 |
|
||
|
Main Business Activity - Economic development consultancy Project Outline - Building a business model to value intangible business assets such as goodwill, networks, contacts and knowledge Abdul Rahim spotted an issue in the micro business market; no one wants to buy them if they turn over less than £2m. He set about developing a business model that would help him secure investment, allowing him to buy these small businesses and extract their value. He is now ready to go to market and begin his first acquisitions. Abdul Rahim, founder of Platinumlinks first became interested in succession planning after he met Peter Gresham, an economist who had built up his own successful economic development consultancy. When the two men met Peter was recovering from a serious illness and had been given a maximum of five years to live. Peter was determined to pass over the knowledge he had built up over 25 years and have it put to good use. Together they found a graduate student from the LSE to work with them, they put her on a fast track mentoring scheme with Peter as her mentor. With her help Peter and Abdul transferred Peter’s knowledge and merged their businesses. Sadly in 2007 Peter died, but his legacy was greater than either of them had realised because as Abdul says, “We had created a whole new business model”. Abdul had been looking for a way to diversify his own business, an economic development consultancy, but he identified a wider challenge. The problem he saw was that no body wants to buy micro businesses that turn over less than £2m, unless there a strategic target. There are more than 500 firms in this situation in the UK according to Abdul, and around 10% of them in London and the South East. “It’s going to become a massive issue over the next twenty five years”, says Abdul, “as the baby boomers retire and leave their employees behind”. It was at this realisation that Abdul approached the Knowledgebase Collaboration programme, for guidance in creating a business model that would help him secure investment to acquire micro businesses and extract their value. The programme supported a project with London Business School academics Professor John Mullins and Jane Khedair. They built a model that put a value on intangibles like goodwill, network contacts and knowledge. “Without a balance sheet valuation it would be difficult to raise finance”, says Abdul, “in the absence of support from the programme, I wouldn’t have the valuation model”. Abdul is now at the stage where he is aiming to raise external capital finance to systematise this process. He then plans to raise a more significant sum of money to roll out the acquisition strategy. The programme has also helped Adbul refine the process of extracting knowledge from key people before they leave the business. “The clever bit for me”, he says, “is the incentive for someone who exits the business”. Abdul’s company will offer takeover shares in the value of the company three years after acquisition. That way their incentive is “How quickly can I enhance value”. Since the completion of the project Abdul says he has spoken to the first half a dozen consultancies out of the 54 he plans to contact. “I’d expected them to kick me out, but many are nursing the proposition”. This is encouraging news for his plans to launch Platinumlinks on AIM, the Alternative Investment Market. He is following a route taken by other companies who went to market with a similar proposition to consolidate companies in their sector through acquisition. “When I go to market, I’ll have the credibility of an independent verification from LBS, a respected institution. When we negotiate the value they’ll have to take note” says Abdul. |
secure log in - register here
Platinumlinks Ltd
Related links:
KNOWLEDGE CONNECT is a London Development Agency and ERDF funded programme delivered by ANGLE plc and Winning Moves Ltd.
