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Joe Cacopardo laskaCOMPANY www.laskacompany.com The Secrets of Buying & Selling a Small Business

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  • 1. Joe Cacopardo laska COMPANY www.laskacompany.com The Secrets of Buying & Selling a Small Business

2. Workshop Goal No Secrets by the End of The Workshop laska COMPANY 3. What Potential Buyers Need To Know laska COMPANY 4. Over 25,000,000 Approximately20% Receptive to Selling laska COMPANY 5. Reasons Owners Want to Sell

  • Retirement
  • Burn-Out
  • Divorce
  • Health
  • Cash Out
  • Other Business Interests
  • Re-Location
  • Death of the Owner
  • Any number of Simple Reasons

laska COMPANY 6. Business Brokers

  • Do You Need One?
  • YesBut
  • The But is Related to Understanding the Business Brokers Role

laska COMPANY 7. Business Broker

  • Business Brokers Almost Always Represents the Seller
  • Seller Pays their Commission
  • Fiduciary Duty to the Seller
  • No Multiple Listing Service in Idaho

laska COMPANY 8. Business Broker

  • Access to Businesses For Sale
  • Details about the Business
  • Majority of Businesses in Idaho are Sold through Brokers

laska C OMPANY 9. Business Broker

  • Buffer Between Buyer and Seller
  • Paperwork is Astounding
  • Closing the Deal

laska COMPANY 10. Buyers Need To Know

  • Identify the Type, Size and Location of the Business you Want to Purchase
  • Know How Much Money to Put Down
  • Know Where the Down Payment/Purchase Money Will Come From
  • Professionals Should Be Lined Up

laska COMPANY 11. Buyers Need To Know

  • Making an Offer is not Buying.. Get the Process Started
  • Keep the Negotiating & Communications Moving Forward
  • Get the Signed Purchase Agreement into Escrow

laska COMPANY 12. What Potential Sellers Need To Know Timing is Everything! laska COMPANY 13. First and Foremost Step

  • Determining Value
  • Basic Factors that Influence Value
    • Value of Hard Tangible Assets
    • Value of Intangible Assets
    • Amount of Re-Cast Cash Flow
    • Growth Rate
    • How Long in Business

laska COMPANY 14. Multiples laska COMPANY 15. From the introduction to the Rules of Thumb by Tom Parker

  • A Rule of Thumb is a homemade recipe for making a guess. It is an easy-to-remember guide that falls somewhere between a mathematical formula and a shot in the dark.. Multiples/ Rules of Thumb are a kind of tool

laska COMPANY 16. Multiples

  • Earnings before, interest, taxes depreciation and
  • amortization (EBITDA)
  • Earnings before interest and taxes (EBIT)
  • Sellers Discretionary Earnings (SDE)
  • % of Annual Sales
  • Many Others

laska COMPANY 17. So What is the Definition of Fair Market Value? laska COMPANY 18. Definition of Fair Market Value

  • What any seller is willing to sell their business for and what any buyer is willing to pay.

laska COMPANY 19. Scenario #1

  • My business is well established and is profitable
  • Option:
  • Price the business at the highest possible value based on sound valuation methods that will satisfy all requirements of the final test to a prospective buyer.

laska COMPANY 20. Scenario #2

  • My business has no earnings, however it does provide me with a salary and a few tax benefits.
  • Options:
  • Sell the business for the current fair market value of the assets plus a small amount of goodwill.
  • The buyer is buying a job and will probably not want to pay much goodwill for an equivalent advanced salary.
  • Buyer may have a hard time finding financing for this case.

laska COMPANY 21. Scenario #3

  • My business does not have net income, does not provide me a
  • salary and there doesnt appear to be any value of goodwill, but the doors are still open.
  • Options:
  • Sell the business as a going concern for the current fair market
  • value of the assetsmaybe a new owner will have good ideas
  • to improve profitability.
  • Almost impossible to find financing for this case; seller may
  • have to carry a promissory note.
  • Close business; liquidate assets by auction, etc.

laska COMPANY 22. Scenario #4

  • My business is only one year old; can I sell it?
  • Same as Scenario #3

laska COMPANY 23. Deal Breakers

  • Neglecting the Operation of the Business
  • Placing too High a Price on Business
  • Not Preparing Far Enough in Advance No Planning
  • Not Anticipating the Buyers Request
  • Wanting to Retire Immediately After the Business is Sold

laska COMPANY 24. Deal Breakers

  • Being Inflexible in Structuring the Transaction..Seller Carry
  • Negotiating Every Item
  • Allocating too Much Time for the Selling Process

laska COMPANY 25. laska Company Joe Cacopardo 877 Main St. Boise,ID. 83702 208.331.1116 [email_address]