1. How to sell your businessByAndrew Rogerson

2. Welcome Thank you for attending Other material available up front Sample documents Flyers and sales material Sample: Successfully Sell Your Business:Expert Advice from a Business Broker Please ask questions 3. Introducing Andrew Rogerson Profession - Business Broker Small business ownership 24 + years Five time small business owner Two businesses in Australia Three in California Last 13 years in Sacramento CA Department of Real Estate license # 01757166 Certified Business Intermediary (CBI) with IBBA Certified Business Broker (CBB) with CABB 4. Introducing (Contd) Certified Machinery & Equipment Appraiser (CMEA) with NEBBI Certified Senior Business Analyst (CSBA) Member of the Sacramento Metro Chamber of Commerce Author four books including: Successfully Sell Your Business: Expert advice from a Business Broker 5. Goal of this presentation Introduce the many steps to sell a Main Street businessAllow you to understand the processesResearch and apply to your businessAllow you to create a planAllow you to decide whats important 6. Whats a Main Street Business NOT: Publicly held companies Privately held companies with sales >$30 million IS: Privately held companies with Sales up to about $3 million Generally an owner/operator 7. Why Main Street? Valuation method Uses Discretionary Earnings not EBITDA Types of Sellers Types of Buyers Individual or Corporate Executive control of their life Unemployed looking for a job Synergistic competitor or already in your industry Investment hires a manager & wants a ROI 8. 10 areas to research & understand 1. Tax Planning 2. Accounting 3. Legal review Part 1 & Part 2 4. Personal Financial Planning 5. Personal Future Planning 6. Build your Team 7. Financing the sale 8. Valuing your business/assets 9. Sales and marketing plan 10. Other parties in the transaction 9. Tax Planning Entities and their tax treatment C Corp, S Corp, Partnership, LLC or SoleProp Check your tax consequences if you sell Purchase Price Allocation Seller and Buyer have different needs andthis has different tax consequences for eachparty. 10. Accounting Is anybody here from the IRS? Report ALL earnings at least 12 months prior to selling So it reflects in your valuation and ultimate price Need - Current and accurate Profit and Loss Statement (P&L) Need - Tax Returns (Last 3 years) 11. Legal Planning Part 1 Check ALL Owners agree to sell Divorce what does the other get? Broad Agreement on price and terms Legal contracts up to date? - suppliers, employees, customers, finance, landlord etc Read existing contracts for gotchas e.g.: lease, equipment finance leases, franchise agreement etc 12. Legal Planning Part 2 Documents to sell the business Confidentiality Agreements Asset Purchase Agreement Sellers Disclosure Buyers Disclosure List of Fixtures, Furniture and Equipment (FF&E) Lease Franchise Agreement Profit & Loss Statements, Tax Returns etc 13. Personal Financial Planning How will you invest the sale proceeds once the business sells? Trust: Living, Charitable, Testamentary etc? Retirement account? Health Insurance account? Shares/Mutual funds/Bonds etc Wills/Heirs 14. Personal Future Planning What will you do once the business sells? Play golf? Spend more time with grandchildren? Travel? Join the Peace Corps? Solve world peace? Note: Sellers change their mind about selling because they lose structure and familiarity 15. Team planning Recommend two teams Primary team Spouse and/or family member and one trusted friend Secondary team Professionals you can hire Attorney/Accountant/Financial Planner Business Broker Critical ingredients = Trust and Ethics Try to avoid changing the team for continuity 16. Financing the sale How will the sale be financed? Cash - Highly unlikely Buyer with $300,000 cash will buy a $900,000 business Seller financing SBA loan program Conventional loans from a bank Commercial Real Estate loan Factor accounts payable and receivable 17. Valuing your business Determine whats being sold and valued Business Machinery and Equipment Real Estate Intellectual Property Main Street businesses sell for multiple of Discretionary Earnings 18. Valuing your business (Contd.) Types of business valuationsBrokers Opinion of Value (Cost $500 to $1,000)Standard Valuation (Cost $2,500 to $5,000)Full Appraisal (Cost $4,000 to $10,000) Do not overpay 19. Sales and marketing plan Executive summary Blind? Confidential Business Review (CBR) Direct Mail Newspaper Advertising Web Trade Association Newspaper Business Opportunity section Magazines Inc or Forbes 20. Potential Deal Killers Family Landlord Attorney or Accountant Selling a business comes with risk Franchise Check your UFOC Lender Each business is unique whats important to sell your business? 21. Review your options Youve done your research and plan what are the options?:Do nothingClose the business downSell to a family member or friendSell the business If you decide to sell 22. If you decide to sell Make sure its what you want It is not a quick process It is an emotional process It is a complex process 23. Seller V Buyer Seller and Buyer are looking for different outcomes 24. What the seller would like All cash Provide one week of training One day of Due Diligence Receive an offer and close escrow two days later Sell at 5 to 6 times Discretionary Earnings 25. What the buyer would like Downpayment of 10% of purchase price 6 months training for free then close escrow 4 weeks of Due Diligence 4 week Test Drive of the business Buy at 1 times Discretionary Earnings 26. Where they end up meeting Buyer downpayment equal to Discretionary Earnings Seller provides some finance 2 to 3 weeks of free Seller training Two weeks of Due Diligence Close escrow 45 to 60 days after offer accepted Sold at 2 to 3 times earnings 27. The perfect business A reasonable price A reasonable down payment (About 30%) Some Seller finance Reasonable sales (hopefully increasing each year) Discretionary Earnings of $60,000 pa or more A compelling reason for sale A desired industry type Good and attractive location 28. 8 reasons a business does not sell 1. Sellers starts process and sees the complexity 2. Seller fears the future 3. Seller receives no offers or lower than expected 4. Sellers next phase of their life less appealing 5. Seller wants all cash and cant get it 6. Due diligence problem: environment, govt., legal 7. Seller unwilling to accept what the market offers 8. Records not support income, expenses & profit 29. Conclusion It is:ComplexDemandingFrustratingTime consumingEmotionalRewarding & a reliefwhen its done 30. Questions? ? 31. Thank you Andrew Rogerson Ph: (916) 570-2674 Email: andrew@Andrew-Rogerson.com Web: http://www.Andrew-Rogerson.com