Thinking of Buying a Business?
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This is a presentation I use regularly to talk to individuals and groups about the importance of being well prepared and following a disciplined process if you are thinking of buying a business. The presentation provides context and framework, raises questions for reflection, and provides guidance for some important preparatory steps.
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Thinking of Buying a Business?
- 1. Thinking of Buying a Business?Gareth J. YoungAbraxas Business Services
- 3. Types of Business: Start-ups, franchisees and existing businesses
- 4. An introduction to key business attributes you must know (including valuation)
- 11. Personal goals meet financial constraints
- 13. Building a Successful Process: Brand “You” Your skills / experience Strong management/leadership skills Good people skills Appreciate and understand financial statements Profit and loss statements Balance sheet Cash flow statements Forecasts Orientation to love the profit – not the product
- 14. Building a Successful Process: Brand “You” Expectations versus reality Profit minimization versus maximization (tax driven) Compiled versus audited statements “Good ole boy/gal” versus pedigree Very long hours versus long hours Empty the trashcans versus call your assistant Orientation to love the profit – not the product – it’s a comment worth repeating
- 15. Building a Successful Process: Brand “You” Personal goals meet financial constraints Buying a job or buying for growth – it matters Is your family on board – especially your spouse Income to support your personal expenses Working capital – can be a significant amount Investment capital And of course, a cushion
- 16. Targeting the Search Around Brand “You” Success Factors...... Passion It’s great to have but it takes more Experience / education What are you really bringing to the success equation If you don’t have it – can you get it? Hire it? Rent it? Are you best served by corporate America Realistic expectations Capital constraints
- 17. What type of business?
- 20. Acquiring an Existing Business
- 21. Where to Look for a Business On-line (review these tonight!) BizBuySell (www.bizbuysell.com) GABB (www.gabb.org) IBBA (www.ibba.org) Referral sources CPAs Attorneys Everywhere
- 22. Attributes You Must Know About a Business
- 23. Attributes You Must Know About a Business
- 24. Cash Flow and Adjusted EBITDA
- 25. Determining the Price of a Business
- 26. Seller and Buyer Views of the Purchase Buyer Perspective Sales price Plus closing costs Plus working capital loan Less down payment Equals the Debt Required to Finance the Business Free cash flow Less debt service (5 – 7 years) Less taxes Less capital expenditures Less working capital increases Equals cash available to purchaser for compensation Seller Perspective Free cash flow Times multiplier Equals the Sales Price Adjusted for: Less advisory fees Less seller financing Less debt repayment Plus A/R and other retained assets Less taxes Equals “Net to Seller”
- 28. Lower middle-market deals are hard to finance with traditional fund sources
- 29. SBA loans could be available but know that loans at this level generally require leveraging of personal assets
- 30. Funding with IRAs gaining popularity
- 31. Plan on 10% to 20% seller financing if the business is priced appropriately
- 32. Plan on at least a 20% down payment
- 34. Practical Tips on Your Purchase Plan to spend six to twelve months looking Expect to see a lot of businesses, and to learn a lot along the way Buying a business is a full time job! There is no single purchase price multiple Look for growth attributes: Scalable Extensible Repeatable Use advisors – but select them with care
- 35. Using a Professional Business Broker To help you determine the type company you are seeking Working with the seller or the seller’s broker on obtaining key information Analyzing the purchase price Constructing a letter of intent or term sheet To lead negotiations Provide advice and experienced leadership Act as a buffer, especially when emotions get high Push the process to the closing table
- 36. Summary Build and manage a disciplined process Leverage your brand “you” strengths Plan ahead Understand the right size deal Plan your financial cushion and full commitment Make sure your spouse is on board It will probably cost more and take longer than you thought Hire a professional and use them effectively
- 37. Contact Information Gareth J. Young gyoung@abraxas.biz +1 404-790-5536 www.abraxas.biz
Editor's Notes
- Good evening and welcome to Entrepreneurship: Build or Buy a Business. My name is Betty Reed and I’m with Abraxas Business Services. Our agenda for tonight is going to be centered around just three themes – but each packs a lot of information. Are you an entrepreneur – do you have the make-up?What are the options to allow you to become an entrepreneurAnd last how do you wrap all this into method to figure out what you want.How many of you have tried entrepreneurship before? Are some of you in the process of looking at a franchise or a business now?
- Good evening and welcome to Entrepreneurship: Build or Buy a Business. My name is Betty Reed and I’m with Abraxas Business Services. Our agenda for tonight is going to be centered around just three themes – but each packs a lot of information. Are you an entrepreneur – do you have the make-up?What are the options to allow you to become an entrepreneurAnd last how do you wrap all this into method to figure out what you want.How many of you have tried entrepreneurship before? Are some of you in the process of looking at a franchise or a business now?
- We are going to discuss each of these in much more depth – jot down which you thinks fits you. Let’s do a hand count and after we’ve gone thru the material – we’ll see if the groups have changed their minds.
- We are going to discuss each of these in much more depth – jot down which you thinks fits you. Let’s do a hand count and after we’ve gone thru the material – we’ll see if the groups have changed their minds.
- We are going to discuss each of these in much more depth – jot down which you thinks fits you. Let’s do a hand count and after we’ve gone thru the material – we’ll see if the groups have changed their minds.
- We are going to discuss each of these in much more depth – jot down which you thinks fits you. Let’s do a hand count and after we’ve gone thru the material – we’ll see if the groups have changed their minds.