This document outlines the slides for a presentation on maximizing business value. The presentation discusses defining and measuring business value, the components of value, challenges to growth, and how to begin building value. It emphasizes that business value is determined by past performance, especially income streams like EBITDA, and that owners should focus on strategic growth and increasing earnings long-term rather than reacting to short-term issues. The slides provide an overview of business valuation concepts and best practices for owners to increase their exit options.

1. Index of slides:
Maximizing Business Value
Hosted by Umpqua Bank, North Bend (WGB)
Presented by Peter Busacca from Washington BBI
06/07/16 Washington BBI The brokers with an end-to-end solution! 1
1. Intro
2. Maximizing Business Value
3. Admin
4. Which is true?
5. Define Business Value
6. Components of Value
7. Measures of Income
8. Why focus on Value?
9. Exit Planning
10. Why Buyers Buy
11. What Buyers Buy
12. What Buyers Pay For
13. Today’s Market
14. Today’s Market (cont.)
15. Challenges
16. It’s Time to Buy!
17. How to Begin
18. Summary
19. Conclusions
20. Contact Info

2. Index of slides:
Maximizing Business Value
Discussion topics:
• What is business value?
• What matters the most?
06/07/16
Washington BBI
The brokers with an end-to-end solution!
Page 2
1. Title
2. Maximizing Business Value
3. Admin
4. Which is true?
5. Define Business Value
6. Components of Value
7. Measures of Income
8. Why focus on Value?
9. Exit Planning
10. Why Buyers Buy
11. What Buyers Buy
12. What Buyers Pay For
13. Today’s Market
14. Today’s Market (cont.)
15. Challenges
16. It’s Time to Buy!
17. How to Begin
18. Summary
19. Conclusions
20. Contact Info

3. Index of slides:
Admin
• Turn off cell phones
• Do you know where the facilities are in this facility?
• Ask questions. I’ll try to answer some of them.
• We have one hour to go over a lot of stuff.
06/07/16
Washington BBI
The brokers with an end-to-end solution!
Page 3
1. Title
2. Maximizing Business Value
3. Admin
4. Which is true?
5. Define Business Value
6. Components of Value
7. Measures of Income
8. Why focus on Value?
9. Exit Planning
10. Why Buyers Buy
11. What Buyers Buy
12. What Buyers Pay For
13. Today’s Market
14. Today’s Market (cont.)
15. Challenges
16. It’s Time to Buy!
17. How to Begin
18. Summary
19. Conclusions
20. Contact Info

4. Index of slides:
Which is true?
From a practical standpoint, business value is the price a
ready, willing and able buyer would pay in an arm’s-length
transaction.
Business value is an informal term that embraces both the
tangible and intangible aspects of a firm.
Business value is the highest price that the market will bear.
06/07/16
Washington BBI
The brokers with an end-to-end solution!
Page 4
1. Title
2. Maximizing Business Value
3. Admin
4. Which is true?
5. Define Business Value
6. Components of Value
7. Measures of Income
8. Why focus on Value?
9. Exit Planning
10. Why Buyers Buy
11. What Buyers Buy
12. What Buyers Pay For
13. Today’s Market
14. Today’s Market (cont.)
15. Challenges
16. It’s Time to Buy!
17. How to Begin
18. Summary
19. Conclusions
20. Contact Info

5. Index of slides:
What is business value?
The real question is value to whom?
• Value to a prospective buyer
• Value to a lender
• Value to an ESOP
For our purposes today, we will assume that business value
is the estimates (most likely) selling price
06/07/16
Washington BBI
The brokers with an end-to-end solution!
Page 5
1. Title
2. Maximizing Business Value
3. Admin
4. Which is true?
5. Define Business Value
6. Components of Value
7. Measures of Income
8. Why focus on Value?
9. Exit Planning
10. Why Buyers Buy
11. What Buyers Buy
12. What Buyers Pay For
13. Today’s Market
14. Today’s Market (cont.)
15. Challenges
16. It’s Time to Buy!
17. How to Begin
18. Summary
19. Conclusions
20. Contact Info

6. Index of slides:
How do appraisers assess value?
Three (main) Components of Value:
• Market Value (aka Comparable Value)
• Asset Value:
• Acquisition value of comparable assets, or
• Disposal value of the assets?
• Income Value:
• Value & consistency of past income streams
• Value of future income stream
• How accurate can this be in today’s market?
06/07/16
Washington BBI
The brokers with an end-to-end solution!
Page 6
1. Title
2. Maximizing Business Value
3. Admin
4. Which is true?
5. Define Business Value
6. Components of Value
7. Measures of Income
8. Why focus on Value?
9. Exit Planning
10. Why Buyers Buy
11. What Buyers Buy
12. What Buyers Pay For
13. Today’s Market
14. Today’s Market (cont.)
15. Challenges
16. It’s Time to Buy!
17. How to Begin
18. Summary
19. Conclusions
20. Contact Info

7. Index of slides:
Measures of Income
Aka “earnings” or “cash flow”:
• Net Income Mainly a tax figure
• EBIT Earnings before interest & taxes
• EBITDA EBIT + depreciation & amortization
• SDE EBITDA + sellers’ benefits –
benchmark general manager salary
EBIT and Sellers’ Discretionary Earnings (SDE) are widely used estimates of cash
flow of the business. Most industry multiples are based upon either EBIT or SDE.
06/07/16
Washington BBI
The brokers with an end-to-end solution!
Page 7
1. Title
2. Maximizing Business Value
3. Admin
4. Which is true?
5. Define Business Value
6. Components of Value
7. Measures of Income
8. Why focus on Value?
9. Exit Planning
10. Why Buyers Buy
11. What Buyers Buy
12. What Buyers Pay For
13. Today’s Market
14. Today’s Market (cont.)
15. Challenges
16. It’s Time to Buy!
17. How to Begin
18. Summary
19. Conclusions
20. Contact Info

8. Index of slides:
Why focus on building value?
• Because it’s what matters!
• Bankers lend based on the value components
• especially earnings, but sometimes assets too
• Your retirement funds depend upon building value
• Both your current and future lifestyles are funded by earnings,
so the higher the business value, the more comfortably you live.
06/07/16
Washington BBI
The brokers with an end-to-end solution!
Page 8
1. Title
2. Maximizing Business Value
3. Admin
4. Which is true?
5. Define Business Value
6. Components of Value
7. Measures of Income
8. Why focus on Value?
9. Exit Planning
10. Why Buyers Buy
11. What Buyers Buy
12. What Buyers Pay For
13. Today’s Market
14. Today’s Market (cont.)
15. Challenges
16. It’s Time to Buy!
17. How to Begin
18. Summary
19. Conclusions
20. Contact Info

9. Index of slides:
Exit Plan?
• Do you have a formal, written Exit Plan?
• Every business owner should develop a formal exit plan,
and should measure and review it at least annually!
• The key variable in exit planning is business value.
Building business value matters!
06/07/16
Washington BBI
The brokers with an end-to-end solution!
Page 9
1. Title
2. Maximizing Business Value
3. Admin
4. Which is true?
5. Define Business Value
6. Components of Value
7. Measures of Income
8. Why focus on Value?
9. Exit Planning
10. Why Buyers Buy
11. What Buyers Buy
12. What Buyers Pay For
13. Today’s Market
14. Today’s Market (cont.)
15. Challenges
16. It’s Time to Buy!
17. How to Begin
18. Summary
19. Conclusions
20. Contact Info

10. Index of slides:
Why do buyers buy?
Some reasons that buyers purchase businesses?
• Capture future growth potential
• Add products, services, technology or IP to their portfolio
• Buy future revenue streams
• Purchase talent, territory or customers
• And some just want to buy a job
The higher the value, the more they will pay!
Focus on building value, not fire fighting.
06/07/16
Washington BBI
The brokers with an end-to-end solution!
Page 10
1. Title
2. Maximizing Business Value
3. Admin
4. Which is true?
5. Define Business Value
6. Components of Value
7. Measures of Income
8. Why focus on Value?
9. Exit Planning
10. Why Buyers Buy
11. What Buyers Buy
12. What Buyers Pay For
13. Today’s Market
14. Today’s Market (cont.)
15. Challenges
16. It’s Time to Buy!
17. How to Begin
18. Summary
19. Conclusions
20. Contact Info

11. Index of slides:
What do buyers buy?
• Established firm (typically 5+ years old)
• Skilled management team (continuity)
• Business Operations (process)
• Productive processes in place (capacity)
• Transferable customer base (clientele)
• Transferable vendor relationships
• Existing products and/or services
• Future (expected) revenue stream
• Chance for growth
06/07/16
Washington BBI
The brokers with an end-to-end solution!
Page 11
1. Title
2. Maximizing Business Value
3. Admin
4. Which is true?
5. Define Business Value
6. Components of Value
7. Measures of Income
8. Why focus on Value?
9. Exit Planning
10. Why Buyers Buy
11. What Buyers Buy
12. What Buyers Pay For
13. Today’s Market
14. Today’s Market (cont.)
15. Challenges
16. It’s Time to Buy!
17. How to Begin
18. Summary
19. Conclusions
20. Contact Info

12. Index of slides:
What do buyers pay for?
• Buyers buy based on perceived potential
• But what buyers actually pay for is your firm’s past
performance*
• Market comparables (multiples)
• Income streams (DCF Method)
• Assets (and other balance sheet items)
* unless the buyer perceives strategic value
06/07/16
Washington BBI
The brokers with an end-to-end solution!
Page 12
1. Title
2. Maximizing Business Value
3. Admin
4. Which is true?
5. Define Business Value
6. Components of Value
7. Measures of Income
8. Why focus on Value?
9. Exit Planning
10. Why Buyers Buy
11. What Buyers Buy
12. What Buyers Pay For
13. Today’s Market
14. Today’s Market (cont.)
15. Challenges
16. It’s Time to Buy!
17. How to Begin
18. Summary
19. Conclusions
20. Contact Info

13. Index of slides:
Today’s Market
• Prime Lending Rate 3.5% (July 2016)
• Ballpark SBA loan rate 7.5% (usually prime + 4)
• WA unemployment rate 5.8% (May 2016)
• Fewer firms remain
• Based on D&B information:
• WA HQ firms with est. revenues $.5M - $50M
• Manufacturers & distributors headquartered in WA
• We purchased this list in 2004 with 6,500 names
• 2010 ZapData lists 1,420 names
06/07/16
Washington BBI
The brokers with an end-to-end solution!
Page 13
1. Title
2. Maximizing Business Value
3. Admin
4. Which is true?
5. Define Business Value
6. Components of Value
7. Measures of Income
8. Why focus on Value?
9. Exit Planning
10. Why Buyers Buy
11. What Buyers Buy
12. What Buyers Pay For
13. Today’s Market
14. Today’s Market (cont.)
15. Challenges
16. It’s Time to Buy!
17. How to Begin
18. Summary
19. Conclusions
20. Contact Info

14. Index of slides:
Today’s Market (cont.)
• Those firms that survived the 4Q07 downturn are doing
pretty well today
• Many failed and are gone
• Others consolidated to survive
• Banks were desperate to loan but afraid
• Transaction Activity:
• Strong activity in the M&A market - $50M+
• Weak activity in Mid-cap
• Strong activity in Mainstreet
06/07/16
Washington BBI
The brokers with an end-to-end solution!
Page 14
1. Title
2. Maximizing Business Value
3. Admin
4. Which is true?
5. Define Business Value
6. Components of Value
7. Measures of Income
8. Why focus on Value?
9. Exit Planning
10. Why Buyers Buy
11. What Buyers Buy
12. What Buyers Pay For
13. Today’s Market
14. Today’s Market (cont.)
15. Challenges
16. It’s Time to Buy!
17. How to Begin
18. Summary
19. Conclusions
20. Contact Info

15. Index of slides:
Challenges to Growth
• Sales - generating revenues
• Very difficult to grow organically
• Controlling operational costs
• Downsizing causes loss of talent & efficiency
• Controlling volatile purchase costs
• Especially petroleum related costs
• Expanding markets and market share
• Best opportunity right now is growth through acquisitions
• Changing S&M methods
• Friend’s daughter: “Does anyone even use email any more”?
06/07/16
Washington BBI
The brokers with an end-to-end solution!
Page 15
1. Title
2. Maximizing Business Value
3. Admin
4. Which is true?
5. Define Business Value
6. Components of Value
7. Measures of Income
8. Why focus on Value?
9. Exit Planning
10. Why Buyers Buy
11. What Buyers Buy
12. What Buyers Pay For
13. Today’s Market
14. Today’s Market (cont.)
15. Challenges
16. It’s Time to Buy!
17. How to Begin
18. Summary
19. Conclusions
20. Contact Info

16. Index of slides:
Take Advantage of Downturns
• Strategic Acquisitions – what to look for:
• Firms with “add-on” Products or Services
• Cross-Sell opportunities
• Complementary clientele
• Opportunities to expand Markets or Territory
• Acquire Intellectual Property or Talent
• Increase Manufacturing/Distribution capacity
• Cost reductions in Purchased Materials
06/07/16
Washington BBI
The brokers with an end-to-end solution!
Page 16
1. Title
2. Maximizing Business Value
3. Admin
4. Which is true?
5. Define Business Value
6. Components of Value
7. Measures of Income
8. Why focus on Value?
9. Exit Planning
10. Why Buyers Buy
11. What Buyers Buy
12. What Buyers Pay For
13. Today’s Market
14. Today’s Market (cont.)
15. Challenges
16. It’s Time to Buy!
17. How to Begin
18. Summary
19. Conclusions
20. Contact Info

17. Index of slides:
Begin Building Value
• First assess current situation
• Then Exit Plan
• Timing and goals
• Mission and LT Strategy
• SMART Goals (or how I will get from here to there)
• Professional Advisors:
• Accountant: business & tax planning
• Valuators: annual measure of value (report card)
• Business Intermediary: preparing business for eventual sale
06/07/16
Washington BBI
The brokers with an end-to-end solution!
Page 17
1. Title
2. Maximizing Business Value
3. Admin
4. Which is true?
5. Define Business Value
6. Components of Value
7. Measures of Income
8. Why focus on Value?
9. Exit Planning
10. Why Buyers Buy
11. What Buyers Buy
12. What Buyers Pay For
13. Today’s Market
14. Today’s Market (cont.)
15. Challenges
16. It’s Time to Buy!
17. How to Begin
18. Summary
19. Conclusions
20. Contact Info

18. Index of slides:
Summary
• Components of Value
• Market value, Assets and Income streams
• Measures of Income (aka earnings)
• EBIT, EBITDA and SDE
• To build value over time, focus on strategy and execution
• Spend your time increasing earnings, not fighting fires
• You need to figure out what is causing the fires, not how to
put them out
• Hold employees responsible for fighting the fires
06/07/16
Washington BBI
The brokers with an end-to-end solution!
Page 18
1. Title
2. Maximizing Business Value
3. Admin
4. Which is true?
5. Define Business Value
6. Components of Value
7. Measures of Income
8. Why focus on Value?
9. Exit Planning
10. Why Buyers Buy
11. What Buyers Buy
12. What Buyers Pay For
13. Today’s Market
14. Today’s Market (cont.)
15. Challenges
16. It’s Time to Buy!
17. How to Begin
18. Summary
19. Conclusions
20. Contact Info

19. Index of slides:
Conclusions
• It is a great time to buy!
• It is a great time to sell!
• Do a Business Health Checkup
• Use the BHC to create operational plans and an Exit Plan
• What are you the very best at in your market? Exploit that!
• The typical business’ value is determined by applying a
multiple to last year’s earnings (EBIT)
06/07/16
Washington BBI
The brokers with an end-to-end solution!
Page 19
1. Title
2. Maximizing Business Value
3. Admin
4. Which is true?
5. Define Business Value
6. Components of Value
7. Measures of Income
8. Why focus on Value?
9. Exit Planning
10. Why Buyers Buy
11. What Buyers Buy
12. What Buyers Pay For
13. Today’s Market
14. Today’s Market (cont.)
15. Challenges
16. It’s Time to Buy!
17. How to Begin
18. Summary
19. Conclusions
20. Contact Info

20. Index of slides:
Contact Info
Peter Busacca Consulting@WashingtonBBI.com
Washington BBI 425/391-8720 www.WashingtonBBI.com
Mailing Address 400 NW Gilman Boulevard, Unit 2208
Issaquah, WA 98027
Office Address: 38579 River Street, Suite 14
Snoqualmie, WA 98065
06/07/16
Washington BBI
The brokers with an end-to-end solution!
Page 20
1. Title
2. Maximizing Business Value
3. Admin
4. Which is true?
5. Define Business Value
6. Components of Value
7. Measures of Income
8. Why focus on Value?
9. Exit Planning
10. Why Buyers Buy
11. What Buyers Buy
12. What Buyers Pay For
13. Today’s Market
14. Today’s Market (cont.)
15. Challenges
16. It’s Time to Buy!
17. How to Begin
18. Summary
19. Conclusions
20. Contact Info