A synopsis of business sales statistics in Florida for the FY 2013.

1. HOW TO CLOSE MORE DEALS AND
EARN MORE MONEY IN 2014
BBF CENTRAL CHAPTER TRAINING
JANUARY 15, 2014
BY LOU VESCIO, CBI, M&AMI

2. 2012
BBF SOLD DATA
Average
Median
Sold Price
$235,114
$130,000
Discretionary Earnings
$105,305
$75,000
Discretionary Earnings
Multiple
2.022
1.431
Price/Sales
49.4%
(2.53)
900 BBF Members sold 867 Businesses
Average Days on Market was 242
Currently have 2963 Listings
(73.4%)
36.7%
(2.26)
(59.5%)

3. 2013
BBF SOLD DATA
Average
Median
Sold Price
$240,948
$125,000
Discretionary Earnings
$113,472
$75,743
Discretionary Earnings
Multiple
1.827 (2.534)
1.644 (1.930)
Price/Sales
53.3%
40.6%
938 BBF Members sold 899 Businesses
Average Days on Market was 226
Currently have 3007 Listings
(62.6%)
(49.4%)

4. CURRENT LISTINGS
At the end of 2012
• 2963 Listings
106 sold in 2013 of which
56 - Restaurants or Bars
• 374 had a DE <= $0.00
• 2589 had DE > $0.00
• 1989 have a DE >= $50,000
• 1107 have a DE >= $100,000
At the end of 2013
• 3007 Listings
• 368 had a DE <= $0.00
• 2639 had DE > $0.00
• 2021 have a DE >= $50,000
• 1172 have a DE >= $100,000

5. SALES BY PRICE
Sold Price Range
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
0
25,000
50,000
75,000
100,000
125,000
150,000
175,000
200,000
225,000
250,000
275,000
300,000
325,000
350,000
375,000
400,000
425,000
450,000
475,000
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
25,000
50,000
75,000
100,000
125,000
150,000
175,000
200,000
225,000
250,000
275,000
300,000
325,000
350,000
375,000
400,000
425,000
450,000
475,000
500,000
No. Sold
41
124
120
100
76
72
34
54
16
36
22
25
9
16
15
7
10
14
5
11
% of Total Cumulative %
4.6%
13.8%
13.3%
11.1%
8.5%
8.0%
3.8%
6.0%
1.8%
4.0%
2.4%
2.8%
1.0%
1.8%
1.7%
0.8%
1.1%
1.6%
0.6%
1.2%
5%
18%
32%
43%
51%
59%
63%
69%
71%
75%
77%
80%
81%
83%
85%
85%
86%
88%
89%
90%
43% of all deals sold
for $100K or less
26% of all deals sold
between $100K-200K
90% of all deals sold
for $500K or less

6. 2013 DONE DEALS BY DE
More of a “Sale of Assets”
vs
Sale Based on Cash Flows
“Sale of Assets” means the “Assets
Sold” are valued at 75% or more of
the Purchase Price

7. SOLD VS
CURRENT LISTINGS
DE Range
Listed
Sold
Avg Sold Price Non Sold DE Multiple % Sales DE Multiple % Sales
Current Listings
No. DE Multiple % Sales
$75K - 100K
$100K - 125K
$125K - 150K
$150K - 175K
$175K - 200K
$200K - 225K
$225K - 250K
$250K - 275K
$275K - 300K
$300K - 325K
$325K - 350K
$350K - 375K
$375K - 400K
$
$
$
$
$
$
$
$
$
$
$
$
$
116
57
61
42
28
29
20
12
8
6
5
6
1
149,636
209,598
227,698
306,679
315,442
432,717
430,556
593,899
576,250
644,666
689,111
958,867
670,286
130
79
61
34
32
23
9
16
12
9
9
6
7
2.10
2.26
1.85
2.17
2.08
2.23
2.07
2.61
2.49
2.31
2.43
3.06
2.03
58%
75%
60%
63%
55%
56%
51%
71%
56%
58%
77%
54%
49%
1.75
1.87
1.65
1.86
1.67
2.02
1.84
2.26
2.01
2.09
2.02
2.63
1.74
50%
63%
54%
54%
44%
51%
45%
63%
45%
47%
63%
47%
41%
3.07
v
3.49
2.90
3.96
3.31
2.96
2.85
2.24
2.72
5.80
5.31
2.01
3.44
91%
93%
103%
129%
84%
92%
67%
58%
92%
151%
142%
42%
37%

8. 2013
BBF SOLD DATA
53.2% of all sales in 2013 were generated
from these industries:
Lawn Biz
Restaurant
4.0%
23.5%
Liquor Related/Bar
5.2%
Real Estate - Prop Mgmnt
5.6%
Coin Laundry & Dry Clean
4.6%
Beauty/Barber Shop
5.5%
Business Services
4.8%

9. LAWN BIZ DETAILS
36 Lawn Businesses were sold in 2013
Avg Price
$147238
Median Price
$60500
Avg Listed Mult DE
1.54
Avg Sold Mult DE
1.28
Avg Listed Price/Sales
72%
Avg Sold Price/Sales
60%
82 Lawn Businesses Currently Listed
Avg Listed Mult DE
2.55
Avg Listed Price/Sales
104%
83%

10. RESTAURANT
DETAILS
211 Restaurants were sold in 2013
Avg Price
Median Price
Avg Listed Mult DE
Avg Sold Mult DE
Avg Listed Price/Sales
Avg Sold Price/Sales
628 Restaurants Currently Listed
Avg Listed Mult DE
Avg Listed Price/Sales
$156,904
$97,500
2.03
1.66
36%
31%
2.67
56%
82%

11. LIQUOR
RELATED/BAR
47 Liquor Related/Bar businesses were sold in 2013
Avg Price
$240,595
Median Price
$165000
82%
Avg Listed Mult DE
2.44
Avg Sold Mult DE
2.0
Avg Listed Price/Sales
43%
Avg Sold Price/Sales
32%
138 Liquor Related/Bar Businesses Currently Listed
Avg Listed Mult DE
2.85
Avg Listed Price/Sales
61%

12. REAL ESTATE
RELAT-PROP MGT
50 Real Estate/Prop Mgt businesses were sold in 2013
Avg Price
$194,906
Median Price
$148,500
98%
Avg Listed Mult DE
1.89
Avg Sold Mult DE
1.75
Avg Listed Price/Sales
83%
Avg Sold Price/Sales
75%
33 Real Estate/Prop Mgt Businesses Currently Listed
Avg Listed Mult DE
2.31
Avg Listed Price/Sales
102%

13. LAUNDRY &
DRY CLEANING
41 Laundry/Dry Cleaning businesses were sold in 2013
Avg Price
$152,229
Median Price
$110,000
84%
Avg Listed Mult DE
2.61
Avg Sold Mult DE
2.20
Avg Listed Price/Sales
79%
Avg Sold Price/Sales
67%
75 Laundry/Dry Cleaning Businesses Currently Listed
Avg Listed Mult DE
3.36
Avg Listed Price/Sales
100%

14. BEAUTY BARBER SHOP
49 Beauty/Barber Shop businesses were sold in 2013
Avg Price
$97,215
Median Price
$65,000
82%
Avg Listed Mult DE
1.64
Avg Sold Mult DE
1.34
Avg Listed Price/Sales
37%
Avg Sold Price/Sales
31%
174 Beauty/Barber Shop Businesses Currently Listed
Avg Listed Mult DE
2.53
Avg Listed Price/Sales
57%

15. BUSINESS
SERVICES
43 Business Services businesses were sold in 2013
Avg Price
$167,152
Median Price
$125,000
Avg Listed Mult DE
1.99
Avg Sold Mult DE
1.74
Avg Listed Price/Sales
73%
Avg Sold Price/Sales
65%
30 Business Services Businesses Currently Listed
Avg Listed Mult DE
3.18
Avg Listed Price/Sales
106%
87%

16. BBF BROKER SUCCESS
• BBF Brokers sell about 10-15% of their listings
• Current Listings
• The current average listing is 3.76 x DE
• The current average listing is 92% x Sales
• 2013 Sales Data
• The average sale in 2013 was 1.827 x DE
• The average sale in 2013 was 53.3% x Sales

17. PRICING A BUSINESS
Steps to good Business Pricing
• Education – Need to know how to do it!
• Proper Recasting of Financial Statements
• Use Good Comparable Sales Data
• Common Sense
• Sanity Check

18. PRICING A BUSINESS
Where to get an Education on Pricing
•
IBBA 210: Analyzing and Recasting Financial
Statements (16 hours)
•
IBBA 220: Introduction to Pricing Small Businesses
(8 hours)
•
IBBA 221: Pricing Small Businesses – Level 2 (8
hours)
•
IBBA 224: Pricing a Business to Sell (4 hours)
IBBA 210, 220, 221 will be offered in
Orlando, FL on April 6 - 9, 2014
http://ibba.org/events/summit

19. RECASTING FINANCIALS
Purpose of Recasting Financials
1. Undo the owner’s tax strategy
2. Make adjustments that will impact
the new owner

20. RECASTING FINANCIALS
Recasting – Common Problems
• “Owner to Prove” & “Owner Estimate” are not real financial
statements and are suspect
• Must Convert Cash Method to Accrual Method
• Can only add back one owner – make market adjustments
for other owners
• Use owner’s W2 salary as the add-back for owner’s comp
• Banks will accept owner’s comp (W2), depreciation,
amortization and interest add backs – others may be
suspect
• Don’t forget adjustments the new owner will experience –
increased rent, replacing underpaid family employees,
necessary annual replacement costs, etc.

21. COMPARABLE SALES
Direct Market Data Method
• Most common method used by brokers to
determine the Most Probable Selling Price (MPSP)
• Relies on good comparable sales data
• For main street businesses – eliminate outliers - DE
multiples under 1.0 or over 5.0
• All comparable sales databases have errors
• The more data the better – but should have 10-12
data points as a minimum
• Try to “bracket” the target business – Sales plus or
minus 20-25% for accuracy

22. COMPARABLE SALES
Where to find Comparable Sales
•
BBF Database – exclusive for BBF Members
•
BizComps – free access if you contribute sold
data
•
IBA database – Must be an IBA member
•
BizBuySell - free access if you advertise &
contribute sold data
•
PeerComps – pay site – only includes deals
that sold with SBA Loans – (most accurate)

23. COMMON SENSE
Your Time is Valuable - Don’t let bad Sellers waste your
time
• Is the owner ready to sell
• Is the owner committed to sell
• Will the owner provide you the data you need prior to
listing (Tax Returns, P&L’s, Sales Data, etc.)
• Are price expectations reasonable
• Are terms expectations reasonable (will they hold any
paper)
• Have all owners agreed to sell – (corporate resolution)
• Has the spouse agreed to sell – (spousal agreement
letter)
• Don’t waste time on “open listings”

24. SANITY CHECK
Develop Your Own Price Sanity Check
• Do the Price and Terms provide a living
wage for the buyer after debt service
• If the DE drops 10-20%, will the buyer be
able to pay the debt service and pay his bills
(banks use a debt coverage ratio)
• Is there an acceptable return on the total
investment (average business sells for a
37.5% ROI)
• Is there an adequate return on the invested
capital (ROE typically 40%+)

25. THINGS TO AVOID
Broker prices a business for $200,000
• Seller agrees to price, but wants all cash
• Business will not qualify for an SBA Loan
• Seller will not agree to hold any paper
What should the Broker do?
• Have a frank discussion with the Seller –
explain the “business brokers facts of life”

26. CASH SALE VS.
FINANCING
Assume a buyer has $200K in cash to invest.
A. Can buy a business for
$200K in cash
• Probable cash flow is
~$100K
• No debt service
• Earns about $100K per year
B. Can make a $200K down
payment on an $800K
business (25% down)
• Probable cash flow is ~$250
to 300K
• Debt service* ~$112K/year
• Earns a minimum of $138K
per year after debt service
*$600K financed at 8%
for 7 years
Which is a better deal?

27. SELLER FINANCING
Why use Seller Financing?
•
•
•
•
•
Expands the pool of qualified buyers
Seller can negotiate a higher price
Seller earns interest on the note
Seller holds a lien on the business
Buyer signs personal guarantee
Improves the probability of selling

28. BEST DEAL
STRUCTURE
Selling with an SBA Loan or other 3rd Party Lender
• Increases the pool of qualified buyers
• Best deal for Seller
• Better quality business for the Buyer
• Easier business for Broker to Sell
• Higher probability of closing the deal
Typical Deal structure
• Buyer Down Payment = 25%
• Third Party Lender Loans 50 - 75%
• Seller holds paper for the balance (0 – 25%)

29. SBA DEALS SELL FOR
MORE MONEY
Restaurant (Limited Service) Comparison
BBF Mult
of DE
(All Comps)
BBF Mult
of DE
(TR & P&L)
PeerComps
Mult of DE
$500,000
1.89
36%
2.2
39%
2.74
59%
750,000
1.91
38%
2.42
44%
2.75
48%
$1,000,000
1.91
36%
2.42
42%
2.75
50%
Sales
Use the Proper Comps for SBA Qualified Businesses

30. LISTING SUGGESTION
Since we never know exactly the price a business
will actually sell at:
• Price the business for where you think it will
sell (MPSP)
• List it for that price on the listing agreement
• Advertise it for 10-15% more to leave room for
negotiations
• Sometimes it is possible to sell it above the
MPSP making the Seller happy
• Commits the Seller to selling at the MPSP on
the listing agreement

31. SUMMARY
To make more money in 2014
•
•
•
•
•
•
•
Get Educated – Learn to price businesses
Use the proper comparable database
Develop your own Sanity Check
Don’t overprice a business just to get a
listing
Educate your Seller on deal structure –
Seller financing key to getting deals done
Try to get listings that are SBA qualified
Don’t take bad listings that waste your time

32. SUMMARY
Make 2014
Your Best Year Ever
Thanks for Your Time
Lou Vescio
lvescio@cbi-florida.com
(321) 255-1309