Selling Your Business in the Energy Broker Market (and Generally)

A lot of people in the Energy Industry have asked me for help selling their business and I'd thought I'd share some tips that helped me.

When you start a business from day one you should be thinking about a sale. What that means is get your processes set up right from day one. I think I learnt that from Peter Jones' book Tycoon (of Dragon's Den fame). In it he talks not only about selling, but knowing who you're going to sell to.

Getting your paper trails right early shows a business that is well run and makes things more attractive for buyers. When you sell a prudent buyer or at least their lawyers will want to see everything, especially if they are taking VC money. In a sale process you have to disclose virtually everything and it’s impossible to hide bad news. If you try, you'll only lose the buyer's faith and scupper the deal.

No Accounting Headaches

Things like not paying your VAT or PAYE on time will get flagged and lots of erroneous business expenses also show a lack of business discipline. For instance, businesses that recently took out bounce back business loans buts didn't use them for the betterment of the business (i.e. buying a company Porsche) should think twice about reading this. If you're not a numbers guy, make sure you have someone on board who is and let them make sure this is done. Personally, I wouldn't buy a business that has lots of accounting headaches and there is no way to hide this in a sale process.

No Legal Headaches

Landlord disputes, supplier disputes and client disputes are all things that will get flagged up in legal due diligence part of the sale.   More importantly though make sure you have your key staff, especially client facing staff, locked into non-compete contracts.   The best way to give you a chance of enforcing these is by paying for good advice.   This is a dealbreaker if you don’t.   No one wants to risk buying a business where on day one the sales staff can up sticks and set up next door.  

Findout who the Dealmakers in your Industry are

I made a conscious effort to reach out to the main dealmakers in my industry through mutual contacts. Through a supplier I managed to meet with one of my industry's main acquisition players (Inspired Energy Plc) and through some of my contacts at the industry's main media outlets Energy Live News and The Energyst and I was able to meet and become friends with one of the industry's pioneers Mark Dickinson. Mark sold his business to the country's biggest broker and then headed up that firm to sell to Schiedner Electric. Mark helped me a lot when I sold my business and we are still good friends today. Funnily enough Mark is now CEO at Inspired Energy Plc. These people can give you great insights and help you find the right place for your business.

Build a Strong Brand

If you have a strong brand within your marketplace it helps massively when you sell your business as the buyer thinks they are getting an intangible amount of goodwill. Its a good reason why I always spent money on marketing to have my business seen as an expert voice by my industry. I'm sure these things get looked at before and during a sale. This is not something that can be done overnight, and it takes 3-5 years of consistent messaging to create this. But again, get your branding right as early as you can. I was lucky to meet some great marketeers including Lee Branch and Huskii Studio to set me on the right course with this.

Entering and winning industry Awards does help, but I feel it carries more weight if you can do it year after year. One of my proudest achievements was to be the first Energy Broker to win Energy Buyer of the Year in 2015 and we did it again in 2017. More thrilling though was to win Energy Technology of the Year in 2016. This year I was a Judge this year on the TELCAS and I was so impressed by how all the entrants had or were building their own technology platforms and systems.

How Technology Can help You Sell Your Business

Tech enabled businesses are certainly what everyone wants. The ability to produce deal data, customer data and customer paper trails supports the day to day operation of the business, but shows the buyer that you have everything at your fingertips. We had built our software to help us run our business operations. The broker market requires rigorous logging of customer data. You need to log signed energy deals, supply terminations and usage data not only per customer but per meter. In a sale the ability to produce this data in an instant saves so much due diligence time and energy. If you’re a broker and are still doing it manually then never mind selling how are you going to scale up!

What this data also reveals especially in the broker market is what margins you're taking. If your margins are inconsistent or too high for the industry, then you’re going to struggle to sell. Buyers want sustainable businesses that are taking a fair margin consistently across a volume of clients. Where you're taking high margins from a couple of customers that poses too much risk to the buyer going forward or could affect the sale price. Even if you're taking high margins from all your clients that's not going to attract buyers as they are then tasked with sustaining that margin against the industry norm and eventually that is a losing bet. Those brokers are likely part of the "here today, gone tomorrow" crowd anyway and as the buying and managing of energy becomes more sophisticated that type of operation has to be nearing the end of its life cycle as we saw with Utiliywise.

It’s likely when you sell your business, your software will come under its own due diligence by a software expert acting on behalf of the buyer.   This was probably the most nerve wrecking part of the sale for me.   I had no idea what the outside expert might say.   My fear was that maybe we’d built our software with a fundamental flaw.   Fortunately, we got the all clear (thank you Gary Fox).   However, I learnt something.   Whenever you build software get an outside expert to oversee the process to make sure what your building stands up to scrutiny down the line.   

So, in conclusion, whilst your business’ internal processes might not be visible to the outside world always behave as if one day they will be, and you want to be proud of what’s on display if the lid gets lifted.   Do that and sustainable growth and potentially a sale (if desired) should follow.