Henry started his construction business with a focus on installing windows but has expanded into other home improvement services like decks, roofs, and siding with an emphasis on energy efficiency. He credits his parents for teaching him values of respect, fairness, and tight family bonds that he has brought to his business. As the head of the company, Henry works to communicate clearly with employees to ensure they share his vision for the business.

1. PAGE 24 SUMMER 2012
make a profit. But I don’t
HENRY want to go out there and take
advantage of people. That
From Page 21 basically stems from my par-
ents.”
learned from his mother is As head of the company,
likely just as important to his Henry works hard at commu-
success. nicating with those who
A recovering “control report to him.
freak,” Henry said his mother “I think that it is crucial
taught him how to quit for the people who work with
micromanaging and start del- you to all be on the same
egating. In truth, it wasn’t that page,” he said.
hard, given the family back- “What happens with a lot
ground and the family struc- of businesses is you get one
ture of the business today, guy running the business and
wherein Henry employs a you don’t have a one-on-one
brother and a son. with your employees, and it
“My parents raised six turns out that they are maybe
kids on a construction salary, not willing or not able to see
so we were always a very tight the business as you see it.
family,” he mused. “They “At the end of the day, it’s
taught us...always respect my name on the side of the
your elders, always respect wall there, my name on the
anyone you are having a deal- side of the truck,” Henry said.
ing with, whether you know “But the people who work for
them or don’t know them. me, I really think they have
“I carried that into my the same respect for that
business. I try to be fair and name as I do, because I have
still try to make a living and communication with them.”
Photo by Tin Nguyen
PAPERS, PLEASE: Greg Ellwood, owner of Sunbelt Business
Brokers of NOVA is an expert in sifting through the
financials to uncover what a business is really worth.
Featured Business
True value
Mum’s the word when selling a business
BY BILL WALSH
Piedmont Business Journal Staff Writer
When and if the time ever comes that he decides to sell his
business, Greg Ellwood will do just exactly what he counsels
today’s business owners in that position to do: Don’t sell it your-
self, get someone else to sell it for you.
For a start, trying to sell it yourself severely limits your negoti-
ating powers, Ellwood said. For a more important second reason,
HIGH ENERGY: Paul Henry started with windows, but you likely do not have any halfway accurate idea what your busi-
everything his company does these days – decks, roofs, ness is really worth.
siding and more — is meant to make a home more As the owner and principal broker of Sunbelt Business
energy efficient. Brokers of NOVA, with offices in Manassas and Leesburg, Ellwood

2. SUMMER 2012 PAGE 25
may not have any idea what starts sinking.” Ellwood starts tearing old those figures,” which are almost
your business is worth, either. When he takes a new list- paperwork apart. always inflated, Ellwood said.
But he knows how to find out. ing, word must go out, of The goal of small-business “I have some computer
It is easy enough to com- course, but what goes up on the owners often is to keep money programs where I can pull up
pare what Sunbelt does — web is that, say, to use an exam- in their business to avoid hav- comps of the same kind of
helping clients buy and sell ple close to home, a newspaper ing to pay taxes on income. businesses, and I can say this
businesses — to real estate is new on the market. “We’ve got to go into all type of business got this kind of
transactions, and, indeed, He would announce the those years of tax returns and multiple of revenue as the sales
property changes hands and availability of the paper, its P&L statements and recast price.”
the agent of that change draws publishing cycle, circulation, them, take all that information If owners are unhappy with
a commission. number of employees, that it out and put it to the side to the estimate — and sellers near-
Commercial real estate has annual revenues of X and come up with a number where ly always start high, just as they
brokers “will list a piece of annual fixed expenses of Y. you know the real earnings,” of do with other asset sales —
property and tell everybody in No mention of the name of the business, he said. “there are ways you can amplify
the world about it — here’s the the newspaper, certainly noth- “You are trying to find out that income,” Ellwood said.
cap rate on it, here’s the ing but the vaguest notion of how much cash flow the per- “Say you sold your busi-
income you can make on it, where it is located. son has to pay himself, pay his ness for $1 million and you got
here’s the paper they will hold, “Before a potential buyer debt and pay the return on the $500,000 down and you held
it’s zoned this way. After that, gets any information, beside money put down. the note for five years at 7 per-
their job is pretty well done,” what we put publicly on the “There are a lot of numbers cent. That’s another $60,000 or
Ellwood said. website, they sign a four-page and it’s a lot of work,” Ellwood $70,000 in interest. Plus, you’re
“In our case, business is non-disclosure agreement,” said, “to come up with an ask- not paying taxes at closing,
very confidential; we don’t Ellwood said, “and I get a net- ing price for the business.” you’re paying them in the year
want anybody to know what’s worth statement from them. Generally speaking, there that you receive the income,
going on.” “I want to know if we are are a couple of reactions from and you can put other expens-
When the cat’s out of the wasting time. Can you get business owners when Ellwood es toward that,” he said.
bag, Ellwood said, your com- money? Do you have money? announces that sum. “Some people are shocked;
petition knows, your neighbor Do you have the ability to bor- “Usually, they have a figure it’s a little bit of reality,”
knows, your employees know, row money?” in their mind that they got from Ellwood said of his valuations.
your vendors know, your cus- No matter who he is work- their buddies over coffee, so
tomers know, “and the ship ing for, the buyer or the seller, you have to sort of get rid of See ELLWOOD, Page 28

3. PAGE 28 SUMMER 2012
ELLWOOD
From Page 25
“Sometimes I’ll take them
through and say, you want $1
million? Let’s do the math.
“Let’s say the buyer puts
$300,000 down and is carrying
a note for $700,000. The cur-
rent net cash flow of the busi-
ness is X. They can’t pay a
$700,000 note on X, besides the
expenses for running the busi-
ness and paying themselves.
That,” he said, “is a little dose
of reality that their business
won’t support that price,” he
said.
“I try to mathematically
take them through the process,
and sometimes they are very
upset, “ he said.
Go home and think about
it, he advises, and we can talk
Photo by Photos.com
again and make some plans.
“You want to sell this business DUE DILIGENCE: Owners typically like to keep as much money as they can in their
anyway. What are you going to business. It’s up to business brokers like Greg Ellwood to discover what the real numbers
do, just sit here and get mad?” are in terms of revenue and expenses.
When he represents buyers sell it for a different price.” Mobil for a while, with the On ness, or start a franchise, you’ve
in the transaction, the back- The most foolish mistake, the Run program. Franchises probably got two or 2 1/2 years
ground examination is the Ellwood said, is to buy a busi- allow people to grow their of being in the red before you
same, but “the main thing for ness because you’re looking for business. You won’t have to start to turn a profit, then
them is to make sure that they a job. worry about things; they are you’ve got all those notes to
have enough cash flow, make “Not only do some people there for you, and you just pay off.
sure that they understand the make that mistake, but then snap into them.” “I think there is value in
principles of cash flow, make they are signed on to a five- or He likes franchises to an existing businesses because
sure that this is a business that 10-year lease that you can’t get extent, he amended. you’ve got existing customers,
fits their expertise, and make out of, not without a penalty. “I have sold a few new existing clients, especially if the
sure that they can see them- “So not only have you franchises, but I’m not a big fan business has been there for a
selves in this business for a cer- wasted money on a business of new franchises right now, few years. They have developed
tain amount of time,” Ellwood that you don’t know how to the way financing is. A buyer it, they have tweaked it.
said. run, you’re losing money, and can be $300,000 or $400,000 in Starting new is hard.”
“The other thing I tell buy- now you have the financial tie debt before he or she opens up Doing what he does offers
ers is, you’re not married to this of a lease around your neck. on day one. I don’t like that some insights into the general
business. You don’t have to be “Then you come back to risk. economy.
here for 25 years. Smart buyers, me and say ‘how do I get out of “We do a lot of franchise “It’s better now than 2011,
in my mind, look at it, see what this business?’” resales, where somebody has and 2011 was better than
kind of cash it’s throwing off had the business for a while 2010,” he said with a shrug.
now, see what kind of an Ellwood bought his and wants to sell it and some- “Banks are much tougher than
income they can have, and if Sunbelt franchise nine years body else wants to buy into it. they used to be for borrowing.
they grow the business, what ago after taking a buyout from They can buy into it a lot In my experience, they want
type of multiple they can have Exxon-Mobil, for whom he had cheaper than the startup.” almost 100 percent coverage. If
off the business in five or 10 worked for the previous 16 His office represents about you are buying for $100,000,
years.” years. 75 franchises on a resale basis, you better have $100,000 in a
Smart buyers, he went on, “Sunbelt is a franchise that Ellwood said. bank account or 401(k) some-
see this as not so very different has been around since the late “I’m very much a fan of where. They are not taking any
from owning stock shares. 1970s. I think it has gotten bet- existing businesses, because risk. I don’t know why we are
“You are going to buy it, ter and better,” he said. the day you [buy an existing paying them interest,” he said
you are going to have income “I like franchises; I was a business], you’ve got positive with a laugh.
off it, and then you’re going to franchise sales manager for cash flow. If you start a busi- That the economy is getting

4. SUMMER 2012 PAGE 29
better is demonstrated, Ellwood
said, by more businesses coming on
the market. Many of their owners How it works
wanted to sell in 2009 or 2010, but
held back because of the doldrums When representing a seller, Greg Ellwood “At that point,” Ellwood said, “due diligence
The economy also shows has them sign an exclusive listing agreement, starts, when the buyer or the seller, whatever
strength in the increasing number of generally for a year with renewals; it usually place you might be in, has access to every
buyers, Ellwood said. takes six to eight months to sell a business. financial record that’s there.
Still, he is worried about taxes
rising at the end of the year if vari- He gets a $1,500 check up front, refundable “There are typically 30 to 45 days where they
ous cuts and tax holidays aren’t at the closing, and charges 10 percent of the go through the financials, seeing that they are
extended, and he is counseling sales price for his services. getting what you say they’re getting.
those who are thinking about selling “There are studies that have proven that you “After that, we have a couple of transactional
to pull the trigger sooner rather than typically get 15 to 17 percent more [selling lawyers that we work with. They set up the
later. with a broker] than you would on your own,” documents. Everybody views them and the
Ellwood likes “to play account- Ellwood said. transaction takes place. The lawyers handle
ant, to play lawyer,” but he is neither. the transfer of money, and you have a new
“I also tell them that they should “Our fees are 10 percent, but you are still up 5 owner.”
go to their personal accountant and or 7 percent, plus it’s a smoother transaction.”
their personal lawyer for clarifica- His final advice to the seller, Ellwood said, is
Returning to his example of selling a to keep the pedal to the metal.
tion,” he said. “I can tell them how newspaper, “Let’s say John is interested in
things have been done in the past, I buying your paper,” Ellwood said. “Once you have made the decision to sell,
can tell them how people have you’re hiring us to sell your business. Let us sell
taken advantage of situations, one “He would make an offer with a refundable your business, and you run it at 105 percent.
way or another, but I always say...go deposit, based upon contingencies. What are
those contingencies? “If you take your foot off the pedal, everyone’s
back to your team. I work very close-
going to realize it, everyone’s going to find out
ly with buyers’ and sellers’ account- “We’ve got to verify the revenues. Can he about it, and you are going to get far less
ants and lawyers.” assume the lease? Will your editor-in-chief stay money at the table. Run it at 105 percent, and
Ellwood can be reached at (703) for a couple of years or a period of time? let us do our job.”
462-2334. Visit the website at
www.NOVA.sunbeltnetwork. com.