underperforming they still have plenty of parts to it that do perform. Take Virgin as an example they have a travel agency , airline , gyms etc. if a SME business owner has a chain of 3-4 gyms then they are very exposed to one country or region and the micro economic climate. Virgin operates globally in many sectors. Whilst we will always try to educate a business owner on valuation sometimes you just can’t get them to accept the reality if they do sell they will sell at 2-3 x. When we pitch an offer to acquire - if it doesn’t progress because of misalignment on valuation we will usually park it in the pipeline and revisit in 6-12 months when aspirations may be more realistic. Two deal structures that can however be used either at point of making an offer or in a revisit could be virtual merger or option agreement. Effectively your pitch is about creating a multiple arbitrage by putting them in a larger group that would justify a higher price. Let’s say you have a company in the recruitment industry as a stand alone £10m turnover and £1m profit - in our normal model the goodwill would be worth £2.5m.

Hi Everyone, We recently created a 7-Day Free learning, for those who want to start making or continue to make acquisitions and grow their revenue. This is result of having made over 100 business acquisitions in the last 14 years. Visit buybuildsell.net and join the 7-Day Free Learning for more info.

I recently sourced my first deal (a car repair business), and the owner wants to sell the business with the property (a car repair garage, car sales office and empty land with permission to construct 4 light industrial units – the whole premises is about an acre, and there is the possibility of getting permission to use the entire premises for residential housing). I’m looking to propose a Deal Pie that consists of Cash (from the sale of the property, which is about 80% of the total cost) and Deferral. Please I would appreciate it if you could help me with the following: · What should be contained in my due diligence? · A three-in-one contract that I can adapt (a Real Estate contract, a contract for the sale of the Business, and a Promissory note that outlines the seller's financing) - non-binding in case of unforeseen circumstances. · Refer me to a buyer (for the property)? · Any other advice will be highly appreciated. Thank you for your kind help.