Broker Matching Case Studies
Case Study 1:
A construction business with turnover of circa £5 million. The owners wanted to retire. They had spoken with a couple of brokers already— BCMS and Bluebox CFG - who presented impressive pitches. However, after some investigation, the vendors realised that these firms were not right for them. They approached us to help.
Brief: We were to put together a shortlist of the best firms in the UK specialised in selling larger businesses in the construction sector. The clients also wanted us to ensure they got value for money. They were not particularly concerned about the size of the retainer they would pay at the start - within reason - but wanted to ensure that the total they paid by the end of the sale (retainer + "success fee") was minimised.
We put together a preliminary shortlist of 30+ brokers who fit the criteria. We spoke with the MDs/CEOs of every single one to take them through our questionnaire (for example, who in the company would be handling our client's account if our client signed with them). We fine tuned our list down to six brokers who passed all tests. Creating the shortlist plus getting through to and speaking with the right people at each firm took a total of over 30 hours. That's despite having a running start with our extensive broker database and knowledge base.
The clients met with all of the six brokers - they choose to meet at each broker's own premises rather than have the broker come to them - and were ecstatic at the shortlist saying that they would never have been able to find those brokers themselves in a million years. And certainly not the top, most competent brokers in their sector for fees ranging between 2% and 3.5%. They then decided which one they preferred.
We got the winning broker to reduce their retainer by £9,000 (which in itself was several multiples of what the client paid us). Further, we got the client a 1% reduction on the success fee - reduced from 3.5% to 2.5% (which equated to £75,000 on his £7.5 million asking price). Total saving for our clients = £80,000 but, more importantly, the clients were satisfied that the broker they picked from our shortlist of six was infinitely better placed to sell the business and meet their price aspirations than any other broker they had met or could find themselves.
They were so delighted that they have written us a letter of recommendation (see below).
Case Study 2:
The owner of a small food business with a turnover of £280K had explored brokers including Turner Butler, Blacks, Intelligent Business Transfer and others. The broker he choose charged him a small fee up front and posted his business online. But that was the extent of their involvement - there was no active hunting for buyers. After six months of no leads, and a broker who wasn't responding to his queries, he asked for our help.
Brief: The client wanted a broker "who'll actually do something". We explained that not all brokers who charge an upfront fee are necessarily proactive brokers. He decided to take our advice on setting the criteria for the broker search and fine tuning.
We first had to extricate our client from his existing broker contract (not an easy task in itself). Subsequently, we introduced him to a number of brokers - all proactive ones. He choose from our shortlist and paid the broker a small retainer.
The client sold his business in three months and sold it for more than the asking price he had with his previous broker. The "excess price" he achieved was 6x the advance fee he paid the broker. In addition, we negotiated the broker's “success fee” (percentage of final sale price) down. The client ended up paying 4% less than he would have paid with his original broker if that broker had managed to find him a buyer.
We do not have the seller's permission in this case to disclose his selling price and the exact commission he paid.
Update 2018: Note that we no longer do broker matching for small businesses like this one as it is exceptionally difficult to find quality brokers in the lower market (businesses with less than £1m in turnover, for example). Over 90% of the quality brokers we approach turn down these businesses as being too small! So we created a different solution for smaller businesses. We call it the "Assisted DIY" option. Please contact us if you wish to find out more.
Case Study 3:
The founder of a software firm was hoping for a multi-million pound price. One problem: His business was pre-revenue—he had developed his product but hadn’t started trading. Proactive brokers don’t take these cases on because the work involved to sell them is high & the probability of sale is low. None of the specialist brokers dealing with multi-million pound tech businesses would even talk with our client. And our client recognised he needed them to reach the big Silicon Valley buyers.
Brief: This was a particularly difficult brief as the client did not have the cashflow to pay a large fee up front and the top technology brokers selling businesses in the £5m - £50m bracket expect in excess of £40,000 as a retainer.
We assembled a list of the top technology brokers in the world, not just the ones in the UK. We then worked on them, speaking with them and providing the documentation they needed to justify meeting with our client and taking on his business (despite the fact that the business hadn't started trading). We know what buttons to press with brokers and how to get them interested in a prospect business!
We opened several doors for the client and persuaded some of the world’s top tech brokers to talk with / meet with him. He finally choose a US firm that happens to also have a UK office. From not being willing to give him an interview, we got them so excited about selling his business that they reduced their retainer by £17,500 + VAT. And they did so without any increase in back end fees (the success fee was maintained at their standard 3% of sale price). At the time of going to press our client had signed their engagement letter and hopes to sell his business within 6—9 months.
The client was delighted with the result, the top technology brokers we arranged meetings / phone calls with and the terms we negotiated with the broker he choose. He has kindly offered to act as a referee and we can put you in touch with him on your request. (How to contact us.)
Case Study 4:
The client owned a small business with a turnover of £400K and a profit of £20K. She had spoken with several brokers including Hornblowers, Stirling, Business Link and SouthEast and was totally confused by the wide range of valuations received—from £100,000 to over £800,000!
We advised her that since she wasn’t paying herself a full salary for the 60+ hours a week she was working, the profit wasn’t really £20K, it was closer to zero! Maybe even negative. We advised her that any broker who gave her a valuation based just on her stated profit (and without a detailed look at her accounts) - or worse, just her turnover - should not be a serious contender for her custom.
We also advised that, given the figures, her best option was to not use a broker but to sell the business herself. We guided her on how to go about it. The client eventually sold her business for a sum which she hasn't disclosed to us but one that she states she is very happy with.
A customer says:
When I wanted to sell my 3rd business I hired Clinton to use his vast network and his intimate understanding of the industry to help me find the right partner / broker. It was worth every penny.
Clinton opened doors for me, introduced me to the top investment bankers and business brokers who wouldn't normally have taken my call and, when I decided on a firm, Clinton, saved me £20,000+ of their advance fees. Most importantly, he matched me with a broker I would not have found myself, someone who I am confident is the spot-on right firm to successfully sell my business at the target price.
Clinton operates with 100% integrity. He provided astute advice, insights, cautions and tips all through the process of finding and signing a broker which I found invaluable. I would certainly use his services again.
I was recommended to Clinton as someone that could ensure we avoided the pitfalls that befall many that fall into the clutches of "brokers" that promise much, achieve little and charge lots! I am sure he would do that but his service in identifying proper companies that could help us was well worth his fee. We had an instant shortlist and it accelerated the process without the angst of worrying about the background of the company with whom we were in discussion.