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Stats for business salse stats in florida

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Stats for business salse stats in florida

  1. 1. Business Brokers of Florida Central Chapter Quarterly Training Maximizing the Broker’s ROI July 20, 2011
  2. 2. Agenda 11:30 -  12:00 Our Current Market Statistics & What they mean? 12:00 – 12:30 Panel of Experts Critique their Own Success Stories and Failures. 12:30 – 1:00 Lunch 1:00 – 2:00 Panel of Experts Continues followed by critique of 5 random listings (chosen by Lee Ossin)
  3. 3. Participants Special thanks to Our Panel of Experts:  Bob Adams  Brian Bateson  Michael Mensch (filling in for John Hoyt)  George Rosen  Mike Shea Statistics supplied by Lou Vescio (unable to attend this meeting) and Michael Mensch.
  4. 4. The 4 Letter Word - RISK  Risk = Probability for a Loss  What is the risk in buying/selling a business?  For the Seller?  For the Buyer?  For the Broker?
  5. 5. The 4 Letter Word - RISK  What is the risk in marketing a business for sale?  For the Seller?  For the Buyer?  For the Broker?  Little risk on Seller & Buyer until the closing.
  6. 6. Broker Buyer Seller Prior to Listing X Packaging the Listing X Advertising the Listing X Working with Buyers X X Buyer-Seller Meetings X X X Offers Made X X X Contracts Signed X X X Due Dilgence Phase X X X Financing Phase X X X Pre-closing Phase X X X Closing X X X Time Investment The 4 Letter Word - RISK
  7. 7. The 4 Letter Word - RISK Low Avg High Prior to Listing 5 10 40 Packaging the Listing 3 10 50 Advertising the Listing 2 5 20 Working with Buyers 10 20 100 Buyer-Seller Meetings 10 20 40 Offers Made 2 10 50 Contracts Signed 4 10 50 Due Dilgence Phase 10 40 100 Financing Phase 0 10 30 Pre-closing Phase 5 10 40 Closing 1 2 4 Total Hours 52 147 524 Hours up to Offer 30 65 250 Broker’s Time Investment
  8. 8. The 4 Letter Word - RISK  Doesn’t include time for:  Marketing  Networking  Attending office meetings  Continuing education  Creating BBF chapter meeting slides
  9. 9. The 4 Letter Word - RISK  The Broker, by far, has the most at risk in marketing a business for sale.  Yet with all the time that we invest, there are no guarantees:  May not find interested buyers  Seller may step out of the business  Business may suffer a set back  Deal may fall apart
  10. 10. The 4 Letter Word - RISK  How can we mitigate our risk?  Weeding out lower probability sales  Businesses that are likely unsellable  Setting realistic asking price & terms  Setting price in-line with market demand  Prepping for realistic sale terms  Understanding common issues  With specific types of businesses
  11. 11. The 4 Letter Word - RISK  Purpose herein is to better understand Low Probability Sales by:  Reviewing sold & current listing statistics  Hearing insight from some experienced brokers  Analyzing issues with some sample listings
  12. 12. Real World BBF Statistics  In the prior 365 days, BBF brokers sold 841 businesses.  BBF has 881 member brokers  average of 0.95 businesses per broker  Average sale price was $241K  Average BBF broker earned about $12K in the past year. *Assumes 10% commission and the listing/seller associate earns 50% of total or independent licensed broker would have about 50% in overhead costs.
  13. 13. Real World BBF Statistics  Of the 841 businesses sold  46% sold for less than $100K  27% sold in the $100K to $200K range  11% sold in the $200K to $300K range  4% sold in the $300K to $400K range  3% sold in the $400K to $500K range  9% sold at $500K or more 84% Most Businesses sold by BBF Members are Lower End Main Street Businesses
  14. 14. Real World BBF Statistics BBF Listings Sold in the Past 365 Days as of July 6, 2011 841 # of busineses sold 118 had Zero Sales Listed 14% 124 had Zero Adj Net or Negative Adj Net 15% 280 Had Adj Net below $50K 33% 156 Had Adj Net between 50-75K 19% 142 Had Adj Net between 75-100K 17% 89 Had Adj Net between 100-125K 11% 43 Had Adj Net between 125-150K 5% 23 Had Adj Net between 150-175K 3% 27 Had Adj Net between 175-200K 3% 42 Had Adj Net between $200 -300K 5% 13 Had Adj Net between $300 -400K 2% 13 Had Adj Net between $400 -500K 2% 22 Had Adj Net over $500K 3% 80% had Adj Net < $125k
  15. 15. Real World BBF Statistics  Of the 841 businesses sold:  46% (390) were a “sale of assets” and not sold based on cash flows  45% (383) were sold with a cash flow of $50K or more.  84% sold for less than $300k  80% had an adjusted net < $125k *“Sale of Assets” = current & fixed assets valued at 80% or more of sold price and/or the adj net was less than $25,000.
  16. 16. Sold Multiples to Consider Brokers that sold businesses in the past year, priced them high but not high enough to deter a Buyer. Listed Sold Listed Sold Adj Net Mult Adj Net Mult % Sales Rev % of Sales Rev 50000 - 75000 1.84 1.47 56% 44% 75000 - 100000 2.12 1.75 69% 57% 100000 - 125000 1.94 1.61 51% 43% 125000 - 150000 2.22 1.88 70% 59% 150000 - 175000 2.79 2.24 103% 81% 175000 - 200000 2.49 2.17 90% 80% 200000 - 300000 2.45 2.06 61% 52% 300000 - 400000 4.04 3.51 97% 82% 400000 - 500000 2.21 1.90 69% 60% 500000 plus 3.23 2.86 72% 65% Average 2.57 2.12 66.57% 54.92% Adj Net 21.2% 21.2%
  17. 17. Current BBF Listed data BBF Listed Data as of July 6, 2011 3276 number of current listings 40 Had Negative Adj Net 1% 446 Had Adj Net of 0 14% 682 Had adj net 0-50K 21% 550 Had adj net 50-75K 17% 401 Had adj net 75-100K 12% 296 Had adj net 100-125K 9% 182 Had adj net 125-150K 6% 126 Had adj net 150-175K 4% 89 Had adj net 175-200K 3% 237 Had adj net 200-300K 7% 110 Had adj net 300-400K 3% 44 Had adj net 400-500K 1% 73 Had adj net over 500K 2% 74% have Adj Net < $125k
  18. 18. Current Listed Multiples compared to Sold Data Current Current Listed Sold Listed Sold Adj Net Mult Adj Net Mult % of Sales Rev % of Sales Rev 50000 - 75000 3.03 1.47 87% 44% 75000 - 100000 2.58 1.75 72% 57% 100000 - 125000 2.89 1.61 79% 43% 125000 - 150000 2.75 1.88 82% 59% 150000 - 175000 2.91 2.24 74% 81% 175000 - 200000 2.85 2.17 75% 80% 200000 - 300000 3.43 2.06 90% 52% 300000 - 400000 4.62 3.51 117% 82% 400000 - 500000 4.35 1.90 101% 60% 500000 plus 4.05 2.86 123% 65% Average 3.35 2.12 90.07% 54.92% Adj Net Current listings are priced so high that most will never attract a serious Prospect, let alone a yield Buyer. 58.0% 64.0%
  19. 19. Current Listings  Are priced 50 to 100% too high.  At least 36% will qualify as a sale of assets. (adj net < $50k.)  Based on our current trend, only about 12.8% will result in a closing.  That suggests that BBF brokers have wasted at least 296,000 to 840,000 hours of effort in the past year trying to sell bad listings.
  20. 20. Supporting Data  This data is not new!  In 2008, JohnsonServices.com completed a detailed study for the IBBA  White Paper entitled “Will Your Listing Sell” – paper by Douglas Perreault (April 2008)  Copies available on request email: LouisVescio@bellsouth.net
  21. 21. JohnsonServices.com Data  JohnsonServices.com reviewed  Listed Data  Sold Data from all of the databases they manage – includes BBF MLS data  Every effort was made to exclude any duplicate data  Start-up listings were also excluded  The data was combined and just the overall results are provided
  22. 22. Percent of Listed to Sold  Of the 96,935 listings in the databases, about 16,000 were still listed, leaving 80,927 businesses to evaluate.  Of this number, 8468 businesses were sold. Sold 10.5% Not Sold 89.5% Current Status Listed Percent Sold 8,468 10.5% Not Sold 72,459 89.5% Totals 80,927 100.0%
  23. 23. Sold Based on Source of Financial Data Sale of Assets (sale of fixed assets only) Non Operating Projected, Owner to Prove, Annualized & Owner’s Estimate P&L’s, Tax Returns, Part Yr 2794 Unsold 330 Sold 10.56% Sold 17,751 Unsold 3,877 Sold 17.93% Sold 14,244 Unsold 2,416 Sold 15.50% Sold 3078 Unsold 29 Sold 0.93% Sold 56% of Listings, 62% of Sold
  24. 24. What the Data Suggests  Brokers can reduce their risk by:  Pricing businesses properly. (Those that sold were listed at a price within ~20% of the sale price).  Listing businesses with positive cash flow (probability increases by 1.5 to 19 x).  Listing businesses with provable financial data.  Listing businesses with financing (PeerComps)  Now lets see what the experts say…
  25. 25. Panel of Experts  Will each discuss:  A good listing that they sold  A bad listing that they could not sell  Someone else’s listing (chosen at random)  Audience: Feel free to ask questions or add insight.
  26. 26. Mensch – Sellable Listing
  27. 27. Mensch – Sellable Listing
  28. 28. Answer Good OK Not so Good Bad Years Established 20 X Years Owned 20 X Financial Records Tax Return X Meets Financial Model for Industry Cost of Goods Sold 50% X Labor Costs 10% X Profitability 26% X Rent as % of Sales 3.5% X Profits over recent history Sales Increasing, Decreasing, Steady Increasing X Pricing DE multiple to comparable sold businesses 2.07 x DE 2.2 w/o inv. 2.45 w/ inv. % Sales to comparable sold businesses 46% 57% to 64% ROI to comparable sold businesses 36% 34 to 38% Financing Offered Bank or Third Party Yes X Seller Yes X Other Comments 1 Health foods & supplements X 2 Revenue steady through year X 3 Minimal add backs and all provable X 4 Seller worked 45 hrs/wk with one wk off/month X 5 Seller was part of the business brand X Mensch – Sellable Listing
  29. 29. Mensch – Unsellable Listing
  30. 30. Mensch – Unsellable Listing
  31. 31. Answer Good OK Not so Good Bad Years Established 44 X Years Owned 17 X Financial Records Tax Return X Meets Financial Model for Industry Cost of Goods Sold 69% X Labor Costs 7.5% X Profitability 11.5% X Rent as % of Sales 6% X Profits over recent history Sales Increasing, Decreasing, Steady Same X Pricing DE multiple to comparable sold businesses 1.64 X DE 2.02 w/o inv. 3.25 w/ inv. % Sales to comparable sold businesses 35% 23% to 37% ROI to comparable sold businesses 44% 43% w/o inv. 27% w/ inv. Financing Offered Bank or Third Party Yes X Seller Yes X Other Comments 1 Niched electronics store X 2 Business was very well known in area X 3 Revenue seasonal X 4 Seller only worked 20 hrs/wk and traveled X 5 Add backs were a little heavy X Mensch – Unsellable Listing
  32. 32. Stable cash flow! Mensch –Sellable Listing
  33. 33. Many months breaking even or in the red! Mensch – Unsellable Listing
  34. 34. Listings 1 thru 5 Random Listing Critique 1
  35. 35. Random Listing Critique 1
  36. 36. Answer Good OK Not so Good Bad Years Established 10 X Years Owned 10 X Financial Records P&L X Meets Financial Model for Industry Cost of Goods Sold 42% X Labor Costs ? Owner works 80 hrs/wk Profitability 19% X 15% if 1 employee is added Rent as % of Sales 7% X Profits over recent history Yes X Sales Increasing, Decreasing, Steady Increase X Pricing DE multiple to comparable sold businesses 1.9 x DE 2.6 w/o inv. 3.19 w/ inv. % Sales to comparable sold businesses 39% 33% 62% ROI to comparable sold businesses 42% 19% Financing Offered Bank or Third Party Yes X Only 40% financing Seller No X Other Comments 1 Owner works 80 hrs/wk - error in adj net X 2 Only two employees X 3 Spike in sales in 2010 & $20k depreciation X 4 5 Random Listing Critique 1
  37. 37. Rosen – Sellable Listing
  38. 38. Rosen – Sellable Listing
  39. 39. Rosen – Sellable Listing Answer Good OK Not so Good Bad Years Established 18 X Years Owned 10 X Financial Records P&L X Meets Financial Model for Industry Cost of Goods Sold 22% X Labor Costs ? Profitability 17% X Rent as % of Sales 11% X Profits over recent history Yes X Sales Increasing, Decreasing, Steady Static X Pricing DE multiple to comparable sold businesses 1.59 x DE 2.79 % Sales to comparable sold businesses 45% 48% ROI to comparable sold businesses 38% 26% Financing Offered Bank or Third Party No X Seller No X Other Comments 1 Lease - Up for Renewal Market Rate X 2 Management team X 3 Recasting minimal add backs X 4 National Franchise X 5 High Profile Location X
  40. 40. Rosen – Unsellable Listing
  41. 41. Rosen – Unsellable Listing
  42. 42. Answer Good OK Not so Good Bad Years Established 18 X Years Owned 10 X Financial Records P&L X Meets Financial Model for Industry Cost of Goods Sold 42% X Labor Costs ? Profitability 9% X Rent as % of Sales 13% X Profits over recent history Sales Increasing, Decreasing, Steady DOWN X Pricing DE multiple to comparable sold businesses 1.69 x DE 7.7 % Sales to comparable sold businesses 39% 77% ROI to comparable sold businesses N/A X Financing Offered Bank or Third Party No X Seller No X Other Comments 1 1 Partner wants out, Silent Partner Ambivalent X 2 Liquor License worth $130,000 X 3 Financial Add-Backs are myriad X 4 Owner Works Short Hours (20 / week) X Rosen – Unsellable Listing
  43. 43. Random Listing Critique 2
  44. 44. Random Listing Critique 2
  45. 45. Random Listing Critique 2 Answer Good OK Not so Good Bad Years Established 14 X Years Owned 14 X Financial Records Projection X Meets Financial Model for Industry Cost of Goods Sold 61% X Labor Costs ? Profitability 11% X Rent as % of Sales 5% X Profits over recent history Sales Increasing, Decreasing, Steady Decreasing X Pricing DE multiple to comparable sold businesses 2.0 x DE 12.5 % Sales to comparable sold businesses 60% 33% 138% ROI to comparable sold businesses 34% 4.50% Financing Offered Bank or Third Party Yes X Seller Yes X Other Comments 1 Selling based on projected growth X 2 Total debt service > 2010 adj net X 3 $650k in inventory > 2010 CGS X 4 5
  46. 46. Shea – Sellable Listing
  47. 47. Shea – Sellable Listing
  48. 48.  Discussion  Good points  Bad points Shea – Sellable Listing
  49. 49. Shea – Unsellable Listing
  50. 50. Shea – Unsellable Listing
  51. 51.  Discussion  Good points  Bad points Shea – Unsellable Listing
  52. 52. Random Listing Critique 3
  53. 53. Random Listing Critique 3
  54. 54. Answer Good OK Not so Good Bad Years Established 6 X Years Owned 5 X Financial Records Projection X Meets Financial Model for Industry Cost of Goods Sold 89% X Labor Costs ? No expense listed for any year! Profitability 11% X Rent as % of Sales ? Profits over recent history Sales Increasing, Decreasing, Steady Increasing X Pricing DE multiple to comparable sold businesses 2.08 x DE 6.7 % Sales to comparable sold businesses 34% 74% ROI to comparable sold businesses 41% 11.90% Financing Offered Bank or Third Party No X Seller No X Other Comments 1 Projecting doubling two years in a row? X 2 No expenses listed X 3 No financing X 4 Low profit margin X 5 Random Listing Critique 3
  55. 55. Adams – Sellable Listing
  56. 56. Adams – Sellable Listing
  57. 57. Answer Good OK Not so Good Bad Years Established 19 X Years Owned 19 X Financial Records Tax Return X Meets Financial Model for Industry Cost of Goods Sold 28% X Labor Costs ? Profitability 13% X Rent as % of Sales 9% X Profits over recent history Yes X Sales Increasing, Decreasing, Steady X Pricing DE multiple to comparable sold businesses 1.9 x DE 2.59 % Sales to comparable sold businesses 40% 33% ROI to comparable sold businesses 38% 27% Financing Offered Bank or Third Party No X Seller No X Other Comments 1 Lease - 3 five year options X 2 Manaagement team X 3 Recasting minimal add backs X 4 5 Good Listing Checklist Bob Adams Good Listing Adams – Sellable Listing
  58. 58. Adams – Unsellable Listing
  59. 59. Adams – Unsellable Listing
  60. 60. Answer Good OK Not so Good Bad Years Established 24 X Years Owned 7 X Financial Records O to P X Meets Financial Model for Industry Cost of Goods Sold 37% X Labor Costs ? Profitability 47% X Rent as % of Sales 2% X Profits over recent history ? Sales Increasing, Decreasing, Steady ? Pricing DE multiple to comparable sold businesses 1.5 x DE 2.1 % Sales to comparable sold businesses 40% 33% ROI to comparable sold businesses 38% 23% Financing Offered Bank or Third Party No X Seller No X Other Comments 1 Lease - 3 years remaining X 2 Minimal hours opened X 3 Owner to prove financials suspect X 4 Buying a $50K job for $125K X 5 Has 1 PT employee X Good Listing Checklist Bob Adams Not So Good ListingAdams – Unsellable Listing
  61. 61. Random Listing Critique 4
  62. 62. Random Listing Critique 4
  63. 63. Answer Good OK Not so Good Bad Years Established 18 X Years Owned 18 X Financial Records Tax Return X Meets Financial Model for Industry Cost of Goods Sold 39% X Labor Costs 31% X Profitability 10% X 12-15% desired Rent as % of Sales 2% X Profits over recent history Sales Increasing, Decreasing, Steady Yes X Pricing DE multiple to comparable sold businesses 2.48 x DE 2.96 For Bus only % Sales to comparable sold businesses 37-39% 38.6% Real Estate excluded ROI to comparable sold businesses 28-33% 25% Financing Offered Bank or Third Party Yes X Seller No X Other Comments 1 Lease - 3 five year options X Real Estate sold with Biz 2 Management team X 3 Recasting minimal add backs Recasting error in rent X 4 Very nice Conf Bus Review X Very nice work 5 Random Listing Critique 4
  64. 64. Bateson – Sellable Listing
  65. 65. Bateson – Sellable Listing
  66. 66.  Discussion  Good points  Bad points Bateson –Sellable Listing
  67. 67. Bateson – Unsellable Listing
  68. 68. Bateson – Unsellable Listing
  69. 69.  Discussion  Good points  Bad points Bateson – Unsellable Listing
  70. 70. Random Listing Critique 5
  71. 71. Random Listing Critique 5
  72. 72. Answer Good OK Not so Good Bad Years Established ? Years Owned 9 Financial Records Tax Return X Meets Financial Model for Industry Cost of Goods Sold 67% X Labor Costs ? Profitability 7% X Rent as % of Sales 2% X Profits over recent history Sales Increasing, Decreasing, Steady ? Gross sales decreased but Gross Profit fluctuating Pricing DE multiple to comparable sold businesses 1.77 x DE 5.7 % Sales to comparable sold businesses 34% 41% ROI to comparable sold businesses 41% 12.70% Financing Offered Bank or Third Party No X Seller No X Other Comments 1 A/R, Inventory & F,F &E not included? X 2 Slim margins X 3 No financing X 4 5 Random Listing Critique 5
  73. 73. Summary  The Broker carries most of the risk in marketing a business for sale.  Steps should be taken to minimize your risk and maximize your time & money:  Screening for sellable listings  Pricing & packaging them right  Following your gut
  74. 74. Thank you!

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