Brian S. Mazar President/CEO

Topic Value Drivers in Business Sale Introduction Transition Plan Buyer’s View Valuations Finance Organization Operations Marketing Administration Closing

Value Drivers in

Business Sale

Value As Seen By The Market Positioning in the market place Strategic buyers Industry buyers Financial buyers Business continuity Balance short term and long term business needs Employee development and mentoring Introduction Transition Plan Buyer’s View Valuations Finance Organization Operations Marketing Administration Closing

Positioning in the market place

Strategic buyers

Industry buyers

Financial buyers

Business continuity

Balance short term and long term business needs

Employee development and mentoring

Transition Plan Results Higher price Manage the factors that affect the valuation Quality financial reports inspire buyer confidence Attract a larger pool of buyers More favorable terms to seller Reduction of tax liabilities Increased satisfaction for Business buyer (new owner) Customers Employees Suppliers Introduction Transition Plan Valuations Finance Organization Operations Marketing Administration Closing

Higher price

Manage the factors that affect the valuation

Quality financial reports inspire buyer confidence

Attract a larger pool of buyers

More favorable terms to seller

Reduction of tax liabilities

Increased satisfaction for

Business buyer (new owner)

Customers

Employees

Suppliers

Good Planning Eases Adversity Owner illness Divorce Death Disability Litigation Introduction Transition Plan Buyer’s View Valuations Finance Organization Operations Marketing Administration Closing

Owner illness

Divorce

Death

Disability

Litigation

Business Viability Concerns Performance relative to benchmarks Revenues and revenue trends Income and income trends Expansion potential Competitive advantages Company background Core competencies Company culture Owner dependence Is the owner the business? Introduction Transition Plan Buyer’s View Valuations Finance Organization Operations Marketing Administration Closing

Performance relative to benchmarks

Revenues and revenue trends

Income and income trends

Expansion potential

Competitive advantages

Company background

Core competencies

Company culture

Owner dependence

Is the owner the business?

Financial Concerns Price justification 3 rd party valuation Return on Investment to buyer Payback periods in years Introduction Transition Plan Buyer’s View Valuations Finance Organization Operations Marketing Administration Closing

Price justification

3 rd party valuation

Return on Investment to buyer

Payback periods in years

Business Valuation Financial statements are key EBITDA multiples Discretionary income multiples Cash and non-cash add backs Value derived from market data Introduction Transition Plan Buyer’s View Valuations Finance Organization Operations Marketing Administration Closing

Financial statements are key

EBITDA multiples

Discretionary income multiples

Cash and non-cash add backs

Value derived from market data

Business Valuation Valuation checks Return on Investment to buyer Payback periods in years Introduction Transition Plan Buyer’s View Valuations Finance Organization Operations Marketing Administration Closing

Valuation checks

Return on Investment to buyer

Payback periods in years

Financial Issues Report all revenues and income Accurate, complete, verifiable Audited financials are preferred Have good cost accounting system Change from bottom line minimization to profit maximization Mindset of a public as opposed to a private business Have a recent business valuation Tax planning to reduce taxes from sale of business Introduction Transition Plan Buyer’s View Valuations Finance Organization Operations Marketing Administration Closing

Report all revenues and income

Accurate, complete, verifiable

Audited financials are preferred

Have good cost accounting system

Change from bottom line minimization to profit maximization

Mindset of a public as opposed to a private business

Have a recent business valuation

Tax planning to reduce taxes from sale of business

Owners Role Delegate more effectively Reduce reliance on business owner Formal employee training Succession/Exit Strategy Employees related to owner Identify and groom a successor Mentoring of key personnel Succession takes time and effort Complex mix of potentially conflicting issues Introduction Transition Plan Buyer’s View Valuations Finance Organization Operations Marketing Administration Closing

Delegate more effectively

Reduce reliance on business owner

Formal employee training

Succession/Exit Strategy

Employees related to owner

Identify and groom a successor

Mentoring of key personnel

Succession takes time and effort

Complex mix of potentially conflicting issues

Partners and Employees Execute agreements with partners Buy/sell and buyout agreements Employee dependency Employee tenure/turnover Employee contracts 401(k) plans to keep employees Culture Human resource documentation Employee handbooks Job descriptions Personnel files Introduction Transition Plan Buyer’s View Valuations Finance Organization Operations Marketing Administration Closing

Execute agreements with partners

Buy/sell and buyout agreements

Employee dependency

Employee tenure/turnover

Employee contracts

401(k) plans to keep employees

Culture

Human resource documentation

Employee handbooks

Job descriptions

Personnel files

Operational Processes Policies and procedures Processes Core activities Systems (consistency of quality, customer service) Equipment maintenance Procedures Technology and automation IT current Equipment up to date Streamline processes Evaluate each product or service to verify contribution to bottom line Outsource non-core activities Analyze and outsource activities that can be obtained cheaper on the outside Inventory control Inventory turnover relative to industry standards Review methods (FIFO, LIFO, etc.) Introduction Transition Plan Buyer’s View Valuations Finance Organization Operations Marketing Administration Closing

Policies and procedures

Processes

Core activities

Systems (consistency of quality, customer service)

Equipment maintenance

Procedures

Technology and automation

IT current

Equipment up to date

Streamline processes

Evaluate each product or service to verify contribution to bottom line

Outsource non-core activities

Analyze and outsource activities that can be obtained cheaper on the outside

Inventory control

Inventory turnover relative to industry standards

Review methods (FIFO, LIFO, etc.)

Suppliers Supplier relations Supplier/approval selection process Long-term contract benefits Owner dependent relationships Cost of raw materials Review frequently Renegotiate if necessary Introduction Transition Plan Buyer’s View Valuations Finance Organization Operations Marketing Administration Closing

Supplier relations

Supplier/approval selection process

Long-term contract benefits

Owner dependent relationships

Cost of raw materials

Review frequently

Renegotiate if necessary

Customers Customer retention Friends or relatives of owner Customer service and support Customer loyalty Limited number of customers 80% of revenue concentrated around a small group of customers 20% of business concentrated with one customer Reevaluate Marketing/Sales Direct Reps Agents Internet – new opportunities Introduction Transition Plan Buyer’s View Valuations Finance Organization Operations Marketing Administration Closing

Customer retention

Friends or relatives of owner

Customer service and support

Customer loyalty

Limited number of customers

80% of revenue concentrated around a small group of customers

20% of business concentrated with one customer

Reevaluate Marketing/Sales

Direct

Reps

Agents

Internet – new opportunities

Marketing and Advertising Marketing strategy/plan Advertising Trade shows Internet Brand awareness Clear and consistent message Differentiation Introduction Transition Plan Buyer’s View Valuations Finance Organization Operations Marketing Administration Closing

Marketing strategy/plan

Advertising

Trade shows

Internet

Brand awareness

Clear and consistent message

Differentiation

Competition Know your competition Use industry groups Ask your customers Know what they do differently Articulate your advantages and disadvantages Pricing strategy Learn from competitors Benchmark Borrow good ideas Introduction Transition Plan Buyer’s View Valuations Finance Organization Operations Marketing Administration Closing

Know your competition

Use industry groups

Ask your customers

Know what they do differently

Articulate your advantages and disadvantages

Pricing strategy

Learn from competitors

Benchmark

Borrow good ideas

Legal Issues Intellectual property is it secure Patent, copyright, and trademark applications Litigation issues Settle all litigation Resolve all product liability cases Resolve all insurance claims Form of incorporation pros & cons C-Corp S-Corp LLC Proprietorship Partnership Introduction Transition Plan Buyer’s View Valuations Finance Organization Operations Marketing Administration Closing

Intellectual property is it secure

Patent, copyright, and trademark applications

Litigation issues

Settle all litigation

Resolve all product liability cases

Resolve all insurance claims

Form of incorporation pros & cons

C-Corp

S-Corp

LLC

Proprietorship

Partnership

Regulatory Issues Regulatory status Clear environmental compliance Have environmental review by reputable firm Review all permits and licenses OSHA issues Pending zoning issues Introduction Transition Plan Buyer’s View Valuations Finance Organization Operations Marketing Administration Closing

Regulatory status

Clear environmental compliance

Have environmental review by reputable firm

Review all permits and licenses

OSHA issues

Pending zoning issues

Questions Introduction Transition Plan Buyer’s View Valuations Finance Organization Operations Marketing Administration Closing