Buying a business in Leeds

Leeds is the largest financial and professional services centre in the UK outside London, and for a buyer that shapes what is available and what the hard question will be.

The regional numbers

Close to the national picture in both directions, which is to say an ordinary churn rate rather than London's or the South West's. These are regional figures; the ONS does not publish them at city level.

The category that dominates, and its one weakness

Professional and B2B services are the deepest part of this market: accountancy practices, recruitment firms, IT support, marketing and compliance consultancies, legal support businesses.

They are attractive for a reason that is worth being explicit about. More of their revenue can be contracted, and the premises matter less, so a larger share of the earnings survives a change of ownership. That is what a multiple actually prices, as our guide to how UK businesses are valued sets out, and it is why this category sits above hospitality and retail in the range.

The weakness that replaces the property risk is people.

In a services business the value goes home every evening and is free not to come back. Two questions follow, and they are the ones to spend your due diligence on:

• Whose clients are they? A client of the firm is an asset. A client of the departing owner is a hope. Ask how many people at the client's end have a relationship with somebody other than the seller.
• What holds the team? Not just the senior people. Under TUPE everyone transfers on existing terms with continuity of service, which protects the knowledge, and nothing obliges them to stay past their notice period. Ask about turnover over three years and about any restrictive covenants in the contracts, including whether they are drafted narrowly enough to be enforceable.

What else trades

• Health and care. Dental, veterinary and care services, with real regulatory barriers to entry and consolidators who buy repeatedly. The service rating is part of the valuation rather than a side issue.
• Trades and property services. Maintenance, electrical, plumbing, cleaning. Often profitable, often owner-dependent, and the owner dependence decides the price more than the trade does.
• Logistics and distribution. The motorway position is a genuine commercial fact. For a yard or warehouse business, the lease on the site is frequently most of the deal.
• Hospitality and leisure. Substantial and competitive, leasehold, priced at the bottom of the national multiple range for structural reasons.

The standard local checks

The lease. Read it in full. Unexpired term, whether it is inside or outside the security of tenure provisions of the Landlord and Tenant Act 1954, the rent review pattern, and whether a change of control requires the landlord's consent. For a services business the lease matters less than it does in hospitality, and it still decides whether you can invest.

The rates. Rateable values for commercial property in England are public on the Valuation Office Agency's site. Look the property up before your first meeting.

The accounts. Reconcile management accounts to filed accounts, and take the adjusted profit schedule apart line by line with the evidence behind each adjustment. That schedule is what the price is a multiple of, so a removed add-back costs you the adjustment times the multiple.

The full scope is in our due diligence checklist.

What a services business is actually worth without its owner

The test to apply, and it is uncomfortable to run on a business you like.

Take the adjusted profit. Now subtract the fee income the departing owner personally generates, and add back the cost of whoever would have to replace them. What is left is the number a buyer is really purchasing, and in a one-fee-earner practice it is frequently a great deal less than the headline.

This is not an argument against buying one. It is the reason the price of a small practice and the price of a firm with three fee-earners and a client list diverge so sharply at the same turnover, and why the second sells faster. A buyer who has run that arithmetic before making an offer is negotiating from the same figure the seller's adviser is.

It is also the seller's roadmap, in reverse. Every pound of revenue moved off the owner and onto somebody else, or onto a retainer, moves the price by a multiple of itself.

For a Leeds seller

If you are in professional services, the work that moves your price is making the earnings less about you: a second fee-earner with client relationships of their own, revenue on retainer rather than project, and a client list where no single name is a large share.

None of it is quick and all of it is worth more than negotiating hard on the day. Our guide to what actually kills a business sale lists what goes wrong, and most of it is settled before you go to market.

Where to look

Search what is listed now by sector and location, free and with no registration. Most listings are confidential, so expect a sector and a broad area rather than a name.