2. Founder and Chairman Emeritus of Sunbelt Business Brokers Network, the largest Small Business Brokerage Franchise in the world. Over 30 years of experience in educating Buyers, Sellers, Brokers, and Franchisees. Author of 3 Books; "Buying a Business to Secure Your Financial Freedom, "The Secrets of Buying The Right Business (for you) Right and The BizBuySell Guide to Buying a Small Business. Founder of Business Buyers University Serves on the Board of Directors of the International Business Brokers Association (IBBA) and is a licensed instructor. 2 3. Founder and past president of several large business brokerage firms; Also a founder, past president, and former Executive Director of the International Business Brokers Association. Author of: The Business Reference Guide, The Complete Guide to Business Brokerage, The Resource Handbook for Business Brokers & Intermediaries, and The Business Broker Online Magazine. Co-Author of Handbook of Business Valuation, 2nd Edition and The Mergers & Acquisitions Handbook of Small & Midsize Companies. 3 4. Toms son, Ron West, became involved with the industry during his summers in college, where he learned the basics of business brokerage under his dads tutelage. After graduation, Ron continued to learn more about the business through his continued involvement with Business Brokerage Press and the opening of his own business brokerage office, Generations. In 2000 Ron chose to join the family business full time. Since then, Ron has handled the technology side of the business developing valuation software and an online version of The Business Reference Guide. Ron heads up the digital marketing side of BBP under the name DealStudio where he develops web sites, systems, and automations for business brokers, associations, and networks around the country and internationally. 4 5. Currently, approximately 45,000 businesses are listed for sale on BizBuySell and the site receives more than 1 million monthly visits. BizBuySell also powers the business-for-sale classifieds for over 150 newspaper publishers including The Wall Street Journal, BusinessWeek, and The Dallas Business Journal. BizBuySell has one of the largest databases of recently sold businesses and a leading franchise directory. 5 6. Main Street Lower Middle Market 6 7. Job security has lessened Options: Get another job Start up a business Buy an existing business or franchise 7 8. 1. Subconscious process of elimination 2. All things considered 8 9. 1. Job for Life 2. Opportunity to Make More 3. Build Value in Something to Sell 4. The American Dream!! 9 you cant sell a job 10. Big Business (football rules) Financials Often have publicly traded stock Audited statements 2 sets of books Management Very Small Business (baseball rules) $1 million/20 employees Confidentiality Financing (on house- yes; on business -no) 1) security; 2) debt payment Relationships Negotiating Valuation L.L.L. 10 $30 million/100 employees SBA (medium-sized business) Small Business 11. Confidentiality Location Track Record/Product or Service/Longevity/ Reputation Management Why selling? What about these numbers? Tax Considerations (minimize taxes/maximize owner's lifestyle) Security for Seller (business assets, personal guarantee not your house) Security for Buyer (Right of Offset) Continuing a successful business How to Value a Business (Rules of Thumb multiple of real earnings) 11 12. Actual results rather than proforma Immediate cash flow Trained employees in place Established suppliers and credit Establish customers and referral business Existing licenses and permits Training by the seller The availability of owner financing A business plan for growth 12 13. ITS ALL ABOUT THE $$$$, plus.. Focus on the business, not the financials Focus on the top line, not the bottom line (earning should be 10-20% on sales) Focus on 70% after the sale, not 30% before the sale (business plan for growth) 13 14. 90% of all buyers are first time buyers, never been in business before. will finance the purchase of their business. dont know what business they want or best serves their needs. are terrified and/or uneducated in the business buying process. (or more) will not buy the business that was advertised or the one that they call in on. have from $50,000 to $150,000 in Hip National Bank. are very comfortable putting 10% down on everything. 90% of all sales will be financed by the seller. 14 15. 1. Why Buy An Established Business? 2. Who Should Build vs. Buy? 3. How to Find the Right Business to Buy? 15 16. 16 17. Start a Business Buy a Business Creativity & Knowledge Required High Moderate Initial Capital Required Low, initially Year 1 Average Investment: $77K Moderate to High Year 1 Average Investment: $96K Capital Access Typically difficult Reliance on savings, family Better due to tangible cash flow Cash Flow Negative, initially 2+ years to profitability Typically exists already Able to grow faster Chance of Success Low >75% of start ups fail in 1st year Better Potential for resale Summary Good fit for those who have. A clear vision Burning desire to create Resources (financial, skills) No viable purchase candidates Good fit for those who have Desire to be own boss Operating skills Immediate cash flow needs 17 18. Existing Business Franchise Opportunity Up-front Cost Minimum 20-40% down Remaining financed via bank or seller Usually 20% down Remaining via bank or franchisor Ongoing Payment None (beyond funding operations, of course) Royalties: Usually 5-10% External Support No direct support Can access SBDCs, CPAs, attorneys, industry associations, etc. The Franchisor Plus the 3rd parties relevant to existing businesses Flexibility Complete flexibility Limited The Franchisor network determines operating rules (owning multiple units further reduces flexibility) Brand Value Initially dependent on business fundamentals and market Ultimately shaped by efforts within the business Primarily driven by franchisor/network Positive: Franchisees can use brand value as a lever for success Negative: If the brand as a whole suffers so will the franchisee 18 19. 19 20. 20 Service Businesses Dry-Cleaning/Laundry Auto Repair Health/Medical/Dental Retail Businesses Restaurants Convenience Stores Bars/Taverns Manufacturing Internet/Online 21. (Select all that apply) 0 10 20 30 40 50 60 "Better income opportunity" "Be my own boss" "Better lifestyle" "Currently own and looking to expand" "Want a side business" Source: Q3 2011 BizBuySell Buyer Survey What are the primary reasons you are looking to purchase a business? 21 22. 1. Why Buy An Established Business? 2. Who Should Build vs. Buy? 3. How to Find the Right Business to Buy? 22 23. 23 24. 24 A Business Brokers Stock-In-Trade You must have inventory to sell You must always be looking for listings The foundation of Main Street Business Brokerage 25. 25 Confidentiality Valuation Small Business Marketplace Bank Financing Offers to Purchase Negotiations Due Diligence 26. Sole Practitioner Multiple Broker Offices Direct Mail Telemarketing Cold (Hot) Calling Direct Cold Calling Three Foot Rule Drop Notes Everyday Life 26 27. Who would by a Franchise? New Franchise Sales Existing Franchise Resales 27 28. Sellers Buyers Other Brokers Real Estate Brokers 28 29. Banks SBA Seller Friends & Family In-place Financing 29 30. BizBuySell Newspapers Industry Trade Groups Vendors/Customers/Competitors 30 31. 31 32. Seller/Broker (Partners???) Buyer/Broker Buyer/Seller Buyer/Banker (Broker) Buyer & Seller Attorney (Broker) Buyer & Seller Accountant (Broker) Closing Attorney or Escrow Agency (Broker) 32 33. 33 Both are important Yeah / Boo 34. 34 The Brokers job is to find the best buyer; That is motivated; That can and will buy the business; 35. Tom West Business Brokerage Press Ron West Business Brokerage Press Ed Pendarvis Founder, Business Buyers University 35 BizBuySell Bob House General Manager Logan Coker Strategic Partnerships Manager 36. Local Regional and USA Worldwide (Visa?) 36 37. 37 38. 38 Service Businesses Dry-Cleaning/Laundry Auto Repair Health/Medical/Dental Retail Businesses Restaurants Convenience Stores Bars/Taverns Manufacturing Internet/Online 39. (Select all that apply) 0 10 20 30 40 50 60 "Better income opportunity" "Be my own boss" "Better lifestyle" "Currently own and looking to expand" "Want a side business" Source: Q3 2011 BizBuySell Buyer Survey What are the primary reasons you are looking to purchase a business? 39 40. 90% of all buyers are first time buyers, never been in business before. will finance the purchase of their business. dont know what business they want or best serves their needs. are terrified and/or uneducated in the business buying process. (or more) will not buy the business that was advertised or the one that they call in on. have from $50,000 to $150,000 in Hip National Bank. are very comfortable putting 10% down on everything. 90% of all sales will be financed by the seller. 40 41. Financially Capable Management Experience Needs an Income Wants the Business Will Make an Offer 41 42. Buyer must be able to make a living Bank Lending ??? Financials (Tax Driven) Why Selling? Buy a Business you like & would be proud to say you owned. 42 43. We sell Business Opportunities, We dont sell Business Guarantees. Just enough information, to create interest and show possibilities ITS JUST LUNCH!!! (Buyer and Seller must meet) My Work is My Life You cant get married if you never go out on a first date. 43 44. 44 First Dates are very important 45. ITS ALL ABOUT THE $$$$, plus.. Focus on the business, not the financials Focus on the top line, not the bottom line (earning should be 10-20% on sales) Focus on 70% after the sale, not 30% before the sale (business plan for growth) 45 46. We like to deal with folks that we like and trust We do not like to deal with folks that we dont like and dont trust. This is not like Buying/Selling a house 46 47. 24 words that DOUBLED my Income, Ed Pendarvis, CBI 47 48. Older Americans dont negotiate New Americans never stop negotiating 48 49. Price Terms Conditions 49 50. Seller always wants more, more, more Buyer has limits (Not necessarily driven by value, but by limits) 50 51. 1. How much is seller making now 2. Less ______ (The new debt service of the purchase) 3. Plus_______ (What the buyer does to improve the business) Formula that works Ratio of Down Payment to Annual Earnings 1:1 = Success 51 52. All paperwork must come through you Dont hide, look for ways to help & problems to solve This is Heavy Lifting This is where the Business Broker Takes care of things. Attorneys/Accountants/Lenders/Financing/Environmental /Landlords 52 53. Checklist Titles/Liens Tax Compliance Validly Existing Funding (Good Funds) 53 54. Always keep moving towards closings Stay in touch with all stakeholders Always use a checklist / Take Inventory/ Check Equipment / Assign Task / Follow Up Seller gets paid (You get paid) 54 55. 55 Listing Agreement Confidentiality Agreement Personal Financial Documents (Disclaimer Stamp) Offer to Purchase Asset Purchase Agreement Completion of Services Agreement 56. Believe in what you are doing Truly, truly help and add value to all that you do Establish good, productive work habits Continue your professional education Join and participate in IBBA and IBBA Affiliate Organizations List and sell more deals & bigger deals Call us if we can ever be of help 56 57. Ed Pendarvis, CBI (Fellow of IBBA) [email protected] Student / Teacher Cell # 843-819-7842 57
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