Selling a Business

Sale of Midwest Retail Services

Presentation by Ken Pritchett

Background

• Started working for Streater Store Fixtures in 1984

• 10 years later I decided to start my own company

Today

• 15 years old• 15 Employees• Represent 25+ Manufacturers• $5 Million in sales

Thoughts on Selling

• Reasons why I should sell– Tired of the responsibility of being the owner– Lost the passion and drive to run the business

at its best– Fairness to the employees– Fairness to the business and to myself

• Reasons not to sell– My Family

Decided to sell (What did that mean?)

• No Broker• No Acquisition• No big time consuming

process• No disruption of business• No secrets and gossip

around the office

• Seamless Transition• Employee Protection• Easy Transaction

Who was I going to sell to

• Our sales rep from our 2nd largest supplier• Been in our industry for 10 years• Had been calling on our company for 5 years• I felt he was the perfect fit and had the ability to

do the job and the deal

My Plan

What I felt I needed in the way of money was in the same ballpark as what I felt the company was worth

• Made an outline of what it would take to retire • Confirmation that this made sense…..Dinner

with Tim Gase• Contact my prospect………Lunch with Matt Ray• Presented my intent

The Process

• 5 years of company tax returns• 5 years of personal tax returns• Several questions along the way

The deal itself

• 20% down payment• 10 years of monthly payments• Interest on the financing• Employee contract to age 65 for health

insurance• Sign 10 year lease to stay in my building• Closed on December 30, 2008• My cost was about $10K• Committed to help and mentor in any way I can

Buying a Business

Acquisition of Midwest Retail Services

Presentation by Matt Ray

Buying a Business

• Personal evaluation• Professional valuation• Assembling an advisory team• Financing• Keys to successful sales

Purchase Structure

• 20% down payment• Cognovit note with 10 year term• Life insurance to guarantee loan• 10 year lease in current building• Consulting contract with owner• Sizeable working capital (defined amount)

left in business– Accounts Receivable, Inventory, & Cash– Accounts Payable zeroed out (seller’s resp.)

Personal Evaluation

• Long term personal fit?• Ten years of experience within the

industry• Hands-on working experience with

prospective business and staff• Full spousal support• “Chicken Little” economic environment

Professional Valuation

• Hired professional valuation firm– $3,000 Fee

• Acquired financial data from owner• Determine if asking price was fair market

value

Advisory Team

• Professional valuation firm• Accountant

– Asset versus Stock purchase– Assisted in acquiring financing

• Attorney– Specializing in small business & acquisitions

• Financial Planner– Company retirement program

Financing

• Down payment financing• SBA loan option

– Denied due to rules involving seller’s future participation in business

• Small local banks– Ongoing banking requirement

Keys to Successful Sale

• Familiarity of all parties involved• Owner’s willingness to share information• Owner financing long term note• Quality support team for both parties• Open communication between buyer and

seller

Buying & Selling a Business

Midwest Retail ServicesKen Pritchett & Matt Ray