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Filta Convention Preparing Your Business For Sale

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Franchisee Presentation from Transworld Business Advisors

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Filta Convention Preparing Your Business For Sale

  1. 1. Preparing your exit
  2. 2. Employment/Industry Transworld Business Advisors, LLC. - Director and Partner International Business Brokers Association Business Brokers of Florida Nestle Waters of America – Market Manager PepsiCo – Distribution Center and Territory Manager Airborne Express – Terminal Manager US Army : Platoon Leader / Company Commander Community Service JMJ Life Center Family Promise of Greater Orlando Coalition for the Homeless Awards/Recognition Deal Transaction Volume 2013 & 2014 BBF Million Dollar Producer 2006 – 2014 BBF Deal Maker in Deal Volume Transworld Presidents Club 2006- 2014 CFl MVP Deal Volume 2006 to 2014 CFL MVP Commission Volume 2006 – 2014 BA Providence College History / Military Science Board Certified Intermediary Florida Licensed Real Estate Sales Agent In 2006 after a career in consumer products sales and distribution, Mike came to Transworld looking for a business to buy rather than continue the never ending cycle of relocation up rooting of his family. He joined the firm as a sales agent believing that access to the systems and data base he would be able to find a business of his own. Nine plus years later and over 200 transactions completed he is consistently one of the leading sales producers in the state and the nation. He has completed transaction ranging from $25,000 to $40,000,000 in sales volume. Mike is also a Partner in Transworld Business Advisors with over 90 offices worldwide.
  3. 3. Increasing the Value of Your Business now and in the future
  4. 4. Valuation Methodology 101 Three Approaches Income Approach Methods Cap Rates Present Value Market Approach Method Revenue & Profit Comparison Asset Approach Method
  5. 5. Quality and Quantity of Earnings Profits/Owner Benefit Levels. (EBITDA vs. Owner Benefits) Growth Potential Trends Owner Financing Bank/SBA Financing Ease of transfer Diversified Client Base
  6. 6. Top 10 Ways to Increase the Value of Your Business Here’s how to rig the system with hot input and information to increase the value!
  7. 7. • It will be the first thing everyone wants to see when buying or valuing your business. With today’s computer technologies and programs you have zero excuse not to have your business records completely automated and accurate to the minute. #1 Keep good books and records
  8. 8. • Up trends are very important. A buyer will value the future earnings based on past results. If the chart is going up, the future earnings must have a growth trend too, and the value will be higher. Would you buy a business that made $150k, then $200K, then $250K in successive years? (YES) Would you buy the reverse business? (NO) Would you buy a business that was flat? (PERHAPS) Would they be equally valued? NO! #2 Grow earnings before you sell.
  9. 9. • I know none of you business owners expense unnecessary items in your businesses. But many legitimate expenses could even be declared by a valuation expert as discretionary. (Did you really have to visit Filta HQ During Bowl Week) Keep a separate credit card, or accounting notation, or a journal. #3 Separate fringe benefits from real expenses.
  10. 10. • Small businesses are valued on one owner operator working the business. If your spouse performs a job that must be replaced, the value will be negatively impacted. Your best bet is to phase the family out and have staff that will stay on after a sale. Also, no buyer wants to work 60 plus hours a week. If you do, you had better get some staff before you try to sell. Chief cook and bottle washer business owners will find it very hard to sell. Transfer the knowledge NOW! #4 Have proper management and staff in place.
  11. 11. • If your business is cramped and the business is limited by the current facility and equipment, you business valuation will reflect that ceiling of revenues and profits. Either sell before you need to invest, or buy the equipment and move the business, and sell in a few years. #5 Have the capacity to grow and make capital expenses.
  12. 12. • (Getting the picture yet?) There are several great accountants and CPA firms in your area. PICK ONE AND USE THEM! #6 Keep good books and records.
  13. 13. • Your business is primarily valued based on the profit to you! And yes, they do use multiples, and the multiple increases as the profit increases, i.e. a business making $100K may be worth 2x’s ($200K), but a business making $500K may be worth 3x’s ($1.5M)….but remember #2, the trend also affects multiples. # 7 Increase the bottom line.
  14. 14. • The value of equipment and businesses will be higher if everything works and looks nice. Also, buyers will want everything in working order at the day of closing…even that old piece of equipment that you do not use anymore. #8 Keep everything in good repair…and if you do not use it THROW IT OUT!
  15. 15. • You got it now right!! FYI. Any bank looking to finance the acquisition of your business will look at least at three years of earnings (this is not owner benefit) to decide how much they can lend. If a buyer cannot get enough money from a bank, you have two choices. Seller financing, or sell for less. Good books and records will allow your business to sell fast, for a high valuation, and be financed with third party financing. ALL GOOD FOR YOU. #10 Keep good books and records.
  16. 16. Increase Owner Benefits/Earnings Keep good books and records Increase sales over a two year period Have management in place Have inventory/assets documented, controlled and managed Make capital improvements or investments now (not too much) Have excess capacity to grow Plan to exit Hire a professional (Broker* as well as accountant)
  17. 17. Comparable business marketplace Specifics
  18. 18. Actual Sold Stats - Florida Sales Sold Price Adj Net / SDE Sold Price/ Sales Adj Net / Sales Sold Price/ Adj Net Rent to Sales Ratio Sold Price to Sold Down Stock / Inv Days on Market 144078 65000 56069 .451 .389 1.16 NA 1 NA 269 102800 115000 89950 .119 .876 1.27 NA .791 NA 134 280626 125000 73066 .445 .260 1.711 NA .76 NA 609 500000 125000 115000 .25 .23 1.087 .0018 1 NA 182 346291 280000 126282 .809 .365 2.217 .035 .286 NA 52 789689 1645022 425102 2.083 .538 3.87 .086 .0856 NA 252 Filta avg high of 2.12 to a low of .61 at the Sold Price to Sales Ratio
  19. 19. Big marketing budgets produce large corporate clients increasing sales Process, support and buying power not available to competitors Your Franchise adds value. Could push up multiple. Franchise recognition Availability of Franchise financing Safety addresses the Subliminal Fear Factor Added Value for Franchises
  20. 20. Questions? Thank you

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