M&A Mastermind

Deal Sourcing
Training Manual

Jonathan Jay
© The Dealmakers’ Academy 2021

All rights reserved. No part of this publication may be reproduced, stored in a retrieval
system, or transmitted, in any form or by any means, electronic, mechanical,
photocopying, recording or otherwise, without the prior permission of the copyright
owner.
Contents
Page
The Deal Sourcing Training Manual 1
Introduction 3
Chapter 1: Business Brokers 5
Chapter 2: Six Additional Deal Sources 13
Websites 13
Asset valuers 14
Networking 14
Direct contact 15
Cold-calling 15
Social media/advertising 16
Chapter 3: Letters 19
Key Points Recap 29
 M&A Mastermind Deal Sourcing Training Manual

M&A Mastermind
Deal Sourcing Training Manual

This manual is one of the set of four that make up The Dealmakers’ Academy M&A
Mastermind training course. The four are: Deal Sourcing; Funding and Deal Structure;
What to do Pre- and Post-Completion; and Negotiation.

At the end of each chapter you’ll see a round-up of the key points. These have also
been collated at the end of the manual, where they provide a quick recap of the points
covered.

Outcomes
This manual will enable you to:

1. Identify and access deals from a variety of sources, to generate deal

flow.
2. Understand how business brokers work, and when it can be to your
advantage to use them.
3. Add a range of deal-sourcing methods and techniques to your
toolbox and leverage them when it suits you to.
4. Know how to use letters to generate viable business opportunities.

Here’s a question you should be asking yourself: ‘If I was thinking bigger, what could
I do?’

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M&A Mastermind Deal Sourcing Training Manual

Typically, when people are looking at buying another business, they look at buying a
business smaller than they currently own. There’s a belief that you can’t buy a bigger
business, a belief that a bigger business buys you. But you don’t have to buy a smaller
business. There’s no reason why you can’t buy a business bigger than the one you
currently own. That way, instead of, say, eight small deals to get to the size you want
your group to be you could do four bigger deals. The steps are fewer but bigger; the
end result is the same.

I worked with some clients who had been hugely successful in property and then
moved into care homes. They were used to dealing with very big numbers and they
now felt like they were dealing with small numbers. However, they still thought large
scale – so they went for the bigger businesses.

Maybe when you’re writing your goals every morning, you should start thinking bigger,
dreaming bigger, wondering what can we do that’s bigger?

If there was nothing stopping you, what would you

buy?’
If the only thing stopping you is you, all you have to do is get out of your own way. And
it usually is just us. No one else is stopping us, we stop ourselves with limiting beliefs.

The information about deal sourcing in this manual is a great starting point when it
comes to thinking bigger. There’s nothing wrong with buying smaller businesses – I’ve
certainly bought plenty of them in my life – but thinking bigger could help get you to
where you want to be that much faster.

The worst that could happen is that someone says ‘no’ – and when that happens, you
simply move on to the next opportunity.

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 Introduction

INTRODUCTION
How to source deals

When you intend to build a group of businesses you need to be able to look at a
selection of them, evaluate each one and make a decision as to whether to buy. There
are bound to be ones you aren’t really sure about, or maybe aren’t really keen on, but
if that’s all there is on the table you might find it hard to walk away.

The starting point for everything is finding a business owner to speak to, but at times
that can feel next to impossible. Happily, there are many places where you can find
businesses for sale, many avenues that can lead to a deal. We’ve got on our list
scouring information on the Internet, developing relationships with key people,
leveraging relationships with the people you already know, and more.

The key is to cast your net wide by accessing a range of potential deal sources. In
other words, you create deal flow.

Deal flow
A big danger is that you become a motivated buyer, and you don’t want that. That can
happen when you look at one business and fall in love with it, and decide that you’ve
got to have it, and that usually happens because you’ve only got one business to look
at. Always remember, it’s the seller who should be motivated, not the buyer!

With good deal flow, you receive more enquiries from people who want to sell. Casting
your net wide gives you a good-sized catch to choose from – so you keep the best of
the bunch and throw the rest back. Good deal flow leads to better deals.

And that’s what this manual is about: developing good deal flow so every deal is a
positive decision. You buy because this is a business I want, not because there’s
nothing else in the pipeline, so you think you’d better buy a business while you still

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M&A Mastermind Deal Sourcing Training Manual

can. There’s a world of difference between opting for a business and settling for a
business.

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 Chapter 1: Business Brokers

Chapter 1:
Business Brokers

A business broker, who may be anything from a one-man-band to a large company,

acts as an intermediary in the process of selling/buying a business. There’s no national
regulatory body overseeing the sector and no qualification or licence required to
practise as a broker.

Brokers are hired by the seller, for whom they value and market the business, then try
to find a buyer. They can handle things anonymously, as not everyone selling a
business wants the fact that they are doing so to be widely known. Owners might want
to keep the fact that the business is for sale hidden from staff and customers, for
example.

Fees can vary, but most brokers charge a percentage of the selling price as a ‘success’
fee. Prior to that, sellers can expect to pay a retainer on signing the contract (more on
that shortly) with possible additional fees at other stages of the deal, such as at heads
of terms.

Brokers need access to both sellers and buyers

As well as attracting business sellers, brokers also need to attract business buyers.
Buyers don’t pay for the service, and it’s important to remember that a broker isn’t
working for you directly. You might gain mutual benefit from the relationship, but the
broker’s client is the seller. That’s who the contract is with.

Business brokers have hundreds of businesses sitting there available to buy, meaning,
in theory, at least, they are the perfect deal source. One reason why they’re not is that
those businesses are, almost without exception, overpriced.

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The problem with brokers

The following exchange is based on a conversation I had with a large broker, although
I should point out it’s a conversation I could have had with any broker:

Me: ‘Why are you putting a price on these businesses that is way out of kilter
with what the business is actually worth?’

Them: ‘I know that’s wrong, but the sales team, the people who go out to do
the evaluations, get paid their commission based on that figure, so the
higher it is, the more they get.’

And there’s the inherent problem.

If I, as the salesperson, say your business is worth £1 million, then your upfront broker
fee is £10,000 and, if I’m on 20% commission, I get £2,000 of that. If I say your
business is worth £100,000, I’m not going to able to charge you £10,000 upfront – I
might only be able to charge you £1,000 – so my 20% is only worth £200.

Also, I’m a salesperson – I need you to sign that contract. I know if I say to you your
business is only worth £100,000, you’re going to be disappointed. You probably won’t
want to sign up. However, if I say to you it’s worth £1 million, you’ll grab the pen out of
my hand and say, ‘Where do I sign?’

Especially if I add, ‘The guys at the office have got buyers lined up. The phone’s ringing
all the time, the market’s hot right now.’

So you sign the contract based upon the £1 million valuation. That’s what you think
you’re going to get as a result of selling your business. The small print says we can’t
guarantee you anything, but you believe the story you’ve been told about your
business being worth £1 million, and the market being hot, and the phones in the office
ringing all day long. You pay your £10,000 and start planning the holiday you’ll go on
when the business sells and the money hits your bank account. Maybe it’ll come
through in time for a summer cruise.

Meanwhile, I’ve now got £2,000 – I’m definitely going on holiday this summer. And I’m
never going to speak to you ever again, so whatever the outcome, there are no
consequences for me. I’m going to pass you over to someone else, managing your
expectations is now their problem. You think your business is worth £1 million – and
that’s the only figure you’re ever going to remember. You won’t remember any other
number I’ve said and you certainly won’t remember that the small print says we can’t
guarantee anything.

The person trying to find a buyer for your business is telling enquirers the business is
worth £1 million even though they know it isn’t, and even though the potential buyers
also know it isn’t. A sale at that price is never going to happen. And that’s the tension
inherent in the business.

According to UK Business Brokers, (http://ukbusinessbrokers.com/) brokerages, on

average, sell only about 20% – a measly one fifth – of the businesses they take on.

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 Chapter 1: Business Brokers

Business brokers hate being compared to estate agents, but there is an indisputable
similarity.

So, how do we deal with this?

Dealing with brokers

The challenge you are going to face is that if you’ve never bought a business before
you are instantly a timewaster in the eyes of a broker. They see you as a dreamer.
You’re also at a disadvantage as someone who has been on a business-buying course
– they don’t want anyone who knows what they’re doing or has any common sense,
they don’t want anyone who sees the bigger picture and knows how it all works.

Their ideal buyer is someone who has bought a business before – if you’ve done it
once, you’ll do it again – or someone who phones up and says, ‘I’ve just received a
huge redundancy payment from my job in the city, we’ve moved out of London, sold
our expensive London house and we’ve downsized, and I’ve got £1 million in the bank
and I’m itching to spend it. Do you have a business I can buy, please?’

‘Oh, yes, sir, step this way! We’ve got something for you that just happens to cost £1
million!’

Because if you’ve got £1 million, we’re going to get all of it out of your bank account
as quickly as possible.

That’s a great buyer for a business broker.

Either that or, ‘We bought a business in the sector six weeks ago, we’re looking to buy
another – a couple, actually, this year – and we’re ready to go.’

Sounds like a professional, another great buyer.

What they don’t want is someone who says, ‘I’ve never bought a business before, I
can’t prove if I’ve got any money, what have you got for me?’

They’ll give you a questionnaire to fill in and you’ll never hear from them again.

The broker’s business model

The business model of a business broker is not to sell businesses, it’s to list and
advertise businesses. They give a valuation, you sign the contract and make a
payment, that is the guaranteed money. Whether the business sells, whether you
change your mind, none of that matters – a signed contract is money in the bank,
they’ve got their commission.

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So the business model of a business broker is the listing. The selling is a bit of a
frustration – you could be talking to a buyer for six months and then the deal falls apart.
I’d rather go for a meeting, sign a contract, get the money in the bank, thank you very
much. Don’t want all that hassle of trying to sell the business.

Having said all that, brokers do have businesses listed, and how much success you
achieve with them is all about how you approach them. As I mentioned earlier, if you’ve
bought a business before, you’re in a much stronger position with a broker.

It’s a fact that some brokers simply don’t return your phone calls, they can’t be
bothered. And, very often, the seller hasn’t been educated in any way whatsoever by
the broker, so is woefully unprepared and has no idea what to expect.

Contracts
The contract the broker has with the seller is absolutely watertight. We’ve had quite a
few people try to circumvent that contract.

We had one instance where the seller – let’s call her Ann – tried to pretend to the
broker that she hadn’t sold the business to us, but that we were leasing it and
managing it on her behalf. We did a press release that included that acquisition and
Ann phoned up the publication it was in and said that she would sue them for naming
her nursery. (It was the old name in the article, we changed the name.) I had a
conversation with the editor about it all and reassured them they weren’t going to be
sued, they hadn’t done anything wrong. They said, ‘But you haven’t bought the
business,’ because that’s what the previous owner had told them, and why would Ann
ring up and say that if it wasn’t true? We replied that we had the email to Ofsted with
the notification of the change and we could prove we had genuinely bought it.

Why did the seller do all this? She was trying to get round the broker to avoid a £12,000
fee. We just got caught in the middle, which happens, sometimes.

Now, even though I’m not a fan of brokers, I do acknowledge and recognise that I
would rather be sent businesses than not. Having a positive relationship with a broker
– or brokers – will not do you any harm. What will do you harm is if you assist a seller
to circumvent the contract they have with a broker.

We are always completely up front with the broker. We tell them, ‘We’ve got an
ongoing relationship with you, these people clearly haven’t. We know you know what’s
going on, we want you to know we don’t condone it. They signed a contract, that’s
between you and them, we’re happy with the outcome we got, but we’ll support you if
you need our support. Because what they’re doing is wrong – they signed a contract,
they shouldn’t pretend that they haven’t sold the business.’

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 Chapter 1: Business Brokers

Brokers can be useful to you

You probably only ever need one or two brokers to send you deals, you don’t need
dozens. It can be a happy relationship between you and the broker – you get someone
to give you the heads-up and a tip-off about pricing before things go on the website,
and they have a potential buyer lined up if it’s the right kind of business.

I mentioned earlier that the broker works directly for the seller – the contract is with the
seller and they’re ultimately paid by the seller – but they end up working for you
indirectly. Why? Because that’s in their best interests. The seller pays them, but the
buyer makes that pay day possible, that’s how they get their money. If they know
you’re going to come back again and again to buy businesses, that’s very helpful to
them.

I always say to people who are new to business buying, don’t go to brokers. That’s
because, at that early stage, you sound as though you don’t know what you’re talking
about. When you’re more experienced, it’s different. You can look to cultivate a
relationship.

It helps if you can tell them exactly what you’re looking for. As soon as you say, ‘Send
me anything,’ you sound like an amateur.

You might want to jump in there early with how you intend to fund a deal, because
otherwise, when they ask you that question, it puts you on the back foot. If you take
the initiative and say, ‘Let me tell you how I’ve funded other deals,’ you take charge.

You might say, for example, ‘It’s a combination of invoice discounting, asset finance
and cash, with an element of deferment, and that combination allows us to reach a
sensible price. If we can’t reach a sensible price we’ve got to pass. But if we’ve got a
sensible seller and everyone wants to do a deal we can usually get our heads together
and make it happen.’

You’ve just elevated yourself above anyone else who’s phoned and said, ‘I want to
buy a business.’

Every now and then someone will email me and say, ‘I just said to a broker I don’t
want to pay anything up front and they laughed at me.’

I don’t know how they could get this so completely wrong.

Why would you say that? In what world does that sound like a sensible thing to say to
anyone? You’re showing your hand a bit too early here.

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M&A Mastermind Deal Sourcing Training Manual

But when you’ve done one deal, however it

Specialist brokers
was funded, it opens the doors to everything
else.
At one point, one of the larger
childcare groups was buying
You need to find out which brokers in your
everything available from one
sector specialise in your type of deal. They
particular broker, before it came on
can help you to save time, cut through the
the market, regardless of what it
noise and get results.
was. They had private equity
money and they needed growth.
The more specific and focused you are, the
more seriously you’ll be taken.
If you have a relationship with a
broker who’s attracting businesses
You might benefit from having a letter from a
in your sector, that’s not a bad
finance broker saying you’re currently
relationship to cultivate.
working with them on some other deals. That
on its own won’t do too much, but if you also
have a letter from your accountant saying something similar, and you have a letter
from your bank saying they can confirm there are cash balances in excess of a certain
amount as of a certain date, it can help your case. Now, whether you intend using the
money in the bank for the acquisition or not is irrelevant, the letter confirms you have
some substance behind you, and that’s what counts. Three letters like that help when
it comes to boosting your credibility.

The key is what you say on the phone and how you say it, and you can’t win them all,
you’ll always have someone who just doesn’t think that you’re credible and you can’t
do anything to persuade them otherwise. There’s one broker who sends us nothing.
When I tried to resurrect a deal that failed due to Covid, they wouldn’t even respond
to my emails. I don’t know why they’re like that, but it’s their loss. The people who
welcome us with open arms are doing fine, they’re earning commission just by doing
an introduction, then letting us do all the work.

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 Chapter 1: Business Brokers

Key points
Brokers are hired by, and work for, the seller.

Brokers also need to attract buyers, to complete a deal.

Brokers have lots of businesses listed, but the vast majority are overpriced.

Brokers will take you seriously if you've bought a business before.

Don't tell a broker you have no experience and no money – you'll never hear from
them again.

A broker's business model is the business listing, not the sale of the business.

It can be worth your while to develop a relationship with a broker; you probably only
ever need one or two to send you deals.

Brokers can let you know about businesses before they are listed, which gives you an
advantage over other potential buyers.

Identify the specialist brokers for your sector and area, and get to know them.

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M&A Mastermind Deal Sourcing Training Manual

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 Chapter 2: Six Additional Deal Sources

Chapter 2:
Six Additional Deal Sources

We’re now going to take a look at some of the additional sources of deals, specifically:

• websites;
• asset valuers;
• networking;
• direct contact;
• cold-calling; and,
• social media/advertising.

Websites
We use the Internet for so much these days – communication, banking, general
information – so using it to help source business deals should be accepted practice.

Harking back to the last chapter, I’d advise you to spend some time on Google to
identify and narrow down your list of sector broker firms. Get to know the specialist
brokers.

There are websites like uk.businessesforsale.com; the online version of the old
Daltons Weekly (https://www.daltonsbusiness.com), and more. Get into the habit of
scanning those sites. We look at them, although maybe not as frequently as we should.

You can set up alerts on Deal Opportunities (https://www.dealopportunities.co.uk), so

if anything comes up that includes your keywords or is within your parameters, they’ll
let you know. I get a daily email from them.

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M&A Mastermind Deal Sourcing Training Manual

Now, you need to be aware that most businesses on these sites are listed by brokers.
However, you’ll find some that have been listed by the owner, and if someone has
listed their own business, probably because they want to avoid a broker fee, they
probably also want to avoid professional fees (like solicitor’s charges). There’s
perhaps a deal to be done with that person.

Asset valuers
If a business gets into difficulties, it might go into administration. That provides
protection from creditors, and an administrator – who must be a licensed insolvency
practitioner (IP) – steps in to handle things. Watch out for businesses in CVAs
(company voluntary arrangements) as they represent potential deals.

Administrators themselves are a source of deals and IP-BID (https://www.ip-bid.com)

is a useful website. However, I’d argue that a better source than administrators is asset
valuers.

When an administrator is appointed to a business, they then need to sell the assets to
realise the best value for the creditors. They need to sell those assets at or as close
as possible to fair market value, so they go to an asset valuer to find out what that is.

There are about a dozen of these and they each have their own areas of speciality.

They’ll say what they think the assets are worth in the current market. Maybe they’re
worth £10,000 in an ideal world, but in the current market, £5,000 or £6,000. The asset
valuers know what’s going on in the world and act accordingly.

After they’ve valued the assets, they confirm their assessment in a written report,
which goes to the administrator. The administrator now has proof of the current value
of the assets and confidence they won’t be sued by a creditor for selling those assets
at below market value.

You can find asset valuers on Google. We use Williams and Partners a lot. (Williams
& Partners Ltd: Valuation and Insolvency Agents, https://www.wapl.co.uk.)

So, everyone goes to the administrators; I’m saying go to the asset valuers instead,
and that way you get in before everyone else.

Networking
Other sources of deals include networking – just putting it out there that you’re eager
to buy. We’ve done deals via the word being out and just meeting the right person at
the right time, and anecdotal evidence from some of the people I work with suggests
we aren’t the only ones to do that.

So, how many people know you are interested in buying a business?

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 Chapter 2: Six Additional Deal Sources

People and places in your network that might prove to be a useful source of deals
include:

• Accountants: many people thinking of selling ask their accountants what they
think the business is worth. While accountants aren’t usually that savvy in that
respect, if you have a relationship with an accountant who is willing to broker a
deal between you and a seller, that can have value.
• Suppliers: if you purchase one of your current suppliers, it can be very
beneficial.
• LinkedIn: if you can find people interested in buying the same type of business
as you and you’re looking in one specific area and they are looking in another,
having that positive relationship can pay off. You aren’t in direct competition.
It’s collaborative, not competitive.
• M&A Mastermind Group: don’t forget that an element of your networking is this
group.

Depending on the relationship you have at your bank, that might be another useful
networking source of deals. However, confidentiality is a big issue when it comes to
banks. A bank manager might facilitate an introduction after speaking to both parties,
but it’s not part of their remit.

Direct contact
Picking up the phone and speaking to someone is effective because no one else wants
to do it – they’re scared to. Because no one else wants to do it, you’re in a one-horse
race if you pluck up the nerve to make direct contact with people or organisations you
know are divesting, like councils. This can be especially useful if you’ve got a
relationship with someone.

With this there is some effort and focus required, and most people just don’t want to
make the effort – but it can be very worthwhile.

Think about it: the worst thing someone can do is say ‘no’ and a lot of people who say
‘no’ come back and say ‘yes’ later, when they’ve had a chance to think about it. The
best sales people are the ones who don’t take ‘no’ for an answer.

Cold-calling
Cold-calling can be effective if targeted.

A common objection, whatever the reason for the cold call, is that something is too
expensive, and there’s a danger that the salesperson might actually agree. That’s
because their opinion of value is coloured by their own financial situation – if something
is too expensive for them, they think it’s too expensive for everyone. If you listen to a
sales call they’ve made you’ll often hear buying signals, in the form of people asking
questions. However, as these sales people have the mindset that the product is too

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expensive, they take a question as an objection, decide the person isn’t a serious
potential buyer and then try to get off the phone and onto the next call because they
don’t want to waste their time – leaving a trail of missed opportunities in their wake.

It’s the same with business buyers. Business buyers take a ‘no’ or an objection or a
question or a ‘tell me a bit about yourself’ as a pushback, lose their nerve and try to
get off the phone as quickly as possible. And that can be a missed opportunity.

However, if you’re prepared to do what other people are not prepared to do, such as
pick up the phone and speak to someone at the local authority, then the worst that can
happen is they say ‘no’ – but even a ‘no’ today can become a ‘yes’ over a period of
time.

It was ‘no’ when you caught them on the hop, but when they sit down at lunch and tell
someone about it, they might realise ‘no’ was the wrong answer. You never know
what’s going to happen behind the scenes, the people your contact speaks to might
have different information or a different perspective, and that ‘no’ might become a
‘yes’.

Social media/advertising
Having a social media presence, possibly backed up by paid-for advertising, can pay
dividends. You can join the groups for your sector and put the word out that you’re
looking to buy, and also keep an eye out for anyone looking to sell. You can message
them or they might message you. We like to get people on the phone as soon as
possible after that, but it can be a good way to make initial contact.

When it comes to paid advertising, you can advertise in appropriate Facebook groups
or target your ads to the kind of people you’re looking to contact. You might also
consider advertising in the trade press.

Conclusion
You’re not looking for huge numbers – if you find one business from each of several
different sources, you can start to build a group. You can’t just do one thing – you need
to spread your net wide – and all of these avenues work together holistically to allow
you to do that. People see you in more than one place – you’re in a Facebook group
and on LinkedIn saying you are looking to buy a business – and that builds your profile
and credibility. There’s an old marketing rule – the ‘Rule of 7’ – which states a prospect
needs to encounter the advertiser’s message at least seven times before they go
ahead and buy a product or service. People don’t necessarily need to see you that
many times and in that many places to be convinced you’re a credible business buyer,
but repetition definitely helps.

So it’s not about doing just one thing, it’s about doing lots of things, and all of those
things have a cumulative effect and help you get to the number of deals you need to
do to build your group.

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 Chapter 2: Six Additional Deal Sources

Key points
Websites:
• The Internet is a valuable source of businesses for sale
• Use Google to identify specialist brokers
• Check regularly and set up alerts on business-for-sale websites

Asset valuers:
• Asset valuers can give you the heads-up on businesses/business assets
coming up for sale

Networking:
• Everyone you know – and everyone they know – is a potential source of
business deals
• Useful contacts can be accountants and suppliers, and possibly your bank
manager
• LinkedIn can be a good place to forge a collaborative relationship
• This M&A Mastermind Group is also a part of your network

Direct contact:
• If you have the nerve to pick up the phone and speak to someone at, for
example, the local council, you have an advantage over others who don't dare

Cold-calling:
• With cold-calling, don't rule people out based on personal bias or your own
financial situation
• Questions aren't objections; they're a sign that someone wants to know more

Social media/advertising:
• Join relevant groups on social media to make contact with potential sellers
• Targeted, paid-for advertising, on social media and in the trade press, can get
results

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 Chapter 3: Letters

Chapter 3:
Letters

Like business brokers, letters get a chapter to themselves. Unlike business brokers –
who should be approached and used with care – I recommend letters wholeheartedly.
I believe letters are your absolute best potential source of business deals.

That’s for a number of reasons, including that they are the one thing that you can
control, and that is scalable, and that doesn’t rely on other people having to introduce
you or think of you at just the right moment.

The process itself is straightforward: acquire mailing data, prepare and post letters,
deal with responses … repeat. However, there are ways to approach each stage that
can make your life easier (or more difficult), things that can be tricky to deal with, and
pitfalls it’s best to avoid.

Let’s take a closer look.

Acquire mailing data

The first issue is the one the entire process hinges upon – getting relevant, accurate,
up-to-date mailing data. You need to know who and where your letters should be sent
to, or else it all falls apart.

How do you identify the people you should be writing to? You buy their data.

There are companies whose business it is to collate data and who can then arrange
that data into useful lists, depending on the needs of their clients.

The lists you buy can be excellent or awful, depending on how accurate the information
is.

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Getting the data you need is so much easier if you have a data broker who’ll go out
and get it for you. Our data broker also deals with the mailing – she does everything
for us.

Now, not all data brokers are equal. For a start, you want a data broker who doesn’t
just pull data from Companies House. You want an individual who thinks about you
and your target market – Where will I get the data for this person’s market? What
would be a good list for them? – and then sets about compiling a tailored list for you.

Sources of relevant data might include:

• Subscribers to a particular publication, with the added benefit that the mailing
address is likely to be accurate!
• Membership lists of relevant organisations, which are generally very good and
provide up-to-date clean data.
• Sector-specific/specialist bodies; for example, Caredata UK
(https://www.caredata.co.uk/) for care homes, home care, etc.

Pulling data from various different sources gets you a far more complete data set than
if you rely on one source.

Here’s some food for thought: everything I was doing with direct mail back in the mid-
Nineties and earlier, I am doing now – it’s the same process.

In the old days I would get all the subscribers to a particular magazine, I would get the
customer database from a particular company, all the data from Yellow Pages and
Thomson Local, and I’d put all that in the same pot, take out the duplicates, get a clean
set of data and then mail that.

And the reason I got more customers than all my competitors was that I was prepared
to do that and they weren’t. I’ll be honest, it was a bit of a pain, but it paid off – quite
simply, I was getting to more people, and this is a numbers game.

Getting that data is more important than writing a brilliant letter. Sending an okay letter
to all the right people will pay off better than sending a brilliantly written letter to all the
wrong people, or to only a very small number of the right people.

There are specialist places that do data manipulation, including postcode sorting, so
you can keep the focus on the postcode areas that you’re interested in.

Cleaning up the data, such as removing duplicate entries if several lists are merged,
is done by the mailing house. They have the know-how and the software to handle it.

You never buy data, you only ever rent it. You don’t own it, you get it either for a single
use or for multiple uses over a period of time (e.g., a year). The cost depends on who
you’re getting it from, and it’s always negotiable.

While you never want to spend money you don’t need to, it’s short-sighted to skimp
on the cost of data. Data helps you get deals.

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Get it, but don’t sweat it

Getting that data right will make it a lot easier – but don’t start going through it line by
line yourself, it’s not worth it. There’s an opportunity cost in there. It’s like the sales
person trap.

The sales person trap

You call the sales person into your office and give them a list of prospects
to call.

They take it away and look at it, and immediately find reasons not to call
certain people.

He didn’t even use caps for his own name, it’s all lower case, he won’t be a
good prospect to call.

They don’t sound like a very professional company, I won’t bother calling
them.

They’re a big company, they won’t be interested.

They pre-select – and deselect – based on assumptions, and so reduce

their own chances of success. However, the best sales person will call every
single company; they won’t make assumptions.

And you shouldn’t either. Don’t shrink your data too early, mail the lot! This is mass
marketing. If your focus is too narrow, you won’t get any momentum.

I had a database of something like 250,000 names and addresses.

Back in 1999, my first big successful business was as a result of me being presented
with a bunch of sheets of sticky labels with people’s addresses printed on them. The
source was very mysterious, but I used them and the phone started ringing. It changed
everything. The data was everything.

Prepare and post letters

Take care with the wording of your letter. You want to sound professional, and to avoid
sounding as though you’re desperate to buy and will pay anything. Take time on this,
then make sure you – or someone else, as you can easily miss your own mistakes –
read over the letter and catch any spelling or grammatical errors.

If you get the tone of your letter right, this is an incredible and powerful way of finding
deals.

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Personalisation
The names and addresses of your target businesses can be printed on the letter, then
you can use a window envelope for mailing. It’s basic, but effective.

If you’re doing your mailing en masse, you can’t personalise it further.

If you’re doing a small mailing, or if you spot a business you’re particularly interested
in, the key is to send them a letter as if it was going to lots of people, so they don’t
know they’re the only recipient. Yes, make the letter feel personal, but don’t go
overboard with the personalisation.

Letterhead or plain paper

If you are after your first business, it can be tempting to create a corporate image. My
advice is don’t; keep it plain and simple.

These days most people don’t have their own letterheads, so if you are writing as you,
as an individual, keep it plain and simple. That doesn’t mean it has to look awful. It
should still be set out as a professional letter and look and read like business
correspondence, and be subject to the usual spelling and grammar checks.

If you use corporate letterhead it can be hard to write as though you’re buying as an
individual, especially if it’s a business that’s known. However, if your business name
carries some weight – it has a good reputation, people know of you, you differentiate
yourself from others in the sector – then it might be worth doing.

You must put ‘private and confidential, for the addressee only’ on the envelope. That’s
because you want it to go to the person named. You want to protect the contents from
anyone but the owner. It improves your opened-by-the-right-person rate.

A postage stamp gets a better response than franking. Bulk mailings are franked;
personal letters have stamps. If someone picks up a pile of post and sorts it into an A
pile and B pile, post with a stamp on, in a white envelope, marked ‘private and
confidential, for the addressee only’, will get in the A pile and be opened first. The B
pile – brown envelopes, or white with marketing slogans, franked letters, obvious junk
mail – will be opened over the bin!

The rules for this kind of communication have never changed.

Some people add a twist and try to make the letters stand out. Two tactics for this are
to use a handwriting font and/or a coloured envelope. The handwriting font isn’t a good
idea, in my opinion – they’re getting better, but some can be tricky to read and also
people might think you are trying to trick them. I’m not sure coloured envelopes help
significantly, but if you do try them, the Royal Mail recommends using white address
labels (assuming they aren’t window envelopes) to make the details more readable.
Whatever you do, don’t use manila envelopes.

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Change it up
Look for new ways of approaching the same people. After several mailings you might,
for example, put a brochure in with the letter. In the mind of the seller, who is looking
to sell to someone professional, who’ll look after the staff and so on, that could be
valuable.

If I ultimately want my big, expensive group I need to put in more effort than just
sending one letter to a business owner. It might take a dozen or more – and I’m going
to keep going until I get my required number of deals.

In an ideal world, you contact people every four to six weeks. The people who weren’t
interested in selling when they got your letter the first time – or the second, or the third
or whatever – one day will wake up and hate their business.

The pizza shop analogy

Let’s say we all get together and open a pizza shop. We look at what our
competitors do and see that other pizza sellers – such as Domino’s and
Papa John’s – put leaflets through people’s doors, so we decide we will, as
well. We get some printed up and get a couple of kids to go and deliver them
… then nothing happens.

We have a board meeting and I ask, ‘What went wrong? Who put the leaflets
through people’s doors, who was in charge of that?’

You say, ‘I got some leaflets done, they went out last week, but no one
phoned up or came in. No one ordered a pizza.’

I ask, ‘How many did we do?’

You say, ‘About a hundred.’

Well, there’s the problem. How many out of those hundred wanted a pizza
on the day the leaflet came through their door? Not many, and the leaflet
probably didn’t hang around very long after that.

‘Okay,’ I say, ‘how many houses are there in the surrounding area?’

‘Maybe five thousand.’

‘Well, let’s do five thousand leaflets.’

‘Great, let’s do that.’

This time, five thousand leaflets get printed and put through people’s doors.
The phone starts ringing, pizzas are ordered, everything’s great … then it
tails off.

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Why?

Because while the people who ordered a pizza are coming back – they kept
the leaflet on the fridge – all the other leaflets went in the bin. Does that
mean all those people are never hungry, never want a pizza? No, they just
didn’t want a pizza at that point.

So, what do we need to do now?

We need to do it again.

Are we going to do another hundred?

No, we learnt that lesson the first time – we’re going to do another five
thousand.

And we discover every time we do five thousand leaflets through all the
doors, we get orders for pizzas. So why would we ever stop doing it?

Well, perhaps because it comes at a cost.

And it does, but without that cost there is no business, so we’ve got to keep
on doing it.

It’s exactly the same with sending out letters to 'Every four weeks I’d send
find deals – you keep on doing it, because if personalised mailings to our new
you stop, there are no deals. Persistence pays business prospects. And I was
off. always amazed to discover how
many of our clients had been
That’s how Domino’s became bigger than attracted to Ogilvy and Mather by
Pizza Hut – persistence. And it’s not just pizza those mailings. That is how we
companies – firms like Just Eat and Uber text grew.'
people every week. It’s not always the same
message – they have offers that revolve to David Ogilvy
keep things fresh.

It should be the same with your letters. You don’t just send the same letter over and
over again; you’ve got to think of a new excuse to keep on writing to people.

Reasons to write to people (again)

Have you bought a business? There’s your excuse – tell them you just bought a
business and you’re looking for another one like it. They’re not going to phone you up
and question who you are and your credibility because you’ve just bought a business.
It does the introduction for you, with your sequence setting the groundwork and paving
the way.

You will be criticised for it. You’ll get people saying, ‘I’m always getting letters from
these people, it’s so annoying.’ You’ll get people who return your letter torn up into

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pieces … but you have to keep going. If you allow yourself to be put off by the critics
you’ll never do anything.

Those people, when they’re networking, will keep telling people about it – these people
keep plaguing me to buy my business.

And you never know ...

I’ve got a friend who’s very good at what he does, but he’s so scared of promoting it
in case he’s criticised. And I suspect that there are people who are interested in buying
a business who are too scared to send out the letters in case they’re criticised.

And, as I say, you probably will be. For example, we got quite a terse letter back from
one nursery group saying, ‘You probably couldn’t afford our nurseries.’ You do get
that, but you’ve just got to brush it off.

I wouldn’t suggest you have a return address on the envelope because that signifies
bulk mail. You will get returns anyway. The amount will depend on the quality of the
data, but you will always get some, not least because some people will open the letter,
get your address, write it on the envelope and send it back to you!

If you do feel you want to put a return address on the data, you could use the one for
the mailing house and then they can update the data for you.

It’s disheartening when you get returned mail, but we can’t let it put us off. We’re
interested in buying a business. All the people who abuse us, or return the letter in
pieces or with a snotty note scribbled on it, or the letter comes back because the
addressee’s gone away, all those are irrelevant. I’m not interested in them. You
shouldn’t be interested in them. I’m only interested in my deals, and nothing’s going to
stop me from getting them – including angry people with too much time on their hands.

This is the mindset that you need to have, that pushes out of the way all of the clutter
and confusion, the ‘do we do this’ or ‘do we do that’. You need complete laser focus
on the outcome, because nothing is going to stand between you and that £25 million.

Deal with responses

If you are taking the responses yourself, the number of letters you send out at any one
time is determined by your availability – you need to be free to talk to people on the
phone. Send out as many as you can reasonably handle the responses to.

You might want to sub-contract handling the initial responses to someone else. If that’s
a choke point because you haven’t got much time, that’s when you need to get
someone else to do it for you. It’s tempting to want to handle everything yourself – I
get that – but if keeping that iron control sabotages your plans, you need to loosen
your grip.

Response handlers should make it clear to callers that their role is to get the necessary
information for you to assess, and it’s you who will ring them back.

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What I do is equip people with a framework, a series of questions that allows them to
determine whether a business fits our criteria. Basically, they work off a tick sheet.

It will help if they have a keen sense to determine if the business owner sounds
motivated, then they can flag that and ask you to phone them straight away.

They can go into basic finances, but often the business owner doesn’t know, or else
the figures turn out to have been exaggerated. However, even bearing in mind that
caveat, it can give you some sense of the size of the business.

The information I get from Maria

This is the information Maria provides to me about people who respond to letters:

• Name of business owner;

• Best contact number;
• Photograph of the premises;
• Table of information: address, website, freehold/leasehold, are they selling the
property as well, etc.;
• Personal information about the caller – reasons for perhaps selling, level of
commitment, business information disclosed, numbers/financials/any valuation
figure obtained; and,
• Any additional notes she feels are relevant.

Getting information in a standard format like this makes it easier to go through it and
compare businesses. It means you make better use of your time and information is
not lost. It’s a very organised, structured approach and it ensures we don't miss an
opportunity due to lack of organisation.

Finding someone to handle responses

If you put a message on LinkedIn saying you want a virtual assistant to handle
responses for you, you’ll be inundated. You probably want someone in the UK, so in
the same time zone, and with a good telephone voice. You don’t want someone to
mess it up for you at the first stage.

They may not ‘get it’ to start with, but over time they’ll learn. It would be useful, for
example, if they were to say, ‘I will pass this on, but we’ve just bought something and
so it may be a day or two before we get back in touch – is that okay?’

I want that seller to realise that they are competing for our attention and we aren’t just
sitting around waiting for the phone to ring. They have to fit around us. In the ideal
world you have someone who can do all that for you.

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Get the picture

Because our businesses are location-dependent, same as, for example, a dental
practice or veterinary practice, the practice itself is part of what’s being sold – even if
it’s leased you are buying the ability to be able to operate from those premises. While
they’re on the phone, we ask the seller to walk across the road, take a photograph and
send it to us, and my assistant attaches that to the notes. That saves a lot of time.

You could also use Google maps, but this is easier and the image is bang up to date.
If part of your criteria is that the business has to have a certain look and feel about it,
that’s all part of that decision-making process.

Speed matters
I said earlier that you should mail as many letters as you could handle responses from.

I instinctively knew, but had no real data, that if you don’t do a deal quickly, that deal
usually comes off the table. We had about seventy businesses that we’d spoken to
and that were kind of okay, but there was something … maybe price expectations
were too high, or they had property that we didn’t want to buy. Then we had some
opportunities where we could and did buy the property so we changed the criteria
slightly. At that point we went back to the seventy that were in limbo and said, ‘We’ve
spoken to you in the past, for whatever reason nothing proceeded but things have now
changed at our end, and we’re interested again and hope you are, too. Call us if that’s
the case.’ That mailing landed and was followed by a resounding silence.

Here’s what happened in the interim – and I kind of knew this in bits and pieces but
this was my real test.

If they don’t sell to you, they put the business with a broker, or they sell to someone
else. Maybe they were already with the broker and now they feel you’re out of the
equation they’re just leaving everything up to them. They might decide not to sell
altogether, or else they go a different route, they sell the property to a developer, they
close the business. Whatever, the outcome for you is the same. Basically, if you leave
it too long, the deal evaporates. You have to take decisive action or the deal
disappears. You are eliminated from their options. There may be an odd exception,
but generally you are eliminated.

The lesson to be learnt is, when you spot an opportunity, even if it’s not perfect, move
on it sooner rather than later. You can always change your mind – just as you would
if you uncovered something unwelcome – but this way it’s your shout.

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M&A Mastermind Deal Sourcing Training Manual

Key points
I believe letters are your absolute best potential source of business deals.

Data
Getting relevant, accurate, up-to-date mailing data underpins the entire process.

You can buy data, but choose your data broker carefully – lists can be excellent and
up to date, or as good as useless.

Data collected from various different sources – such as magazine subscribers and
membership lists – gets you a better data set.

Getting good data is more important than writing a brilliant letter.

Don't skimp on the cost of data; data helps you get deals.

Don't shrink your data too soon – mail everyone!

Letters
Letters should sound professional, and be carefully proofread to eliminate errors.

Personalise them as much as is practical, depending on the size of the mailing.

Good quality plain paper is probably best – unless your company name is recognisable
and carries weight.

Use a white (not manila) envelope, and mark it ‘private and confidential, for the
addressee only’.

Use stamps rather than having the letters franked – it looks more personal and
improves your chances of having the letter opened.

Don't just write once – think of reasons to get back in touch.

Don't let returns or negative responses put you off.

Responses
The number of letters you send in any one go should be based on the number of
responses you can handle.

It's a good idea to get someone else to handle the initial responses on your behalf.
Equip them with a tick list of things to cover.

If the business is location-dependant, make sure you get an up-to-date photo of the
premises.

Respond as quickly as you can to enquiries – if you leave it too long, the deal
evaporates.

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 Key Points Recap

Key Points Recap

Chapter 1: Business Brokers

Brokers are hired by, and work for, the seller.

Brokers also need to attract buyers, to complete a deal.

Brokers have lots of businesses listed, but the vast majority are overpriced.

Brokers will take you seriously if you've bought a business before.

Don't tell a broker you have no experience and no money – you'll never hear from
them again.

A broker's business model is the business listing, not the sale of the business.

It can be worth your while to develop a relationship with a broker; you probably only
ever need one or two to send you deals.

Brokers can let you know about businesses before they are listed, which gives you an
advantage over other potential buyers.

Identify the specialist brokers for your sector and area, and get to know them.

Chapter 2: Six Additional Deal Sources

Websites:
• The Internet is a valuable source of businesses for sale
• Use Google to identify specialist brokers
• Check regularly and set up alerts on business-for-sale websites

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Asset valuers:
• Asset valuers can give you the heads-up on businesses/business assets
coming up for sale

Networking:
• Everyone you know – and everyone they know – is a potential source of
business deals
• Useful contacts can be accountants and suppliers, and possibly your bank
manager
• LinkedIn can be a good place to forge a collaborative relationship
• This M&A Mastermind Group is also a part of your network

Direct contact:
• If you have the nerve to pick up the phone and speak to someone at, for
example, the local council, you have an advantage over others who don't dare

Cold-calling:
• With cold-calling, don't rule people out based on personal bias or your own
financial situation
• Questions aren't objections; they're a sign that someone wants to know more

Social media/advertising:
• Join relevant groups on social media to make contact with potential sellers
• Targeted, paid-for advertising, on social media and in the trade press, can get
results

Chapter 3: Letters
I believe letters are your absolute best potential source of business deals.

Data
Getting relevant, accurate, up-to-date mailing data underpins the entire process.

You can buy data, but choose your data broker carefully – lists can be excellent and
up to date, or as good as useless.

Data collected from various different sources – such as magazine subscribers and
membership lists – gets you a better data set.

Getting good data is more important than writing a brilliant letter.

Don't skimp on the cost of data; data helps you get deals.

Don't shrink your data too soon – mail everyone!

Letters
Letters should sound professional, and be carefully proofread to eliminate errors.

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 Key Points Recap

Personalise them as much as is practical, depending on the size of the mailing.

Good quality plain paper is probably best – unless your company name is recognisable
and carries weight.

Use a white (not manila) envelope, and mark it ‘private and confidential, for the
addressee only’.

Use stamps rather than having the letters franked – it looks more personal and
improves your chances of having the letter opened.

Don't just write once – think of reasons to get back in touch.

Don't let returns or negative responses put you off.

Responses
The number of letters you send in any one go should be based on the number of
responses you can handle.

It's a good idea to get someone else to handle the initial responses on your behalf.
Equip them with a tick list of things to cover.

If the business is location-dependant, make sure you get an up-to-date photo of the
premises.

Respond as quickly as you can to enquiries – if you leave it too long, the deal
evaporates.

31