Sunbelt Seminars Presents:

Maximizing The Value of Your

Privately Held Business

2350 Herron Road suite 201

Dorval, Quebec

H9S1C5

Thank you for attending

WELCOME!Thank you for attending our seminar “Maximizing the Value of Your Privately Held

Business”. We will share some ideas and experiences that we hope will be beneficial in your understanding of the “Real World” of privately owned businesses and the factors that affect their value.

That Sunbelt is the largest business brokerage network in the world with over 300 offices in 14 countries is not particularly important to this presentation. However the source of this presentation comes from the experience pool of a large network of professional business brokers.

In this seminar Joseph Harrel will convey awareness of areas that drive the value of a business, methods and factors involved in valuation , confidentiality in the sale or transfer of the business, finance issues , how we help protect all parties throughout the process with a goal to arriving at a win-win scenario for everyone involved.

Joseph J. Harrel CBI Bsc. Admin.

Sunbelt West Island 514-694-0554 poste 1

www.SunbeltNetwork.com

Seminar Presenter

Joseph J. Harrel is a Certified Business Intermediary

and a member of the International Business Brokers Association

• Born in Toronto and raised in Montreal Joseph has extensive experience

in management within small, medium and large privately held companies

in addition to having bought, successfully operated and profitably sold

his own business before moving on to establish a Sunbelt office on the

West Island of Montreal.

• He is trained in the intricacies of pricing businesses, bringing buyers and

sellers together and negotiating long term solutions.

Purpose of this Seminar

Planning and Preparation.

• Awareness of value drivers.

• Who can you talk to.

• Confidentiality is King.

• Don’t wait till it’s to late.

Setting the Rules

1. Defining Business Size

a. Big Business (football rules), often times publicly traded stock

Financials (audited statements – 2 sets of books )

Goal to increase shareholder value by maximizing profits.

Management Team

b. Medium sized Business (basketball rules)

Financials ( review engagements? )

Management Team ??

c. Small Business (baseball rules)

Confidentiality

Financials ( notice to reader? )

Goal to lower taxes with lower declared profits.

Value Drivers …..

What are they???

• Good Books

• Documentation of Policies and Procedures.

• Your Management Team.

• Diversification of Concentration of Clients.

• How solid is your Revenue stream.

Value Drivers …..

• Physical cleanliness and appearance.

• A well structured transition program.

• Tax preparation. (what a tax dollar is worth)

• Fix legal issues.

• Availability of Financing!!!

Availability of Financing is a Critical Factor...

What impact can it have on value.

• Have you ever bought a house without a mortgage?

• How many minivans and SUV’s would be sold without

financing.

• What you declare affects what a third party will finance.

• What you don’t declare may need to be financed by you.

Other Critical Factors ...

• Confidentiality

• Location

• Track Record/ Product or Service

• Longevity/Reputation

• Why are you selling?

• Tax considerations.

Valuing a Small Business

Methods and Factors…..

• What is the purpose of the valuation?

• When and why should a business be evaluated.

• Which Methods are used in valuing a small

business.

• How can other Critical Factors affect the value of

your business.

What is the Purpose …..

Many purposes for evaluating a business.

• Partnerships.

• Marriage or Divorce.

• Insurance.

• Financing growth.

• Succession Planning.

• Sale of the Business.

When and Why Evaluate a Business

• Be prepared for the unexpected.

• Get ready for Change.

• Keep the information up to date.

• If you can measure it you can manage it.

• Learn what drives value.

If you know where you stand today, and where you want

to be tomorrow; You can plan to get there.

What about these numbers…

Methods of valuing small businesses.

Three Approaches :

• Market Approach

• Asset Approach

• Income Approach

Value versus Price.

• What is Fair Market Value?

• How do I come up with the Most Probable Selling Price.

Availability of Financing

• Is it a factor.

• How does it impact value

Market Approach

Principle of Substitution

“A buyer will pay no more that which he/she would have to pay to

purchase an equally desirable substitute”

• Can you find comparables?

• Can you adjust for all the differences?

• How much real data is there?

• Is all the data relevant?

• What about the marketplace?

Asset Approach

Fair Market Value versus Book Value?

• Most useful when the Fair Market Value replacement cost of assets

represents most if not all, of the value of the business.

• Certified equipment appraisals valuable to obtain bank financing.

• Not useful when the value of the business is largely derived from

intangible assets.

Income Approach

Multiple of what ……...

• What is the right Multiple?

• Art or Science ?

• What numbers can you prove?

• What are you willing to show?

• What is recasting?

• What are the true owners benefits

Business Transitions

Hold and grow, or Sell and Go?

• The decision to transfer or sell your business is a

choice that only you, the business owner, can make.

• Sunbelt has successfully represented companies both

large and small in manufacturing, distribution, retail,

and service industries.

• Understanding the transaction process helps owners

make tough decisions.

Best Buyer is Often the Farthest Away

• Buyers are generally divided into two categories—Strategic and Financial.

Buyers that can achieve operational or strategic benefits from acquiring

your company are classified as Strategic. Financial buyers are more

concerned with the return on investment that can be earned.

• Sunbelt maintains a large database of both Strategic and Financial

buyers, both local and international. In filtering these buyers, we are able

to search out more buyers that are best suited to each unique situation.

Critical Steps in the Transition Process

Meet with your Sunbelt Advisor Preparation of an exclusive valuation Client Decision to Transfer the business, Go to Market or Wait to

build value Preparation of a Confidential Business Review Strategic plan to maximize the value of the business Conducting Targeted Buyer Search Negotiating offers Due Diligence Purchase Agreements Closing

Importance of Confidentiality

• If you decide to Sell your business Sunbelt Business Advisors you will gain

national and international exposure. The exclusive Sunbelt website is viewed by

Strategic and Financial buyers daily. Sunbelt has a large network with over 20

Canadian offices 300 U.S offices and locations in 14 countries. By engaging

Sunbelt you achieve confidential worldwide exposure. Sunbelt understands the

importance of privacy when it comes to your company and the confidential

information.

• At Sunbelt there is personal attention by experienced professionals tracking and

monitoring the stages of your business transaction. By focusing on objectives and

using proven methods our dedicated personnel will provide highly professional

services. Sunbelt does big business with attention to small details.

• Our job is to help you reach YOUR goals.

Thank you!

• Thank you for attending our seminar

• If you feel you have any questions please call!

• I will be pleased to set up a confidential meeting.

Joseph J. Harrel CBI Bsc. Admin

Sunbelt West Island

514-694-0554

Jharrel@sunbeltnetwork.com

www.Sunbeltnetwork.com