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When Lee Smith bought his first company for just one pound, most people thought he was crazy. Twelve years and 20+ acquisitions later, he’s proven there’s a method to the madness, and valuable lessons for anyone planning to sell their business.
As an acquisition entrepreneur at Verdani Capital, Lee has seen hundreds of deals from the buyer’s side. What he’s learned might make you rethink everything about preparing your business for exit.
The #1 Reason Deals Fall Apart
“The biggest criteria is: are there other people in the company that can actually take over what you do?” Lee explains. “Most of the time in companies that are sub two to three million, the answer is no. They are the key to the business.”
This owner-dependency issue kills more deals than any other factor. If you’re everything in your business – sales, operations, strategy, client relationships – you’re not running a sellable business. You’re running a job.
The fix? Hire someone to take over your role 2-3 years before you plan to exit. For Lee’s HVAC business, this meant bringing on a general manager, then recruiting a managing director from a company seven times their size. “Now the two key people who are over 60 can step away in two to three years. We’ve built that infrastructure.”
What Your Business Is Really Worth (According to Buyers)
Forget the inflated EBITDA multiples you see in headlines. Lee operates in reality: 2-4x true profit for blue-collar businesses.
“We tend to aim for true profit, not EBITDA,” he emphasizes. “If you’re picking up stuff where they’ve adjusted the EBITDA by adding back the director’s salaries, that’s insane. Someone’s got to run it after you buy it.”
This is where many sellers get tripped up. They present adjusted numbers that look great on paper but collapse under scrutiny. Buyers aren’t impressed by creative accounting, they want to see real, sustainable profit that will continue after the transaction.
The Art of the £1 Acquisition
Lee’s most remarkable deals didn’t come from aggressive negotiation tactics. They came from solving desperate problems.
One founder had built up £500,000 in debt and was being pressured by HMRC to sign a bond that would claim all her future earnings. Lee saw an opportunity to help.
“Within two weeks, she had signed over 40% stake of the company to us. Within four weeks, we had set up a new entity for her and moved her customers over legally. She had a fresh entity with no debt.”
Seven months later? Lee sold that 40% stake back to her for a low six-figure sum. The founder got her business back, debt-free and thriving. Lee made six figures. Everyone won.
“That was a real wake-up moment that you can do some real good in this world,” he reflects.
The Deal Structure That Actually Works
Lee doesn’t buy 100% of businesses. He typically acquires 60-80%, leaving founders with skin in the game.
Why? Three reasons:
- Proper handover incentive – The seller is motivated to ensure a smooth transition
- Continued alignment – They benefit from the growth trajectory ahead
- Bigger payday later – When the group exits in 2-3 years at a higher multiple, founders often make as much (or more) on their remaining equity as they did on the initial sale
“We like to keep people in for the long run,” Lee explains. “When it’s three years time and we’ve built this much bigger group, they’ll probably get the same, if not more again, when they exit with us.”
Red Flags Buyers Can’t Ignore
Concentration Risk
Lee recently evaluated two deals where single clients represented 60-70% of revenue. He didn’t walk away, but he did structure protection.
“We’ll still give them a decent valuation, but the multiple would probably be around a three. More importantly, in the sale and purchase agreement, we would have a key customer clause.”
If that major client leaves during the deferred payment period, the price adjusts accordingly. It keeps the founder motivated to maintain those critical relationships.
The Phantom Equity Disaster
Lee’s closest call came 30 minutes before closing on a deal. During a final call with lawyers, they discovered the seller had given the general manager 15% of net profit, buried in an employment agreement disclosed just seven days earlier, on a weekend.
“We were coming in and buying 100% of that company. This is a massive red flag. If you’re buying 100% and someone puts that in an employment agreement, it’s very, very hard to come back on that with employment law.”
The deal didn’t close.
The Biggest Mistake You Can Make
It wasn’t a bad acquisition that cost Lee the most. It was choosing the wrong partner.
“I ended up selling my shares back in that business last year for far less than I thought I was going to get for it, just to get away from the toxic situation,” he admits. “Should have been a nine million pound exit, four and a half million pounds each. I ended up giving the shares away for almost nothing.”
The lesson? Someone should always have ultimate responsibility. 50-50 partnerships sound fair, but they create deadlock situations when disagreements arise. More importantly, you don’t discover personality issues until money’s involved.
“There’s some crazy people out there, and you don’t discover that until money’s involved.”
When Should You Actually Sell?
Most founders wait for “the perfect year” that never comes. Next year’s profit is always going to be better, right?
“You’re wasting your life if you keep thinking the next year is always gonna be the best,” Lee says bluntly.
From a buyer’s perspective, timing matters less than you think. “If I look at a business and the profits look too strong, it always raises a flag. We don’t mind picking up something that maybe hasn’t had the best year because we know we can do something with it.”
Buyers like Lee are evaluating systems, client base, and personnel—not just last year’s P&L. If you’ve built real infrastructure and transferability into your business, market timing becomes secondary.
Building Trust in the Deal Process
After 12 years and dozens of acquisitions, Lee’s approach has become surprisingly simple: “Two ears, one mouth.”
“I like to listen to the pain points they’re going through. I structure deals to fix their pain points. I’m not coming in with any ego or set strategy. For me, it’s finding out about the human sitting opposite me.”
This human-first approach cuts through the noise. Numbers matter, but at the end of the day, you’re not negotiating with a spreadsheet—you’re sitting across from another person with fears, hopes, and problems to solve.
The Framework for Post-Acquisition Integration
Lee uses EOS (Entrepreneurial Operating System) to manage acquired businesses. The key principle? Light touch.
“People don’t like change. When we acquire, the whole aim is that the next day things look exactly the same. We only want it different from the board level and from the people at the top.”
This approach respects the reality that the business was successful for a reason. Rather than swooping in with dramatic changes, Lee waits 3-6 months before introducing suggestions. The business continues operating as normal while leadership gradually implements improvements.
What Lee Would Tell His Younger Self
“Just chill out, it will all be okay. Put one step forward every day, and everything will work out fine.”
Ten years ago, Lee was trying to build a hundred-million-pound group from day one. Now he focuses on something different: purpose over numbers.
“Figure out why you want to build a hundred-million-pound group. What’s the purpose? Do you really need it? Sometimes you don’t always need it. That’s just ego speaking.”
His favorite quote, from Jim Rohn, captures this philosophy: “Become a millionaire for what it will make of you, not for the money.”
The Bottom Line for Sellers
If you’re planning to exit your business in the next 2-5 years, Lee’s experience offers clear guidance:
- Start building transferability now – Hire someone to replace you in operations, even if it feels uncomfortable
- Focus on true profit – Stop playing EBITDA games that sophisticated buyers see through immediately
- Address concentration risk – Diversify your customer base or accept a lower multiple
- Document everything – Employment agreements, customer contracts, financial arrangements—transparency prevents deal-killing surprises
- Be honest about your situation – The right buyer will structure a deal that solves your actual problems
Most importantly, understand that selling your business isn’t just a financial transaction. It’s a human conversation about solving problems, transferring something you’ve built, and setting up the next chapter of your life.
As Lee puts it: “It’s humanizing it. Sitting one-on-one, really listening, and actually caring about that individual and trying to find a win-win situation.”
That approach has worked for 20+ acquisitions and counting.
Ready to explore your exit options? Visit Flippa.com to connect with qualified buyers and get a free business valuation.
Personal &/or Company Bio:
Lee Smith is a values-driven entrepreneur and dealmaker with more than 25 years of experience and a respected track record in UK M&A. After completing his first acquisitions in 2014, he went on to buy and turn around nine underperforming companies before founding Verdani Capital, where he continues to acquire and scale larger UK businesses. To date, Lee has completed 26 acquisitions across sectors such as Manufacturing, Professional Services, Construction, HVAC, and IT Services, supported by training from leading M&A mentors in the UK and US. His current portfolio generates over £2M in annual profit with a clear path toward £10M, strengthened by three strategic exits in 2024. Grounded in spirituality and conscious leadership, Lee combines substance, strategy, and long-term thinking in every partnership.
Website – https://www.leeasmith.co.uk/
