Our phones are always on.

Most of the people we work for are retiring, and they’ve spent decades building their businesses alongside staff who have become far more than an employer–employee relationship. So it’s quite common to be having a conversation at the beginning of the sale process about not selling to an entity where it could be detrimental to the future of key staff. We’ve seen owners take deals that financially aren’t quite as good as another offer, because they can see a better future for their staff and their families.

In the $1–15 million sector it can range anywhere from a 1 to a 5 times multiple on the pre-tax earnings of the business. A one multiple represents more of a job than a business: no barriers to entry, and clear and present risks around the profit. At the opposite end, a five multiple can apply where risk around future earnings is low: great growth prospects, and everything else about the business unquestionably safe. It has to be an exceptionally sound proposition to command a multiple of 5, and we’ve achieved that level and more where the business ticked all the boxes and the earnings were calculated properly.

Normally a business is valued on its risk profile going forward. Someone who’s made an offer has usually arrived at a value by ascertaining what impact any associated risks could have on the business. So due diligence should be about verifying everything they already know, and looking again at every single part of the business to establish whether it’s going to be the same, better or worse under their new ownership once the current owner has gone.

Everything a buyer’s independent due diligence team is going to want to look at. Historic finalised end-of-year accounts and P&Ls for the year we’re in. Products and services by revenue for recent years. Customer revenue ratios. Lease agreements on the premises. Supplier agreements. Customer service agreements. Condition of the plant and equipment. The normal stock holding and what’s obsolete. We also need to understand the organisational structure, as well as any anomalies in staff employment contracts.