Behind the crutain part1 (3)


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Behind the crutain part1 (3)

  1. 1. Selling Your Business - A Look Behind The Curtain
  2. 2. A Look Behind the CurtainTimingBuyersPriceDangers
  3. 3. TimingQ: What is the best time to sell your business?a) When the market is peakingb) When my sales and profit are peakingc) When I’m big enoughd) I have no idea
  4. 4. TimingA: I have no idea
  5. 5. TimingTiming the market oryour business peakis very difficult.2008 market fall?18 months early?
  6. 6. TimingTiming is determinedby the Buyers, notSellers.There is no way toknow when theright buyer has theright fit, right dealat the right time foryou.
  7. 7. Timing
  8. 8. Timing
  9. 9. BuyersQ: Who is the right buyer for my business?a) One of the largest industry playersb) One of my customersc) One of my competitorsd) The icons (Google, Microsoft, Lockheed, etc)e) I have no idea
  10. 10. BuyersA: I have no idea
  11. 11. BuyersCustomers and competitors make the most unlikelyand lowest value buyers• There is a good reason they are a customer…• Competitors very often have to much overlap togenerate full value
  12. 12. BuyersThe very big often do not bother with the very small.• Most likely buyer is 5x – 20x your current revenue• Often completely unexpected• Buyers priorities shift unpredictably…
  13. 13. Buyers
  14. 14. Buyers – Part 2Q: How many potential buyers do I need to talk to besure I have the best deal (or any deal at all)?a) < 5b) < 50c) More than 50d) I have no idea
  15. 15. Buyers – Part 2A: More than 50
  16. 16. Buyers - Part 2
  17. 17. Buyers - Part 2Remember…You are selling a illiquid asset into an illiquid marketThere are probably 1 – 5 buyers for every small businessIt takes 2.5 LOI’s for a deal to actually close
  18. 18. PriceQ: Your golf buddy tells you a story about a friend who soldhis business for $100 million, what was the real price?a) Moreb) Lessc) Much Lessd) Even less than that
  19. 19. PriceA: Much less
  20. 20. PriceYour price, my terms:So, you got a $20 million* valuation…* 10% cash, 10% stock, 80% earn out* 75% must be in my private company stock* Investors get an 8 to 1 liquidation preference* Conversion price does not prevent dilutionWithout terms, price means nothing
  21. 21. Price – Part 2Q: What’s the best way to know the true value of mybusiness?a) Revenue or profit multiple against public multiplesb) What other companies like mine sold forc) Valuation from accountant, ibanker, etcd) Throw a dart
  22. 22. Price – Part 2
  23. 23. Price – Part 2Other answers are reasonable ifyou are comfortable with beingoff by 50%Small businesses rarely have goodcomparablesBuyers do not go to valuationschoolTerms are as important as price
  24. 24. Price – Part 3Q: If you hire an investment banker or businessbroker or accountant or valuation expert, shouldyou believe his valuation?a) Nob) No
  25. 25. Price - Part 3A: No
  26. 26. Price – Part 3Brokers & ibankers can’t help butpitch a high valuationAccountants & valuation prosaren’t as conflicted but still can’tbeat the dartRemember, your business is worthwhat a buyer will pay for it. Trick isto find the best buyer with the bestdeal
  27. 27. DangersQ: What’s the biggest danger in selling my firm?a) Customers will find out and boltb) Employees will find out and boltc) My ex-spouse will find out and want their cutd) None of the above
  28. 28. DangersA: None of the above
  29. 29. DangersEmployees and customers rarelybolt- it’s an urban mythYour competitors are already tellilngyour customers and employees yourbusiness selling (failing or bankrupt)anywayBiggest danger is you won’t likeretirement as much as you thoughtand go right back to building thesame business you soldOn the ex-spouse, we can’t give legaladvice
  30. 30. Selling Your business – A Look Behind the CurtainTodd Taskey, PrincipalStonecroft Capital, LLC7625 Wisconsin Ave #300Bethesda, Maryland 20814240-482-3590