Opportunities & secrets in buying selling & valuing businesses _J Harrel)


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Secrets of buying,selling and evaluating a business!

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  • Pass out the flow chart for buying a business
  • Opportunities & secrets in buying selling & valuing businesses _J Harrel)

    1. 1. Sunbelt Seminars Presents: <ul><li>The Secrets of Buying, and Valuing a Business </li></ul>2350 Herron Road suite 201 Dorval, Quebec H9S1C5
    2. 2. Thank you for attending WELCOME! Thank you for attending our seminar “Buying , Selling and Valuing Your Privately Held Business”. We will share some ideas and experiences that we hope will be beneficial in your understanding of the “Real World” of privately owned businesses and the factors that affect their value. That Sunbelt is the largest business brokerage network in the world with over 300 offices in 14 countries is not particularly important to this presentation. However the source of this presentation comes from the experience pool of a large network of professional business brokers. In this seminar Joseph Harrel will convey awareness of areas that drive the value of a business, confidentiality in the sale or transfer of the business, finance issues , how we help protect all parties throughout the process with a goal to arriving at a win-win scenario for everyone involved. Joseph J. Harrel CBI Bsc. Admin. Sunbelt West Island 514-694-0554 poste 1 www.SunbeltNetwork.com
    3. 3. Seminar Presenter <ul><li>Joseph J. Harrel is a Certified Business Intermediary </li></ul><ul><li>and a member of the International Business Brokers Association </li></ul><ul><li>Born in Toronto and raised in Montreal Joseph has extensive experience in management within small, medium and large privately held companies in addition to having bought, successfully operated and profitably sold his own business before moving on to establish a Sunbelt office on the West Island of Montreal. </li></ul><ul><li>He is trained in the intricacies of pricing businesses, bringing buyers and sellers together and negotiating long term solutions. </li></ul>
    4. 4. Is buying a business the right decision. <ul><li>What are your alternatives. </li></ul><ul><li>Finding a job? </li></ul><ul><li>If you find another job will they let you sell it when you leave? </li></ul>
    5. 5. Options <ul><li>Keeping the job you have? </li></ul><ul><li>How confident are you that your job is secure? </li></ul><ul><li>Do you like your job? </li></ul><ul><li>Can you build wealth based directly on your efforts? </li></ul><ul><li>Buy an existing Business or a Franchise! </li></ul>
    6. 6. More Options <ul><li>Retiring? </li></ul><ul><li>Trends are against retirement - evidence is mounting that people who retire are not as happy as they thought they would be. </li></ul><ul><li>Many people who want to “Retire” realize they simply want a change and a new challenge. </li></ul>
    7. 7. The Fact <ul><li>We sell many businesses to people who leave the corporate world….. </li></ul><ul><li>We rarely sell a business for someone who wants to go back into the corporate world. </li></ul>
    8. 8. The Decision <ul><li>A well known saying among business owners: </li></ul><ul><li>“ The worst day of owning your own business is better than the best day working </li></ul><ul><ul><li>for someone else .” </li></ul></ul>
    9. 9. First Basic Rule <ul><li>“ Never confuse a business that doesn’t show a profit for tax purposes, with a business that isn’t Profitable” </li></ul>
    10. 10. Understanding Why? <ul><li>Public Companies do their accounting to Maximize reported profits profits. </li></ul><ul><li>Private Businesses prepare their tax returns to Minimize taxable income. </li></ul>
    11. 11. The Reality <ul><li>Minimizing Taxable income is part of the normal activities of private business. </li></ul><ul><li>Private businesses rarely have audited financial statements. </li></ul><ul><li>Private business owners are very concerned with Confidentiality. </li></ul>
    12. 12. You can see, only what is there. <ul><li>Small businesses don’t have (or want) the level of detailed record keeping usually seen in larger companies. </li></ul><ul><li>Small businesses all have a system although often it is an inadequate system. </li></ul><ul><li>There are no perfect businesses. </li></ul>
    13. 13. Will you thrive? <ul><li>Must be a business that you will enjoy. </li></ul><ul><li>Dealing with clients, staff , suppliers. </li></ul><ul><li>Hours, location , product or service. </li></ul><ul><li>Image </li></ul><ul><li>Your role. </li></ul><ul><li>Will you have a vision. </li></ul>
    14. 14. Suggestions on how to approach your investigation <ul><li>Be persistant, don’t be easily discouraged. </li></ul><ul><li>Recognize the limitations of the available information and analyze what is available. </li></ul>
    15. 15. Strengths and Weaknesses <ul><li>Have a clear understanding of your own strengths and weaknesses. </li></ul><ul><li>View weaknesses in a business as an opportunity. Remember the profits of the business are being generated with those weaknesses present. Fixing the weaknesses should improve the profits for the buyer. </li></ul>
    16. 16. Most Important <ul><li>Determine how much is the minimum you need to make from the business and determine what is the investment level you are willing to make. Typically the higher your investment the higher the business profitability </li></ul>
    17. 17. Financing the Purchase <ul><li>90% of businesses sold have Vendor financing </li></ul><ul><li>(10 to 50% is typical) </li></ul><ul><li>Other sources – BDC, SBL, etc. </li></ul>
    18. 18. <ul><li>Good News is: </li></ul><ul><li>You get to make all the decisions. </li></ul><ul><li>Bad News is: </li></ul><ul><li>You get to make all the decisions . </li></ul>The News
    19. 19. <ul><li>Salary, vehicle costs, personal insurance, entertainment not directly related to the business, some charitable contributions, travel, maintenance costs for non-business items, rent costs in excess of normal market rent or rent paid to an entity that the seller controls, etc. </li></ul>Owner compensation/benefits that are often identified:
    20. 20. <ul><li>The taxable income reported on a small business tax return is rarely an indicator of the true earnings realized by the business owner. </li></ul>Conclusion
    21. 21. <ul><li>Confidentiality </li></ul><ul><ul><li>This is critically important </li></ul></ul><ul><ul><ul><li>Customers </li></ul></ul></ul><ul><ul><ul><li>Employees </li></ul></ul></ul><ul><ul><ul><li>Vendors </li></ul></ul></ul><ul><ul><ul><li>A confidentiality agreement usually grants you the opportunity to share the confidential information with your financial advisors. </li></ul></ul></ul>Dealing with sellers
    22. 22. Buyer seller meetings <ul><li>Keep a good relationship , you want the seller to help you after buying the business. </li></ul><ul><li>Focus on determining the skills you will need to replace. </li></ul><ul><li>Try to ascertain the weaknesses of the current owner and determine if your skills can add value to the business. </li></ul>
    23. 23. Negotiations <ul><li>Don’t confuse the desire to win with what is a fair price. </li></ul><ul><li>Understand how you arrived at the business value before you start negotiations. </li></ul><ul><li>All negotiations through the broker, it will give both parties a chance to test the reasonableness of their requests </li></ul>
    24. 24. Due Diligence <ul><li>Get everything you need ( limited to what is available ), move quickly and be persistent. </li></ul><ul><li>Never lose sight of the characteristics of small business record keeping. When you own the business you can keep the books any way you like. </li></ul>
    25. 25. Key Points <ul><li>Be willing to spend some money in the process to do it right. </li></ul><ul><li>Always respect the need for confidentiality </li></ul><ul><li>Don’t worry if you’re nervous, it’s natural </li></ul>
    26. 26. <ul><li>Steps taken by successful buyers of an operating business or a new franchise: </li></ul><ul><li>Take time to decide if buying a business is best </li></ul><ul><li>If yes, commit the time necessary to accomplish the many tasks </li></ul><ul><li>Minimize risk </li></ul>Headed in the Right Direction
    27. 27. Minimize Risk <ul><li>VTB with right of offset </li></ul><ul><li>Training and transition program </li></ul><ul><li>Due diligence </li></ul><ul><ul><li>Contracts, financials, operations, staff, systems, equipment, exposure, customer relationships, supplier relationships, inventory, reputation </li></ul></ul><ul><li>Legal Counsel </li></ul><ul><ul><li>Structure </li></ul></ul><ul><ul><li>Tax planning </li></ul></ul><ul><ul><li>Protection from misrepresentation or failure to disclose </li></ul></ul><ul><ul><li>Title </li></ul></ul>
    28. 28. Goal Line <ul><li>Keep moving toward the goal, not every deal works out. You may need to find more than one business to pursue. </li></ul><ul><li>No matter how thoroughly you try to prepare when the day comes to sign you will still have some unanswered questions. </li></ul><ul><li>There is no such thing as a risk free transaction for a buyer or a seller. </li></ul>
    29. 29. Things to Do <ul><li>Use a Good Broker </li></ul><ul><li>Be responsive to your broker </li></ul><ul><li>Keep an open mind </li></ul><ul><li>Be forceful and determined…but be reasonable </li></ul><ul><li>Get appropriate legal and accounting advice </li></ul>
    30. 30. Thank you! <ul><li>Thank you for attending our seminar </li></ul><ul><li>If you feel you have any questions please call! </li></ul><ul><li>I will be pleased to set up a confidential meeting. </li></ul><ul><li>Joseph J. Harrel CBI Bsc. Admin </li></ul><ul><li>Sunbelt West Island </li></ul><ul><li>514-694-0554 </li></ul><ul><li>[email_address] </li></ul><ul><li>www.Sunbeltnetwork.com </li></ul>