Legacy Businesses

Your business is an income generating legacy

Its legacy reflects your hard work, philosophy and character

It is unique to every other business

The strength of that legacy impacts the return you will get for your business

Know the answers!

What is my business worth?

Will my business be ready to sell when I am?

How can I get the most for my business?

What Is the Value of Your Business?

Fair Market Value

The hypothetical price at which a transaction occurs between a:– Willing buyer– Willing seller

Both reasonably informedNeither acting under any compulsionBoth of whom have the financial capacity to engage in the transaction

SANITY test

In the final analysis, the final price of a business must pass the SANITY test

- Must cover debt service- Must provide a reasonable income for the

buyer- Must allow for working capital fluctuations

Turnaround Opportunities – Businesses with a negative cash flow may not pass the sanity test but may be a good acquisition candidate for the right buyer.

While the Broker assists the seller in finding the best method to price a business, the final price and terms are determined by the seller.

What Buyers Look For

Provable books and records

Reasonable price

Leverage and terms

Living wage

FF&E (current FMV, not overstated)

Appearance

Lease (reasonable term and cost)

Training (by seller for 1–6 months)

Covenant not to compete

Good reason for sale

Time is of the essence

No last-minute surprises

What do businesses sell for?

 

Sold Price/Sal

es

Sold Price/Adj 

Net

Contractor  0.847 3.359

Contractor  0.812 1.448

Contractor  0.668 4.911

Contractor  0.536 2.459

Contractor  0.455 1.995

Contractor  0.34 0.83

Contractor  0.309 1.591

Contractor  0.085 1.913

Averages 0.506 2.313

Sold Price to Sales

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Get the Most for Your Business

There are dozens of benchmarks to consider when preparing to sell your business for the highest selling price

Act now, even if you don’t plan to sell your business at this time

Here are a few examples

Earnings

Show every dollarExampleAssume $1,000 not recorded Assume 40% tax bracket (no help from CPA)Assume business sells at 2.5 times net profitSave $400 in taxes each yearLoose $2,500 when your business sells Tax at least six+ years to make it worth while

Sales Trend Up

Keep the growth effort up and sell before your company feels any “burn out”.

$0.00

$500,000.00

$1,000,000.00

$1,500,000.00

$2,000,000.00

$2,500,000.00

$3,000,000.00

$3,500,000.00

$4,000,000.00

1999 2000 2001 2002 2003 2004 2005$0.00

$500,000.00

$1,000,000.00

$1,500,000.00

$2,000,000.00

$2,500,000.00

$3,000,000.00

$3,500,000.00

$4,000,000.00

1999 2000 2001 2002 2003 2004 2005

Operating Records

Get it out of your head and on to paper.

Make it a system like Ms. Fields Cookies.

Customer Data Base

Your customers are a special part of your business that makes it worth buying versus starting a new company

Keep it updated, detailed and very confidential

The Brand, not the Owner

Get people to fall in love with your company and note you (the owner).

Ray Kroc bought McDonald’s and kept the name – the brand became valuable 

Key Employee Retention

Have a system that will help key people stay around after you are gone

Prepare for the Unexpected

Have insurance and other tools for life’s unexpected curve balls

Know Where You Stand

Update your business valuation each year and prove you are growing value

Position for the Future

Keep your company ready for the marketplace change (Kodak went digital, Apple went IPod…)

Look for signs

The Golden Rule

Stand in an Investor’s Shoes - Try to objectively and critically think as if you were outside looking to buy

Impressions Mean a Lot

Freshen your look and style without breaking the bank. It matters.

Maintain Confidentiality

It is almost always best to not let your employees, customers, and vendors know your business is for sale

Reach the Masses

The best price is reached when a wide range of buyers can consider your business.

 The more potential buyers that know, the better chance of getting your price

Race to the Finish Line

No sale is done ‘til its done

So keep the business going strong until the sale is complete

 

Lance Armstrong

Patience

It can take a while to sell your business (from weeks to over a year)

Be Proud

Nearly 50% of Americans desire to own their own businessFewer than 5% of shopper ever buyIn this great and free country, it is a shame not to pursue one’s dreamsYou are one of the few

Thank You

If you ever care to contact us, our conversations and transactions will be completely confidential

Check us on the web at BuyBizUSA.com

Call us at 813 571 7700

Thank you