The document provides guidance for first-time business buyers on how to become informed buyers and improve their chances of successfully acquiring a business. It recommends buyers set clear acquisition objectives, understand the marketplace and deal processes, develop quality deal flow sources, consider working with professional intermediaries, and be patient as it is a lengthy process to find and close a deal.

1. Sources of Acquisition Deals - and “ Generating Buyer’s Deal Flow” Todd Cushing EBIT Associates, Ltd.

2. Buyer's Ten Commandments 10. Thou Shalt Not Be Greedy! Sellers deserve a fair price for the years they have spent developing their business. Be prepared to pay for the goodwill of the business. 9. Thou Shall Have A Good Reason For Buying! Buying a business is hard work! It takes a commitment! Spend time deciding why you want the responsibility of owning a business. 8. Thou Shalt Provide Background Information! Be prepared with a resume and financial statement. Remember, the seller will most likely be your banker and will want to know that you can run the business successfully.

3. Buyer's Ten Commandments 7. Thou Shalt Keep An Open Mind! There are no perfect businesses. 6. Thou Shalt Keep In Mind Tax Benefits! Remember tax benefits are realized from intangible as well as tangible assets. 5. Thou Shalt Offer A Reasonable Down Payment! A low down payment indicates a lack of commitment. When sellers question commitment, serious negotiations are in jeopardy. 4. Thou Shalt Realize Businesses Are Priced On Profits! A business making huge profits with a few assets could save you money later in capital outlay for expansion.

4. Buyer's Ten Commandments 3. Thou Shalt Remember Time Is Of The Essence! After all parties have agreed upon price and terms it is important to quickly proceed toward closing. 2. Thou Shalt Be Prepared To Meet the Landlord! Landlords usually have little to gain by cooperation. Therefore,come to meetings armed with resume and financial statement. 1. Thou Shalt Avoid Surprises! Disclose pertinent information early and avoid surprises that might destroy your credibility. Courtesy of BBP

5. Preliminaries What should I do before I begin my search? Pre-Search Fundamentals – Define the Target!

6. If you see two dolphins, you are probably not buying a business!

7. Pre-Search Fundamentals – Define The Target! Tom West reports on the Small Business Target: 700,000 businesses w/revenue >$1 mil <$2.5 mil and 10-19 employees 140,000 are for sale 35,000 will be sold! 570,000 businesses w/revenue >$2.5 mil <$10 mil and 20-100 employees (average 40) 113,000 are for sale 38,000 will be sold!

8. Pre-Search Fundamentals – Define the Target! What am I looking for? Clarify! Prioritize! Build a Buyer’s Profile Incorporate Value Judgments Early On - Wide or Narrow Search?

9. Pre-Search Fundamentals – Targeting Elements Where? – location Industry? – Related to professional/personal experience? Type? – B2B, Retail, Service, Distribution, Mfg. Special Category? – Franchise, troubled Size? – financial resources Skill set? – professional expertise Timeline? – project planning What help will I need? – partners, advisors, financing

10. Where Do I Start? Don’t Overlook the Personal Network – They already know you and its free! Communicate with: Close friends, neighbors, confidants Financial/Tax Advisor Personal Accountant Personal Attorney Insurance Broker Community Organizations if you are active

11. What Else Can I Do On My Own? Professional Industry Experience Network Industry/Work Contacts Former Competitors Former Suppliers Professional/Industry Associations – contacts, newsletters or other publications Former Customers/Clients Former Company Associates

12. The Internet – “101 Sites” Web Listings Ebitassociates.com Acg.org Bizmls.com Bizbuysell.com Bizquest.com Businessesforsale.com Chicagobusiness.com Emerge.com Firstlist.com comglobalbx.com Ibba.org Mbbi.org Restaurants-for-sale.com Mergernetwork.com Sunbeltnetwork.com

13. Professional M&A Resources Business for Sale – “Actively Marketed” Attorneys – M&A, Trust, Bankruptcy Accounting Firms Consultants Financial Advisors Private Equity Groups Trade Association Publications Bankers Business Brokers and other M&A Professionals

14. Professional M&A Resources High Technology Redneck Radar System

15. Professional M&A Resources Companies Not on the Market Industry Trade Shows Trade Association Publications Bankruptcy Court Buyer’s Broker/Intermediary Create Buyer Profile/Bio

16. Why Buyers Use/Don’t Use M&A Pros. Use: Uncover hidden sellers Target a market Industry Specialization 3 rd Party Approach & Negotiate Valuation – Seller’s Reality Check on Expectations Deal Experience Professional Contacts and Resources Don’t Use: It Will Cost Me Money! Will they add as much value as they charge for fees? Exclusivity - Fear of limiting or missing other deals Fear of losing control of Process Unsure how to make selection

17. Sources Of Acquisition Deals… To Summarize: Preliminaries – Set the Target Make your intentions known to the appropriate Personal and Professional Network Contacts Determine how you can most effectively use the Internet Build, communicate with and use your professional M&A network to maximize your personal deal flow If appropriate, retain professional representation

18. Are You An Informed Buyer ? Primarily addresses first time buyer Basic tools to becoming a buyer The process involved Benefits of becoming informed

19. Over 80% of Buyers Have Their Head in the Sand!

20. “ Definition Of An Informed Buyer” Understands the “buy” process Has a feel for the marketplace Can measure business value Knows when to seek assistance Has realistic expectations Responds to opportunities Has patience

21. “ Becoming An Informed Buyer” Requires focus It is a seasoning process It is time consuming Requires participation in the marketplace

22. Benefits Of Being An Informed Buyer Betters the odds - of finding a potential target negotiating the transaction closing the transaction of buying at or below market value

23. Type Of Companies For Sale Formally on the market “Available” but not on the market “ The Hidden Market” Available but not on the market does not mean “I will sell if I get my price ”

24. Typical Buyers Track Record Industry statistics (first time buyers) 100 lookers – 5 become buyers 3 out 5 bought companies that were not targeted profiles 6 – 18 month timeline 95% failed

25. Contributors To Buyer Failure Unrealistic goals Unrealistic timelines Lack of focus Misperception of the marketplace Seller related Buyer’s advisors

26. Buying a business is just like Buying real estate One Of The Key Misperceptions Of The Marketplace

27. People related issues Valuation issues Timelines Market efficiencies Deal related problems Closing probabilities Broker “skill-set” Major Differences Between Real Estate And Biz Deals

28. “ Deal” Probabilities 50 % fail at the LOI (Letter of Intent) 25 % fail at due diligence 15 % fail at documentation phase 10 % of those make it to closing ? Die at the closing table

29. Bettering Buyer Odds Becoming informed – a continuous process Understanding the marketplace Setting realistic objectives Developing quality deal flow Understanding business valuation basics Seeking out professional assistance

30. Understanding The “Buy” Process Finding the opportunity Analyzing the deal Indicating interest to purchase Negotiating terms Letter of Intent Due-diligence Contract to purchase Transaction closing

31. Workings Of The Market Market is highly inefficient Why companies are for sale Where are the deals How to access the opportunities

32. Setting Acquisition Objectives What do you want to buy ? A job ? A business ?

33. Setting Acquisition Objectives Availability of equity Collateral for financing Target match operating skill-set

34. Setting Acquisition Objectives Requires a reasonable definition of a “right-fit” opportunity Type of company Revenue size Cash flow size Affordability &quot;what can I afford&quot;

35. Setting Acquisition Objectives Understanding what the buyer’s equity can buy A key element of forming a relationship with intermediaries / business brokers

36. Seeking Out Opportunities Reactionary Approach Typically broker sourced Results of networking efforts Proprietary Approach Pro-active activities Buyer managed effort

37. Reactionary Focus Deals formally on the market Typically broker sourced Formal process Highly competitive Buyer lacks leverage Seller controlled

38. Pro-Active Focus Limited if any competition Informal approach Time consuming Shifts leverage to buyer Buyer controlled process

39. “ Working With Intermediaries” What not to say to a seasoned M&A intermediary / business broker

40. “ Working With Intermediaries” 10. How much liquid capital/cash do you have for the down payment? Depends on the deal. Money is no PROBLEM for the right deal! I have investors. Money is no PROBLEM! 9. Why buy now? &quot;I will know it when I see it&quot;. Good question, lets get together so I can tell you what I'm looking for!

41. “ Working With Intermediaries” 8. How much income do you expect to take out of the business? Depends on the deal! Business needs to be very profitable. 7. Have you ever owned your own business before? NO, but I know I'm an Entrepreneur! Business needs to have limited competition.

42. “ Working With Intermediaries” 6. Are you currently employed or unemployed? I'm currently employed. I'm currently unemployed and will pull out equity in my home for down payment. 5. Who besides yourself will be involved in the decision? My investors My spouse said the business has to have proprietary products.

43. “ Working With Intermediaries” 4. Are there any past or current bankruptcy/tax issues? YES, but I'm going to put the business under my father's name! Business will need a lot of seller financing 3. How long have you been searching for a business? Call me when you have a &quot;good deal&quot;. I have been looking for years!

44. “ Working With Intermediaries” 2 . Have you made any offers to purchase a business? Started looking a week ago. I have submitted 5 Letter of Intents and all have fallen apart! 1. Do you have a current financial statement available on yourself? I only give my financial statements to principals. Here is the name and phone number of my banker!

45. Seek Assistance If you have not done it before – get help from someone that has !!!

46. Don’t Fly in Bad Weather Alone

47. QUESTIONS?

48. EBIT Associates, Ltd. Todd Cushing, Principal CBI, FRC, BTS, CBB 117 S. Cook Street, # 212 Barrington, IL 60010 Telephone: 847-566-0500 Facsimile: 847-566-0100 E-Mail: [email_address] www.ebitassociates.com Contact Information