Buying Bus.Presentation


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Buying Bus.Presentation

  1. 1. Joe Cacopardo laska COMPANY The Secrets of Buying & Selling a Small Business
  2. 2. Workshop Goal No Secrets by the End of The Workshop laska COMPANY
  3. 3. What Potential Buyers Need To Know laska COMPANY
  4. 4. Over 25,000,000 Approximately 20% Receptive to Selling laska COMPANY
  5. 5. Reasons Owners Want to Sell <ul><li>Retirement </li></ul><ul><li>Burn-Out </li></ul><ul><li>Divorce </li></ul><ul><li>Health </li></ul><ul><li>Cash Out </li></ul><ul><li>Other Business Interests </li></ul><ul><li>Re-Location </li></ul><ul><li>Death of the Owner </li></ul><ul><li>Any number of Simple Reasons </li></ul>laska COMPANY
  6. 6. Business Brokers <ul><li>Do You Need One? </li></ul><ul><li>“ Yes……… But ” </li></ul><ul><li>The But is Related to Understanding the Business Broker’s Role </li></ul>laska COMPANY
  7. 7. Business Broker <ul><li>Business Brokers Almost Always Represents the Seller </li></ul><ul><li>Seller Pays their Commission </li></ul><ul><li>Fiduciary Duty to the Seller </li></ul><ul><li>No Multiple Listing Service in Idaho </li></ul>laska COMPANY
  8. 8. Business Broker <ul><li>Access to Businesses For Sale </li></ul><ul><li>Details about the Business </li></ul><ul><li>Majority of Businesses in Idaho are Sold through Brokers </li></ul>laska C OMPANY
  9. 9. Business Broker <ul><li>Buffer Between Buyer and Seller </li></ul><ul><li>Paperwork is Astounding </li></ul><ul><li>Closing the Deal </li></ul>laska COMPANY
  10. 10. Buyers Need To Know <ul><li>Identify the Type, Size and Location of the Business you Want to Purchase </li></ul><ul><li>Know How Much Money to Put Down </li></ul><ul><li>Know Where the Down Payment/Purchase Money Will Come From </li></ul><ul><li>Professionals Should Be Lined Up </li></ul>laska COMPANY
  11. 11. Buyers Need To Know <ul><li>Making an Offer is not Buying….. Get the Process Started </li></ul><ul><li>Keep the Negotiating & Communications Moving Forward </li></ul><ul><li>Get the Signed Purchase Agreement into Escrow </li></ul>laska COMPANY
  12. 12. What Potential Sellers Need To Know Timing is Everything! laska COMPANY
  13. 13. First and Foremost Step <ul><li>Determining Value </li></ul><ul><li>Basic Factors that Influence Value </li></ul><ul><ul><li>Value of Hard Tangible Assets </li></ul></ul><ul><ul><li>Value of Intangible Assets </li></ul></ul><ul><ul><li>Amount of Re-Cast Cash Flow </li></ul></ul><ul><ul><li>Growth Rate </li></ul></ul><ul><ul><li>How Long in Business </li></ul></ul>laska COMPANY
  14. 14. Multiples laska COMPANY
  15. 15. From the introduction to the Rules of Thumb by Tom Parker <ul><li>“ A Rule of Thumb is a homemade recipe for making a guess. It is an easy-to-remember guide that falls somewhere between a mathematical formula and a shot in the dark…….. Multiples/ Rules of Thumb are a kind of tool” </li></ul>laska COMPANY
  16. 16. Multiples <ul><li>Earnings before, interest, taxes depreciation and </li></ul><ul><li>amortization (EBITDA) </li></ul><ul><li>Earnings before interest and taxes (EBIT) </li></ul><ul><li>Seller’s Discretionary Earnings (SDE) </li></ul><ul><li>% of Annual Sales </li></ul><ul><li>Many Others </li></ul>laska COMPANY
  17. 17. So What is the Definition of Fair Market Value? laska COMPANY
  18. 18. Definition of Fair Market Value <ul><li>“ What any seller is willing to sell their business for and what any buyer is willing to pay”. </li></ul>laska COMPANY
  19. 19. Scenario #1 <ul><li>My business is well established and is profitable </li></ul><ul><li>Option: </li></ul><ul><li>Price the business at the highest possible value based on sound valuation methods that will satisfy all requirements of the final test to a prospective buyer. </li></ul>laska COMPANY
  20. 20. Scenario #2 <ul><li>My business has no earnings, however it does provide me with a salary and a few tax benefits. </li></ul><ul><li>Options: </li></ul><ul><li>Sell the business for the current fair market value of the assets plus a small amount of goodwill. </li></ul><ul><li>The buyer is “buying a job” and will probably not want to pay much goodwill for an equivalent advanced salary. </li></ul><ul><li>Buyer may have a hard time finding financing for this case. </li></ul>laska COMPANY
  21. 21. Scenario #3 <ul><li>My business does not have net income, does not provide me a </li></ul><ul><li>salary and there doesn’t appear to be any value of goodwill, but the doors are still open. </li></ul><ul><li>Options: </li></ul><ul><li>Sell the business as a going concern for the current fair market </li></ul><ul><li>value of the assets…maybe a new owner will have good ideas </li></ul><ul><li>to improve profitability. </li></ul><ul><li>Almost impossible to find financing for this case; seller may </li></ul><ul><li>have to carry a promissory note. </li></ul><ul><li>Close business; liquidate assets by auction, etc. </li></ul>laska COMPANY
  22. 22. Scenario #4 <ul><li>My business is only one year old; can I sell it? </li></ul><ul><li>Same as Scenario #3 </li></ul>laska COMPANY
  23. 23. Deal Breakers <ul><li>Neglecting the Operation of the Business </li></ul><ul><li>Placing too High a Price on Business </li></ul><ul><li>Not Preparing Far Enough in Advance…… No Planning </li></ul><ul><li>Not Anticipating the Buyer’s Request </li></ul><ul><li>Wanting to Retire Immediately After the Business is Sold </li></ul>laska COMPANY
  24. 24. Deal Breakers <ul><li>Being Inflexible in Structuring the Transaction…..Seller Carry </li></ul><ul><li>Negotiating Every Item </li></ul><ul><li>Allocating too Much Time for the Selling Process </li></ul>laska COMPANY
  25. 25. laska Company Joe Cacopardo 877 Main St. Boise,ID. 83702 208.331.1116 [email_address]