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Successfully sell your main street business
 

Successfully sell your main street business

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Sell a Business in Sacramento. In the Slide, Andrew Rogerson provides a number of tips, ideas and information on what to do or not to do when selling your business. His company, Rogerson Business ...

Sell a Business in Sacramento. In the Slide, Andrew Rogerson provides a number of tips, ideas and information on what to do or not to do when selling your business. His company, Rogerson Business Services can help you to evaluate when is the best time to sell a business.

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    Successfully sell your main street business Successfully sell your main street business Presentation Transcript

    • Successfully sell your ‘Main Street’ business
      By
      Andrew Rogerson
    • Goal of this presentation
      Introduce the many steps to sell a Main Street business:
      Introduce some of the processes
      How to research and apply to your business
      Allow you to create a plan
      Allow you to decide what’s important
    • What is a ‘Main Street’ Business?
      NOT:
      Publicly held companies
      Privately held companies with sales >$5 million
      IS:
      Privately held company with
      Sales up to about $5 million
      Generally an owner/operator
    • Why ‘Main Street’?
      Valuation method
      Uses Discretionary Earnings – not EBITDA
      Types of Sellers
      Types of Buyers
      Individual or Corporate Executive – control of their life
      Unemployed – looking for a job
      Synergistic – competitor or already in your industry
      Investment – hires a manager & wants a ROI
    • 10 areas to research & understand
      Tax Planning
      Accounting
      Legal review
      Personal Financial Planning
      Personal Future Planning
      Build your Team
      Financing the sale
      Valuing your business/assets
      Sales and marketing plan
      Other parties in the transaction
    • Tax Planning
      Entities and their tax treatment
      C Corp, S Corp, Partnership, LLC or Sole Prop
      Check your tax consequences if you sell
      Purchase Price Allocation
      Seller and Buyer have different needs and this has different tax consequences for each party.
    • Accounting
      Report ALL earnings at least 12 months prior to selling…
      So it reflects in your valuation and ultimate sale price
      Need - Current and accurate Profit and Loss Statement (P&L)
      Need - Tax Returns (Last 3 years)
    • Legal Planning
      Check ALL Owners agree to sell
      Divorce – what does the other ½ get?
      Broad Agreement on price and terms
      Legal contracts up to date?
      suppliers, employees, customers, finance, landlord etc
      Read existing contracts for “gotcha’s” e.g.: lease, equipment finance leases, franchise agreement etc
    • Legal Planning (cont’d)
      Documents to sell the business
      Confidentiality Agreements
      Asset Purchase Agreement
      Sellers Disclosure
      Buyers Disclosure
      List of Fixtures, Furniture and Equipment (FF&E)
      Lease
      Franchise Agreement
      Profit & Loss Statements, Tax Returns etc
    • Personal Financial Planning
      How will you invest the sale proceeds once the business sells?
      Trust: Living, Charitable, Testamentary etc?
      Retirement account?
      Health Insurance account?
      Shares/Mutual funds/Bonds etc
      Wills/Heirs
    • Personal Future Planning
      What will you do once the business sells?
      Play golf?
      Spend more time with grandchildren?
      Travel?
      Join the Peace Corps?
      Solve world peace?
      Note: Sellers change their mind about selling because they lose structure and familiarity
    • Team planning
      Recommend two teams
      Primary team
      Spouse and/or family member and one trusted friend
      Secondary team
      Professionals you can hire
      Attorney/Accountant/Financial Planner
      Business Broker
      Critical ingredients = Trust and Ethics
      Try to avoid changing the team for continuity
    • Financing the sale
      How will the sale be financed?
      Cash - Highly unlikely
      Buyer with $300,000 cash will buy a $900,000 business
      Seller finance
      SBA loan program
      Conventional loans from a bank
      Commercial Real Estate loan
      Factor accounts payable and receivable
    • Valuing your business
      Determine what’s being sold and valued
      Business
      Machinery and Equipment
      Real Estate
      Intellectual Property
      Main Street businesses sell for multiple of Discretionary Earnings
    • Valuing your business (Cont’d.)
      Types of business valuations
      Brokers Opinion of Value (Cost $500 to $1,000)
      Standard Valuation (Cost $2,500 to $5,000)
      Full Appraisal (Cost $4,000 to $10,000)
      Do not overpay
    • Sales and marketing plan
      Executive summary – Blind
      Confidential Business Review (CBR)
      Direct Mail
      Newspaper Advertising
      Web
      Trade Association
      Newspaper Business Opportunity section
      Magazines – Inc, Forbes or Trade Association
    • Potential “Deal Killers”
      Family
      Landlord
      Attorney or Accountant
      Selling a business comes with risk
      Franchise
      Check your UFOC or FDD
      Lender
      Each business is unique – what’s important to sell your business?
      Do not forget - Buyers have choices
    • Review your options
      You’ve done your research and plan – what are the options?:
      Do nothing
      Close the business down
      Sell to a family member or friend
      Sell the business
      If you decide to sell …
    • If you decide to sell…
      Make sure it’s what you want
      It is not a quick process
      It is an emotional process
      It is a complex process
    • Seller V Buyer
      Remember: Seller and Buyer are looking for different outcomes but cannot close a deal without each other.
    • What the Seller would like
      • All cash
      • Provide one week of training
      • One day of Due Diligence
      • Receive an offer and close escrow two days later
      • Sell at 5 to 6 times Discretionary Earnings
    • What the Buyer would like
      • Downpayment of 10% of purchase price
      • 6 months training for free then close escrow
      • 4 weeks of Due Diligence
      • 4 week “Test Drive” of the business
      • Buy at 1 times Discretionary Earnings
    • Where they end up meeting
      • Buyer downpayment equal to Discretionary Earnings
      • Seller provides some finance
      • 2 to 3 weeks of free Seller training
      • Two weeks of Due Diligence
      • Close escrow 45 to 60 days after offer accepted
      • Sold at 2 to 3 times earnings
    • The ‘perfect’ business
      A reasonable price
      A reasonable down payment (About 30%)
      Some Seller finance
      Reasonable sales (hopefully increasing each year)
      Discretionary Earnings of $60,000 pa or more
      A compelling reason for sale
      A desired industry type
      Good and attractive location
    • 8 reasons a business does not sell
      Sellers starts process and sees the complexity
      Seller fears the future
      Seller receives no offers or lower than expected
      Sellers next phase of their life less appealing
      Seller wants all cash and can’t get it
      Due diligence problem: environment, govt., legal
      Seller unwilling to accept what the market offers
      Records do not support income, expenses & profit
    • Conclusion
      It is:
      Complex
      Demanding
      Frustrating
      Time consuming
      Emotional
      Rewarding & a relief…when it’s done
    • Questions?
      Phone: (916) 570-2674
      Email: Andrew@RogersonBusinessServices.com
    • Thank you
      Andrew Rogerson
      Web: http://www.RogersonBusinessServices.com