filta convention preparing your business for sale
Post on 17-Jul-2015
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Employment/Industry
Transworld Business Advisors, LLC. - Director and Partner
International Business Brokers Association
Business Brokers of Florida
Nestle Waters of America – Market Manager
PepsiCo – Distribution Center and Territory Manager
Airborne Express – Terminal Manager
US Army : Platoon Leader / Company Commander
Community Service
JMJ Life Center
Family Promise of Greater Orlando
Coalition for the Homeless
Awards/Recognition
Deal Transaction Volume 2013 & 2014
BBF Million Dollar Producer 2006 – 2014
BBF Deal Maker in Deal Volume
Transworld Presidents Club 2006- 2014
CFl MVP Deal Volume 2006 to 2014
CFL MVP Commission Volume 2006 – 2014
BA Providence College History / Military Science
Board Certified Intermediary
Florida Licensed Real Estate Sales Agent
In 2006 after a career in consumer products sales and distribution, Mike came to Transworld looking for a business to
buy rather than continue the never ending cycle of relocation up rooting of his family. He joined the firm as a sales
agent believing that access to the systems and data base he would be able to find a business of his own. Nine plus years
later and over 200 transactions completed he is consistently one of the leading sales producers in the state and the
nation. He has completed transaction ranging from $25,000 to $40,000,000 in sales volume. Mike is also a Partner in
Transworld Business Advisors with over 90 offices worldwide.
Valuation Methodology 101
Three Approaches
Income Approach Methods
Cap Rates
Present Value
Market Approach Method
Revenue & Profit Comparison
Asset Approach Method
Quality and Quantity of Earnings
Profits/Owner Benefit Levels. (EBITDA vs. Owner Benefits)
Growth Potential
Trends
Owner Financing
Bank/SBA Financing
Ease of transfer
Diversified Client Base
Top 10 Ways to Increase the
Value of Your Business
Here’s how to rig the system with hot input
and information to increase the value!
• It will be the first thing everyone wants to see when buying or valuing your business. With today’s computer technologies and programs you have zero excuse not to have your business records completely automated and accurate to the minute.
#1 Keep good books and records
• Up trends are very important. A buyer will value the future earnings based on past results. If the chart is going up, the future earnings must have a growth trend too, and the value will be higher. Would you buy a business that made $150k, then $200K, then $250K in successive years? (YES) Would you buy the reverse business? (NO) Would you buy a business that was flat? (PERHAPS) Would they be equally valued? NO!
#2 Grow earnings before you sell.
• I know none of you business owners expense unnecessary items in your businesses. But many legitimate expenses could even be declared by a valuation expert as discretionary. (Did you really have to visit Filta HQ During Bowl Week) Keep a separate credit card, or accounting notation, or a journal.
#3 Separate fringe benefits from real expenses.
• Small businesses are valued on one owner operator working the business. If your spouse performs a job that must be replaced, the value will be negatively impacted. Your best bet is to phase the family out and have staff that will stay on after a sale. Also, no buyer wants to work 60 plus hours a week. If you do, you had better get some staff before you try to sell. Chief cook and bottle washer business owners will find it very hard to sell. Transfer the knowledge NOW!
#4 Have proper management and staff in place.
• If your business is cramped and the business is limited by the current facility and equipment, you business valuation will reflect that ceiling of revenues and profits. Either sell before you need to invest, or buy the equipment and move the business, and sell in a few years.
#5 Have the capacity to grow and make capital expenses.
• (Getting the picture yet?) There are several great accountants and CPA firms in your area. PICK ONE AND USE THEM!
#6 Keep good books and records.
• Your business is primarily valued based on the profit to you! And yes, they do use multiples, and the multiple increases as the profit increases, i.e. a business making $100K may be worth 2x’s ($200K), but a business making $500K may be worth 3x’s ($1.5M)….but remember #2, the trend also affects multiples.
# 7 Increase the bottom line.
• The value of equipment and businesses will be higher if everything works and looks nice. Also, buyers will want everything in working order at the day of closing…even that old piece of equipment that you do not use anymore.
#8 Keep everything in good repair…and if you do not use it THROW IT OUT!
• You got it now right!! FYI. Any bank looking to finance the acquisition of your business will look at least at three years of earnings (this is not owner benefit) to decide how much they can lend. If a buyer cannot get enough money from a bank, you have two choices. Seller financing, or sell for less. Good books and records will allow your business to sell fast, for a high valuation, and be financed with third party financing. ALL GOOD FOR YOU.
#10 Keep good books and records.
Increase Owner Benefits/Earnings
Keep good books and records
Increase sales over a two year period
Have management in place
Have inventory/assets documented, controlled and managed
Make capital improvements or investments now (not too much)
Have excess capacity to grow
Plan to exit
Hire a professional (Broker* as well as accountant)
Actual Sold Stats - Florida
Sales Sold Price
Adj Net / SDE
Sold Price/ Sales
Adj Net / Sales
Sold Price/ Adj Net
Rent to Sales Ratio
Sold Price to Sold Down
Stock / Inv
Days on Market
144078 65000 56069 .451 .389 1.16 NA 1 NA 269
102800 115000 89950 .119 .876 1.27 NA .791 NA 134
280626 125000 73066 .445 .260 1.711 NA .76 NA 609
500000 125000 115000 .25 .23 1.087 .0018 1 NA 182
346291 280000 126282 .809 .365 2.217 .035 .286 NA 52
789689 1645022 425102 2.083 .538 3.87 .086 .0856 NA 252
Filta avg high of 2.12 to a low of .61 at the Sold Price to Sales Ratio
Big marketing budgets produce large corporate clients
increasing sales
Process, support and buying power not available to
competitors
Your Franchise adds value. Could push up multiple.
Franchise recognition
Availability of Franchise financing
Safety addresses the Subliminal Fear Factor
Added Value for Franchises
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