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