Why should I use a business broker?

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<ul><li><p>1 </p><p>MINNEAPOLIS 1300 Godward Street NE, Suite 6000 Minneapolis, MN 55413 612-455-0880 SAINT PAUL 3212 Rice Street Saint Paul, MN 55126 651-484-2677 CHICAGO 8745 W. Higgins Road, Suite 220 Chicago, IL 60631 773-243-1603 MILWAUKEE 330 S Executive Drive, Suite 102 Brookfield, WI 53005 262-901-0086 LAS VEGAS 2300 West Sahara Avenue, Suite 800 Las Vegas, NV 89102 702-364-2551 </p><p>MAIN STREET BUSINESS BROKERAGE </p><p>We Build Bridges Between Buyers &amp; Sellers </p></li><li><p>2 </p><p>Why Use Sunbelt? </p><p> Largest Worldwide, National, and Regional Presence Confidential Proactive Marketing Brings More Buyers Our Unique Comprehensive Process Drives Highest Value </p><p> Worldwide Leader in Lower Middle Market </p><p> Experienced Team has led Thousands of Transactions </p><p>WHY USE SUNBELT </p></li><li><p>3 </p><p>Largest Worldwide, Regional, and National Presence LARGEST WORLDWIDE, REGIONAL, AND NATIONAL PRESENCE </p><p> Founded in 1978 </p><p> 200 + Offices Worldwide </p><p> 1,400 Professionals </p><p> 50 Member Midwest Team Largest </p><p>Geographic Group </p><p> Sunbelt Business Advisors Specializes in </p><p>Lower Middle Market Companies with $5 to </p><p>$50 Million + in Revenue. </p><p> Sunbelt Sells More Businesses than any </p><p> Firm in the World </p></li><li><p>4 </p><p>Services &amp; Expertise While we know many industries </p><p>Sell Side Engagements </p><p>Buy Side Engagements </p><p>Corporate Divestitures </p><p>INDUSTRY EXPERTISE </p><p> Manufacturing </p><p> Service Distribution </p><p> Constr./Trades </p><p> Technology </p><p> Energy </p><p> Transportation </p><p>We dont Specialize in Industries - We Specialize in Transactions </p><p>SERVICES &amp; EXPERTISE WHILE WE KNOW MANY INDUSTRIES </p></li><li><p>5 </p><p>Strategic Sales Process: Middle Market vs Main Street </p><p>MERGERS &amp; ACQUISITIONS u LOWER MIDDLE MARKET TRANSACTIONS u $5-$50 + MILLION REVENUE </p><p>Typically outbound in natureSunbelt calls decision maker to illustrate opportunity Subset of team focuses </p><p>here Large number of team </p><p>members to make initial call and funnel to investment banker </p><p> Sunbelt does more strategic sales than any other boutique firm by far </p><p> Manpower plus leverage of Sunbelt offices internationally creates best price and terms </p><p> Analyst Team dedicated to identifying best buyers </p><p> Confidential In-bound in nature Buyers reach out to Sunbelt Mass marketing Over 10,000 listings on web site Marketed through 14 web sites 12,000 unique buyers in database Brokers match buyer needs, ability, </p><p>and net worth with listings </p><p> Supermarket effect Buyers more likely to be local or </p><p>regional </p><p> Confidential Outbound in nature </p><p> Strategically market and illustrate opportunity to buyers </p><p> Heavy collaboration to execute deal with precision </p><p> Analyst team dedicated to </p><p>identifying best buyers </p><p> Manpower + leverage of Sunbelt </p><p> Offices internationally creates best </p><p>price and terms </p><p>BUSINESS BROKERAGE u MAIN STREET TRANSACTIONS u UNDER $5 MILLION REVENUE </p><p>M&amp;A vs. BUSINESS BROKERAGE </p></li><li><p>6 </p><p>Client Objectives </p><p>Realize your Personal and Financial Post-Closing Goals </p><p> Confidentially Market the Business Maximize Acquisition Candidates </p><p> Maximize Selling Price Maximize Cash at Closing Minimize Tax Burden </p><p> Minimize Post-Closing Risks </p><p>CLIENT OBJECTIVES </p></li><li><p>7 </p><p>Our Unique Comprehensive Process </p><p> Capitalize on client control during offer stage </p><p> Maximizes price &amp; terms </p><p> Multiple buyers keeps seller in control </p><p> Secures optimal tax strategy </p><p> Saves legal and accounting fees </p><p>OUR UNIQUE COMPREHENSIVE PROCESS </p></li><li><p>8 </p><p>Transaction Management System TRANSACTION MANAGEMENT SYSTEM: STAGE 1 </p><p>Valuation </p><p>Engagement </p><p>Prepare CBP </p><p>Marketing </p><p>Industry PEGs Strategic Buyers Financial Buyers </p><p>Information Management </p></li><li><p>9 </p><p>Transaction Management System TRANSACTION MANAGEMENT SYSTEM: STAGE 2 </p><p>Offer </p><p>Offer Negotiations Buyer Seller </p><p>Buyer Accountant Seller Accountant Due Diligence </p></li><li><p>10 </p><p>Transaction Management System TRANSACTION MANAGEMENT SYSTEM: STAGE 3 </p><p>Purchase Agreement </p><p>Closing Documents Buyer Seller </p><p>Buyer Attorney Seller Attorney Closing $$$ </p></li><li><p>11 </p><p>Engagement Timeline </p><p>ENGAGEMENT TIMELINE </p><p>Week </p></li><li><p>12 </p><p>Phase 1 Planning </p><p> Sign Listing Paperwork Define Goals, Objectives, and Sales Strategy Obtain 3rd Party Business Valuation Collect Company Data Prepare Confidential Business Profile (CBP) Identify and Analyze Key Potential Buyers </p><p> Phase 2 Marketing Identify and Approach Potential Buyers Distribute Teasers &amp; Confidentiality Agreements Establish On-Going Dialogue with Potential Buyers Select Buyers for CBP Reviews </p><p>ENGAGEMENT TIMELINE </p><p>ENGAGEMENT TIMELINE: PHASE 1 &amp; 2 </p></li><li><p>13 </p><p>ENGAGEMENT TIMELINE: PHASE 3 &amp; 4 </p><p>Phase 3 - Management Presentation Management Presentations Conduct Facility Tours Hold Data Room Visits Continued Dialogue with Potential Buyers </p><p> Phase 4 - Structuring and Negotiating </p><p> Solicit Formal Offers Evaluate Formal Offers Select Optimum Offer </p></li><li><p>14 </p><p>ENGAGEMENT TIMELINE: PHASE 5 &amp; 6 </p><p>Phase 5 - Due Diligence Assist in Buyers Due Diligence Prepare Purchase Agreement </p><p> Phase 6 Closing Finalize and Execute Purchase Agreement Disburse Funds Make Public Announcement if Appropriate </p></li><li><p>15 </p><p>Dominant Marketing </p><p>Proprietary Websites </p><p> www.sunbeltmidwest.com www.sunbeltnetwork.com </p><p>Industry Websites </p><p> More than a dozen sites to confidentially match your business to relevant acquirers </p><p>Traditional Advertising Brings Acquirer Traffic </p><p> Corporate Branding via direct mail, magazines, radio* </p><p>The Sunbelt Network </p><p> 1,400 agents in 200+ offices worldwide </p><p>DOMINANT MARKETING </p></li><li><p>16 </p><p>BUYERS GO WHERE LISTINGS ARE </p><p> We have the largest proprietary database of business listings and buyers in the world. </p><p> We generate more website traffic than the franchised competition COMBINED. </p><p> Sunbelt has 3x the number of listings, than the competition COMBINED. </p><p> We have more $1M+ listings than the competition COMBINED. </p><p> Our API feed relationships with top, third-party websites automatically feed your </p><p>Sunbelt listings to searchable databases. </p></li><li><p>17 </p><p>Our 550 Deal Update Reaches Key Acquirers MARKETING: NEW BUSINESS ALERTS </p></li><li><p>18 </p><p>MARKETING: PROPRIETARY WEBSITES </p></li><li><p>19 </p><p>MARKETING: INDUSTRY WEBSITES </p></li><li><p>20 </p><p>MARKETING: TRADITIONAL ADVERTISING </p></li><li><p>21 </p><p>CONFIDENTIAL WEB MARKETING </p></li><li><p>22 </p><p>The Blind Profile Engages Attention BLIND PROFILE ENGAGES ATTENTION </p></li><li><p>23 </p><p>Confidentiality &amp; Knowing the Acquirer CONFIDENTIALITY &amp; KNOWING THE ACQUIRER </p><p> Customers Employees </p><p> Vendors </p><p>Buyers are required to sign/fill out... 1. Confidentiality Agreement 2. Non - Disclosure Agreement 3. Buyer Profile </p></li><li><p>24 </p><p>Circles of Buyers: Further from You = Greater Value </p><p> Seller </p><p>Employees &amp; Competitors </p><p>High Net Worth Individuals &amp; Small Buying Groups </p><p>Private Equity Groups </p><p>Strategic Acquirers </p><p> Closest to </p><p>Seller (see the least value) </p><p>Furthest from Seller </p><p>(see the most value) </p><p>CIRCLES OF BUYERS: FURTHER FROM YOU = GREATER VALUE </p></li><li><p>25 </p><p>Sunbelts New Circle of Value The NON-OBVIOUS </p><p> Targeting Strategic Buyers Sunbelt creates a target list of potential bidders using </p><p>Sunbelts market research capabilities and gathering input from Seller. </p><p> Waterfront coverage on PEGs and within your Industry. </p><p>Private Equity Groups </p><p>Strategic Acquirers </p><p> NON-OBVIOUS BUYERS </p><p>Bench Markers </p><p>EVERY INDUSTRY EVERY COMPANY HAS NON-OBVIOUS or HIDDEN BUYERS </p><p>NEW CIRCLE OF VALUE: NON - OBVIOUS BUYERS </p></li><li><p>26 </p><p>Valuation Multiples are Driven By Risk &amp; Growth VALUATION MULTIPLES ARE DRIVEN BY RISK &amp; GROWTH </p><p> Growing Industry Proprietary Product/High Barriers to Entry Strong Brand Intellectual Property / Patents Consistent and Growing Revenues &amp; </p><p>Earnings Customer Diversity Management in Place Post Closing Audited Financials </p><p> Declining Industry Commodity Products Inconsistent Revenues and </p><p>Earnings Heavily Dependent on Owner Partial Sale/Divestiture Low Barriers to Entry Large Customer Concentration Low Repeat Customer Factor Compete on Price </p></li><li><p>27 </p><p>BANK FINANCING &amp; SELLER FINANCING </p><p> Banks restrict the largest pool of buyers Every Dollar Gained In Recast Earnings Equals Multiple Dollars In Sales Price Every Dollar You CANT COUNT because of a bank costs you Multiple Dollars </p><p>POPULATION OF BUYERS </p><p>HIGH NET WORTH INDIVIDUALS INDUSTRY BUYERS </p><p>OTHER </p></li><li><p>28 </p><p>ADVANTAGES OF SELLER FINANCING </p><p>Certainly, you would not want to offer financing to just anyone. We will show you how to </p><p>conduct due diligence on a buyer by checking business experience, financial resources and </p><p>other factors. </p><p> Offering financing for credible buyer will help you by: Getting you a dramatically higher sales price and overall net proceeds for your business in most cases Earning you higher interest rates on the note than you would earn in a money market account Allowing your business to be accessible to a substantially larger pool of buyers Deferring ordinary income to a later tax year potentially at a lower tax rate if you are retiring Increasing the speed of closing by avoiding delays and price restrictions of bank financing Keeps you in first lien position to reduce risk </p></li><li><p>29 </p><p>WHY TO ENGAGE IN SELLER FINANCING IF BANK WONT LEND </p><p>Banks Lend on Tax Return Income Owners run books to pay lower taxes. Many discretionary expenses are not considered by bank loan programs. </p><p>Banks Limit Sales Price Strict guidelines and Debt Coverage Ratio formulas limit the price of a bank financed transaction. </p><p>Sales Must Be Trending Upward If your sales or profits are trending downward, SBA guidelines will likely not allow bank financing on your business. </p><p>Experienced Buyers Get Disqualified If a buyers occupation and work history dont line up with stringent SBA guidelines, he wont qualify. Buyers with </p><p>years of management experience and no direct industry experience wont qualify for SBA. </p><p>High Net Worth Buyers are Disqualified If a buyer has made too much money, SBA lending programs are not available. </p></li><li><p>30 </p><p>SELLER FINANCING PROTECTING YOURSELF </p><p>Most business owners have heard horror stories about seller financing. </p><p>By being proactive and smart, you can avoid many problems. </p><p> Demand enough of a down payment. After investing a large portion of their net worth, months of hard work and </p><p>note payment, buyers cant afford to walk away. Look at a pool of potential buyers. Dont just offer the business to an employee, brother-in-law or friend for a low </p><p>down payment. Carefully interview buyers and choose the buyer with the best mix of experience, potential and financial ability. Perform due diligence on a buyer, including a credit report and buyers personal financial statement. Use a broker. If a buyer gets in trouble, hell call the broker to resell before defaulting. Get a personal guarantee from the buyer. Make sure to file security interests and include conditions in the note to receive regular financial updates from the </p><p>buyer. </p></li><li><p>31 </p><p>SELLER FINANCING NETS YOU MORE </p><p>Bank Financing Seller Financing </p><p>Cash Flow/SDE (banks may not recognize all add-backs) </p><p>$150,000 $200,000 </p><p>Multiple of SDE 3.00 3.50 </p><p>Sales Price $450,000 $700,000 </p><p>Seller Note $90,000 $490,000 </p><p>Seller Financing (7.0%, 10 yr. amo, 5 yr. balloon) </p><p>20% 70% </p><p>Cash at Closing $360,000 $210,000 </p><p>Monthly Payment to Seller $1,045 $5,689 ($68,272 annually) </p><p>Total Note Payments $115,472 $628,681 </p><p>Total Pre-Tax Proceeds (after broker fee) </p><p>$428,472 $766,681 </p><p>Extra $338,209 Seller Advantage 79% HIGHER </p></li><li><p>32 </p><p>WALL STREET JOURNAL </p></li><li><p>33 </p><p>WALL STREET JOURNAL </p></li><li><p>34 </p><p>WALL STREET JOURNAL </p></li><li><p>35 </p><p>Selected Recent Transactions </p><p>M&amp;A TRANSACTIONS </p></li><li><p>36 </p><p>TECHNOLOGY </p></li><li><p>37 </p><p>DISTRIBUTION </p></li><li><p>38 </p><p>CONSTRUCTION </p></li><li><p>39 </p><p>FOOD </p></li><li><p>40 </p><p>MANUFACTURING </p></li><li><p>41 </p><p>RETAIL </p></li><li><p>42 </p><p>AUTO </p></li><li><p>43 </p><p>SERVICE </p></li><li><p>44 </p><p>FRANCHISE SALES </p></li><li><p>45 </p><p>Questions Every Seller Should ask Investment Bankers </p><p>1) Whats the size of your team? </p><p>2) How many transactions does your firm have an engagement agreement with? </p><p>3) How many offices do you have? Do you have International presence? </p><p>4) Process for maximizing price for your clients? </p><p>5) Do you have dedicated analysts on staff? </p><p>6) Does your firm have a dedicated marketing department? </p><p>7) Who does your firm represent, is it exclusive, who pays your fee? </p><p>8) Do you know our Industry? </p><p>9) What type of buyers are you targeting and give me examples of each? </p><p>QUESTIONS SELLERS SHOULD ASK BROKERS </p></li></ul>