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Buying Bus.Presentation

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  • 1. Joe Cacopardo laska COMPANY www.laskacompany.com The Secrets of Buying & Selling a Small Business
  • 2. Workshop Goal No Secrets by the End of The Workshop laska COMPANY
  • 3. What Potential Buyers Need To Know laska COMPANY
  • 4. Over 25,000,000 Approximately 20% Receptive to Selling laska COMPANY
  • 5. Reasons Owners Want to Sell
    • Retirement
    • Burn-Out
    • Divorce
    • Health
    • Cash Out
    • Other Business Interests
    • Re-Location
    • Death of the Owner
    • Any number of Simple Reasons
    laska COMPANY
  • 6. Business Brokers
    • Do You Need One?
    • “ Yes……… But ”
    • The But is Related to Understanding the Business Broker’s Role
    laska COMPANY
  • 7. Business Broker
    • Business Brokers Almost Always Represents the Seller
    • Seller Pays their Commission
    • Fiduciary Duty to the Seller
    • No Multiple Listing Service in Idaho
    laska COMPANY
  • 8. Business Broker
    • Access to Businesses For Sale
    • Details about the Business
    • Majority of Businesses in Idaho are Sold through Brokers
    laska C OMPANY
  • 9. Business Broker
    • Buffer Between Buyer and Seller
    • Paperwork is Astounding
    • Closing the Deal
    laska COMPANY
  • 10. 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
    laska COMPANY
  • 11. 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
    laska COMPANY
  • 12. What Potential Sellers Need To Know Timing is Everything! laska COMPANY
  • 13. First and Foremost Step
    • Determining Value
    • Basic Factors that Influence Value
      • Value of Hard Tangible Assets
      • Value of Intangible Assets
      • Amount of Re-Cast Cash Flow
      • Growth Rate
      • How Long in Business
    laska COMPANY
  • 14. Multiples laska COMPANY
  • 15. 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”
    laska COMPANY
  • 16. Multiples
    • Earnings before, interest, taxes depreciation and
    • amortization (EBITDA)
    • Earnings before interest and taxes (EBIT)
    • Seller’s Discretionary Earnings (SDE)
    • % of Annual Sales
    • Many Others
    laska COMPANY
  • 17. So What is the Definition of Fair Market Value? laska COMPANY
  • 18. Definition of Fair Market Value
    • “ What any seller is willing to sell their business for and what any buyer is willing to pay”.
    laska COMPANY
  • 19. Scenario #1
    • My business is well established and is profitable
    • Option:
    • 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.
    laska COMPANY
  • 20. Scenario #2
    • My business has no earnings, however it does provide me with a salary and a few tax benefits.
    • Options:
    • 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.
    laska COMPANY
  • 21. Scenario #3
    • 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.
    • Options:
    • 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.
    laska COMPANY
  • 22. Scenario #4
    • My business is only one year old; can I sell it?
    • Same as Scenario #3
    laska COMPANY
  • 23. Deal Breakers
    • 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
    laska COMPANY
  • 24. Deal Breakers
    • Being Inflexible in Structuring the Transaction…..Seller Carry
    • Negotiating Every Item
    • Allocating too Much Time for the Selling Process
    laska COMPANY
  • 25. laska Company Joe Cacopardo 877 Main St. Boise,ID. 83702 208.331.1116 [email_address]