u/UltraBBA

Some thoughts on selling smaller businesses vs selling mid-market companies.

Selling a mid-market business: competitive process, strategic acquirers, institutional capital, management presentations.
Selling a microbusiness: "Can you prove it makes money, and will the owner stay for six months because nobody knows how anything works?"

Mid-market buyers ask about synergies.
Microbusiness buyers ask whether the van is included.

In the mid-market, buyers analyse adjusted EBITDA.
In microbusinesses, buyers analyse whether the owner’s mobile number is basically the whole business.

Mid-market sale: data room, IM, Q&A tracker, buyer shortlist.
Microbusiness sale: three years’ accounts, a WhatsApp thread, and someone asking if the price includes stock.

Mid-market buyers worry about customer concentration.
Microbusiness buyers worry that the only customer, supplier, salesperson and operations manager is a guy called Dave.

Selling a mid-market business is about proving the business can scale.
Selling a microbusiness is about proving it can survive the owner going on holiday.

Mid-market business: "We have a second-tier management team."
Microbusiness: "My wife does the invoices and my nephew knows the password."

Mid-market acquirers want strategic fit.
Microbusiness buyers want to know if the landlord will let them keep the sign.

The mid-market has deal teams.
Microbusinesses have a buyer, a broker, a lender, and someone’s uncle who once bought a café.

Mid-market buyers ask, "What is the growth thesis?"
Microbusiness buyers ask, "Will the staff stay if John leaves?’”

Mid-market businesses have systems.
Microbusinesses have Sarah-Jane.

Mid-market businesses are sold on process.
Microbusinesses are sold on trust, coffee, and whether the buyer believes the owner’s add-backs.

Mid-market deal issue: earn-out mechanics.
Microbusiness deal issue: the owner’s son still uses the company van.

Mid-market valuation: multiple of EBITDA.
Microbusiness valuation: multiple of profit, less chaos, plus whatever the owner thinks 20 years of graft is worth.

Selling a mid-market business is like running an auction.
Selling a microbusiness is like trying to get a mortgage, a therapy session and a pub argument into one transaction.

I don't know what I'm doing wrong. I've got the Reddit sub in the subject, formatted as it should be. I've got the full link in the body of the post. I've selected the SFW flair but the post button is still greyed out and I can't post this.

Please, does anyone have any suggestions for what might be wrong?

Update: Thanks to everyone for their help. This is now sorted.

I'm curious to hear from business brokers and experienced buyers.

What are the biggest mistakes you see first-time buyers make before they even reach out about a business for sale?

For example:

* Focusing on the wrong metrics?

* Not understanding valuation?

* Asking the wrong questions?

* Chasing the wrong types of businesses?

* Not doing enough research beforehand?

If you had to give a first-time buyer three pieces of advice or action steps before they contact a broker, what would they be?

Just that. Was interested if anyone sold with a high percentage of seller financing (and if you did, how did that work out for you?)

https://preview.redd.it/axocqkf42m7h1.jpg?width=800&format=pjpg&auto=webp&s=ff62e1b2566aedbb30778ce04d3e031bfbfdfb65

SpaceX today starts trading on Wall Street after their IPO.

Please, please, please, would owners of other businesses not take the SpaceX 100x valuation as a multiple that applies to your business.

On behalf of business broker and M&A advisories all over the globe, thank you so much. :)

My view: Right at the start, especially if you've got a good and trusted accountant.

Sellers rarely speak with their accountant first. Instead, they speak with a friend down at the pub or with a business broker.

I think that's the wrong starting point.

Here’s why.

𝟭. 𝗬𝗼𝘂𝗿 𝗮𝗰𝗰𝗼𝘂𝗻𝘁𝗮𝗻𝘁 𝗮𝗹𝗿𝗲𝗮𝗱𝘆 𝗸𝗻𝗼𝘄𝘀 𝘁𝗵𝗲 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀.

A broker may know the market. Your accountant knows your numbers, your history, and often the commercial reality behind the accounts.

𝟮. 𝗧𝗵𝗲𝘆 𝗰𝗮𝗻 𝗮𝗱𝘃𝗶𝘀𝗲 𝗼𝗻 𝗺𝗼𝗿𝗲 𝘁𝗵𝗮𝗻 𝗷𝘂𝘀𝘁 𝘁𝗵𝗲 𝘀𝗮𝗹𝗲.

A good accountant can help you think through tax, transaction structure, valuation, timing.

𝟯. 𝗬𝗼𝘂 𝘄𝗶𝗹𝗹 𝗻𝗲𝗲𝗱 𝘁𝗵𝗲𝗺 𝗮𝗻𝘆𝘄𝗮𝘆.

Whichever broker or adviser you appoint, your accountant is likely to play an important role during the process. Bringing them in early is far better than asking for urgent support halfway through a deal.

𝟰. 𝗧𝗵𝗲𝗶𝗿 𝗶𝗻𝗰𝗲𝗻𝘁𝗶𝘃𝗲𝘀 𝗮𝗿𝗲 𝗯𝗲𝘁𝘁𝗲𝗿 𝗮𝗹𝗶𝗴𝗻𝗲𝗱 𝘄𝗶𝘁𝗵 𝘆𝗼𝘂𝗿𝘀.

Some brokers are excellent. But brokers are still selling a service. That can sometimes lead to optimistic valuations and optimistic promises about saleability. Your accountant is generally in a better position to give you a more grounded view.

𝟱. 𝗧𝗵𝗲𝘆 𝗰𝗮𝗻 𝗵𝗲𝗹𝗽 𝘆𝗼𝘂 𝗽𝗿𝗲𝗽𝗮𝗿𝗲 𝗽𝗿𝗼𝗽𝗲𝗿𝗹𝘆.

Before a business goes to market, there is often value in tidying up the accounts, improving management information, clarifying adjustments, and addressing issues that may come up in due diligence.

That preparation can influence both price and probability of sale.

To be clear, this is not an argument against brokers. It is an argument for getting the foundations right before speaking to one.

In many cases, the best sale processes start with a good accountant involved early.

What do you think? When should the accountant be brought in?

The below advice is for the mid-market and based on my many years of operation in that market.

In the UK at least, businesses in the mid-market are not sold by brokers but by advisory firms so I'll use that terminology going forward.

There are four things I advise clients to not say to advisory firms:

Prior to that, remember that the best players in the market, the ones who can get you the highest price, are in huge demand and they are very, very selective in which clients they take on.

The rubbish advisories in the market will take on anything and everything. They'll flatter you, they'll give out free valuations based on little to no information about your business, they'll talk up the potential and their "success rate".

The best players in the market will ask a hundred questions before agreeing to take you on. Here are some tips for dealing with them:

1. Don't tell them what you price you need to see! Accept that they're the experts and that whatever deal they get you is what your business is worth in the current market.

2. Don't underplay the extent of the business dependence on you (unless you're 100% sure you'll survive that being tested in depth, 100%, every which way. Do NOT lie on this. You WILL get caught out!)

3. Do not offer to pay less up front in exchange for a higher % on the "success fee". You're not a genius for coming up with that fee structure suggestion. A lot of people try that stunt and it really annoys them.

4. Do not lie on anything they ask you. You'll be surprised how easily they can spot your lie with a few online searches / credit reports / AI analysis.

If you have questions about the logic behind any of the above, feel free to drop your question below and I'll try to answer.

In Mod Tools > Insights > Reports and Removals, there's a chart showing number of admin actions taken. They are categorised as

• Not reviewed by mods
• Opposite of mod action and
• Aligned with mod action

Where there's a positive number for decisions taken that were opposite of mod action, I'm assuming an admin decided to reverse a decision taken by a moderator.

However, there doesn't seem to be any way to identify which moderator decision was reversed (or why).

How can I find out what decision(s) was reversed?

When hiring business brokers and M&A advisory firms, there’s something most business owners don’t realise which causes them to make fatal mistakes.

First, most M&A firms are broadly honest. But they are also extremely creative in how they present their “track record” 😉

I'll share a recent example where I was assisting a client in the renewable energy sector identify the right UK adviser to sell their £15m business.

As part of the process, I spoke with around 40–50 firms active in energy M&A and asked a very specific question:

“Give me examples of sell-side mandates where YOU were the lead adviser.”

I was crystal clear:

- not buy-side work;

- not fundraising;

- not “we advised in some capacity”;

...only deals where they actually led the sale process.

One firm (whose name begins with “G”) then sent over examples including:

• sale of GEV Wind Power to Certek;
• sale of Boston Energy to LDC;
• sale of SMC to OEG Offshore.

Sounds impressive. Except after extensive digging online, checking deal announcements and press releases etc, I found that the lead advisers appeared to be:

• FRP Corporate Finance on the GEV deal;
• KPMG on the Boston Energy deal;
• and Argyll Partners on the SMC transaction.

In other words, the firm claiming these examples did not appear to have led any of those transactions!

They may have provided some ancillary advice, sure, but they didn't handle the sale.

And this kind of thing happens often!

The same applies to other claims on “success rates”, “average multiples”, “sector expertise” ...and even claims that a business was “sold”.

Quite often, once you start checking Companies House filings and transaction details, the reality looks rather different. The business never changed hands!

This is not to say there aren’t excellent advisers in the market. There absolutely are.

But business owners should carry out far more due diligence before paying five-figure retainers.

What amazes me is that many founders will spend:

- weeks researching a company car;

- months researching a software system;

…but appoint the firm handling the sale of their life’s work after one pleasant Zoom call and a glossy pitch deck.

Many owners barely investigate the adviser at all and they take a lot of what they're told ....purely on trust. 🤦‍♂️

Why are multiples for SaaS firms going down the pan?

I've been observing this for the last year or so - brokers have been reporting to me increased difficult with selling many tech businesses.

Is it all to do with 'AI displacement risk' or is there something else going on?

There are still individual cases of deals that have gone very well and that have achieved high multiples.

What's your experience been as a business broker or as a seller / buyer?

Some of the things that sellers of businesses say which I find cringeworthy:

"My valuation is based on what I need to see to retire"
(You obviously didn't attend Valuation 101)

"I've got a good problem. My side hustle exploded so I need to get rid of my main business"
(yeah, right!)

"We have done $x of revenue over the last 10 years"
(who gives a damn about lifetime revenue?!)

"I may consider selling if I get a good enough offer"
(you might as well say, "My business is overvalued, would you like to buy it?")

"This business has unlimited potential, it just needs someone who is good at marketing"

You brokers must have seen some good lines? What are some of the cringeworthy things you've heard sellers say?

“Just buy a business. It’s easier than growing one.” This is one of the most misleading ideas circulating online. This infection seems to have come over from Instagram and TikTok.

Yes, acquisitions can accelerate growth.

No, they are not the easy option.

In fact, buying a business is far harder than people expect.

Why?

1. Finding the right deal is bloody difficult.

Quality businesses are hard to find, and when they do come up, competition is intense. Deal sourcing takes time, money and persistence.

Most "buyers" out there in the market give up within 24 months and walk away with their tail between their legs (and a much smaller bank balance).

2. Inexperience is expensive.

If you haven’t done acquisitions before, it is very easy to underestimate the complexity. Valuation, negotiation, due diligence, deal structure, tax, legal risk... there are a lot of ways to get hurt.

3. You still need serious financial firepower.

There’s a lot of online fantasy around 100% seller finance and “creative structures” or financial engineering. In the US, having the SBA does help but it's not as easy as it's made out to be to get an SBA loan (and you have to provide a personal guarantee on it!)

In reality, most acquisitions require credibility, capital, and the ability to absorb risk if things go wrong.

4. Failed deals are costly.

Even when a transaction doesn’t complete (and over 70% of 'done deals' don't get done), the bills still need to be paid.

Advisory fees. Legal fees. Financial due diligence costs. Management time.

Tens of thousands! All gone.

5. Completion is only the start.

Integration is where many acquisitions create value... or destroy it.

Systems, people, culture, customers, reporting lines, incentives.

None of that is easy.

And plenty of acquisitions end up eroding shareholder value rather than increasing it.

So yes, buying a business can be a powerful growth strategy.

But the idea that inorganic growth is somehow the “easy route” is nonsense.

It can be faster.

It is not easier.

What’s your view?

If selling, read rule #2 before posting. If buying, read rule #3 before posting. Rule violations will get your post deleted and you may get banned.

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If you have a question about how to describe your business / website, or have other questions about selling, this is not the sub for it. Use r/SellMyBusiness which is a question and answer sub about selling and buying businesses.

If you're looking for a business broker to assist your sale / purchase, use r/businessbroker

If you want a valuation, post in r/Business_Valuation

From what I hear, the SBA has just increased the amount borrowers can access through a combined SBA 7(a) + 504 structure from $5m to $10m

Doesn't affect us here in the UK, of course, but what do you US folk think about it?

Forget all the 3x EBITDA and 5x EBITDA you see bandied about.

That's chicken feed.

Some will say that 100x is impossible. It's not, I promise you.

You'll hear comments about how such high multiples are only for exceptional tech businesses with recurring revenue etc.

Nonsense!

Anyone can get 100x.

All you've got to do is reduce your EBITDA to £0.01 and I'll give you a whole list of no-money-down buyers who'll be delighted to pay 100x.

This is for all those sellers drooling over big multiples they see quoted in the press! 😉

That's not the reality for smaller businesses and, in any case, those multiples on their own are meaningless without sight of all the other terms of the deal.

I came across reviews for a well known UK business broker who, I know, has absolutely diabolical service.

They really are rubbish. But the reviews are all 5 star reviews! Then I discovered this in their standard contract:

https://preview.redd.it/vcw5ygj47c0h1.jpg?width=800&format=pjpg&auto=webp&s=45aab32cb7bb44da3cd371f04dd7ee245f433e5a

If anyone's unhappy with their service, they can't post it online. They can post an online review if and only if they are happy with the service.

What looks like an innocent confidentiality clause is actively used to prevent clients from leaving negative feedback anywhere!

So this broker looks like a 5* broker when, in reality, they are one of the worst in the UK.

Is it common to have such a clause in broker contracts in other places like the US?

Acquirers seem to be all chasing the same deals.

And it shows.

Over the last few years, I’ve spoken with dozens of buyers. Most are using the same playbook:

- chasing business brokers;
- trawling marketplaces;
- cold outreach to owners;
- looking for distressed signals.

All perfectly sensible.

And all highly competitive.

But very few are looking where some of the most interesting opportunities actually sit:

- corporates divesting non-core divisions;
- private equity firms quietly offloading underperforming assets; and
- businesses being forced to sell through regulatory intervention.

These are not hypothetical.

Large corporates are actively reshaping portfolios - shedding divisions that don’t align with core strategy, particularly as capital is redirected into tech and AI.

PE is sitting on a backlog of assets held far longer than planned. Some of those will be restructured, some refinanced, some sold.

And then there’s the like of the Competition and Market Authority (that's UK only but there are equivalents in other countries).

Structural remedies - ie., forced divestments - continue to be used to resolve competition concerns. Last week CMA announced investigation into the Vandemoortele / Delifrance deal as a current example (for the former to sell off the latter's UK laminated dough business), and there have been several others in recent years.

These situations often create:

- motivated sellers;
- less crowded processes; and
- occasionally, better value.

Yet most acquirers never even see them.

Because by the time they hit the open market, the advantage is gone.

So the real question is this:

How do you get in front of these opportunities before they become widely marketed? (I'm not in the market to buy a business. I'm simply seeking your thoughts / a discussion)

In 1998, Volkswagen “bought” Rolls-Royce for £430m.

Or so they thought.

What they actually acquired was:

- the factories
- the staff
- the inventory

What they didn’t buy?

The Rolls Royce name.

That sat with the aerospace business.

So VW spent £430m… and didn’t end up owning RR.

Now here’s where it gets interesting.

BMW bid £340m in the process.

Not because they wanted to win.

They just wanted VW to pay more and knew that VW would put in a higher bid.

Once VW “won”, BMW quietly went to the aerospace division and bought the Rolls Royce brand for £40m.

Result:

- VW spends £430m and ends up with Bentley
- BMW spends £40m and gets Rolls Royce

That’s not bad execution.

That’s understanding what’s actually being sold.

And more importantly - understanding what the other side thinks they’re buying.

I see versions of this mistake all the time in SME deals.

Buyers and sellers focusing on:

- revenue
- EBITDA
- multiples
…while missing what really matters.

In M&A, the headline deal is often the least interesting part.

The real game is hidden underneath. 😉

Corporate Finance / Advisory Firm required to handle the sale of a £1m+ EBITDA business in the Renewable Energy sector.

(Buyers, do NOT contact me, I'm not interested in speaking with you or putting you in touch with the target.)

I’ve been instructed to help a client identify the right adviser to run the sale of their UK business.

High-level:

- +£1m in profit before tax;

- +£5m in net assets on B/S;

- +8 years established;

- strong growth profile;

- full management team in place, no reliance on owner;

- realistic seller price expectations.

I’ll be approaching a number of sector specialists (e.g. Gneiss, Alexa Capital, Portland Advisers, Augusta & Co and about 20 others) as well as broader firms with recent, sector-based deal experience (e.g. Canaccord, Cenkos and 25+ others) even if this business is too small for some of them.

If you’re sector agnostic but have recent, relevant energy transactions, feel free to get in touch. I can share a teaser, subject to the following:

- you've completed energy sector deals within the last #24 months;

- these were sell-side mandates (not fundraises, not buy-side);

- your role as lead adviser can be verified and

- transaction size was > £5m

For clarity: my clients pay my fees. I don’t take commissions from advisory firms. The role is to identify the adviser BEST suited to this client, not just an adviser.

Thank you.