Wednesday, May 31, 2017

Article Review: Timing an Exit | Diverstopedia

Adam Croft , May 17, 2017

Key Takeaway: Early exit planning is both necessary and invaluable. Take these steps to ensure you are putting yourself int he best position possible when it comes time to leave your business.

Source: turk-stock-photographer/iStock

Takeaways:

Day-to-day operations take precedence for the owner and exit / succession planning is often an afterthought.
An effective plan begins long before an actual exit.
Important elements of a plan to maximize value:

Be able to demonstrate long-term relationships with customers/clients.
Have a solid management team in place (remove owner dependency).
Review your strategy and operational plans (niche > too diversified with no strategy).
Clean up your financial statements.
Track key performance metrics.
Establish a message around QOE and performance and anticipate buyer questions.
Identify the ideal buyer(s), estimate their valuation and what would drive it higher.
Be honest about the strengths and weaknesses of your business.

Article LINK

For additional information regarding Florida business sales, acquisitions and valuations, please contact Eric J. Gall at Eric@EdisonAvenue.com or 239.738.6227. Also, visit our Edison Avenue website at www.EdisonAvenue.com. To search for Florida Businesses for Sale: CLICK HERE

Friday, May 26, 2017

Article Review: What is EBITDA, and Why Do Investors Care About It? | Axial

Karen Sibayan | January 13, 2017

Key Takeaways:

For the novice only. Very basic article explaining what EBITDA is and how to calculate it.

EBITDA stands for earnings before interest, taxes, depreciation, and amortization. EBITDA indicates whether a business is profitable by revealing the amount of its normal operational earnings.
EBITDA is used by traders, analysts, portfolio managers and others as an indicator of whether companies are properly valued. In the sale of a business a buyer will pay a multiple of EBITDA for a business.
EBITDA is used by lenders to see if companies will be able to pay their future debt obligations.
EBITDA does not necessarily provide a complete picture of a business’ true value or performance.
EBITDA is not cash flow, but serves as a proxy for pre-tax operational cash flow. Because a company’s depreciation, amortization, debt, and tax profile will change as a result of a deal, EBITDA removes those components from the picture. EBITDA is a more standardized way for buyers to compare companies within their respective sectors.

Article LINK

Wednesday, May 24, 2017

Article Review: Lessons Learned From Providing 13 Million+ Business Valuations | Divestopedia

Noah Rosenfarb , September 17, 2014

Key Takeaway: Michael Carter, CEO and president of BizEquity, talks about their simple and affordable online tool to value a lower mid-market business.

Lessons Learned From Providing 13 Million+ Business Valuations

Source: Sergey Khakimullin/Dreamstime.com

Other Key Takeaways:

All business owners want to know, but few really do know, the value of their business.
Valuation is both art and science. The science being comps and the art being feel for the company's industry, technology, growth prospects, etc..
Early stage venture valuation is more "art." More mature company's valuation is more "science."
Pro-forma financials are critical as long-term revenue and EBITDA growth drives the premium around the valuation of the business.
BizEquity was born seven years ago on a flight from Buffalo to Philadelphia when Michael realized he could find home values on Zillow, car values on TrueCar, but where do you find your businesses value?
BizEquity is the only patented online business valuation tool (www.bizequity.com).
It is being used mostly by M&A advisors for their clients for tax planning, divorce cases, estate planning and insurance.
$365 price point.

Listen here:

You can also get this Podcast by:

Article LINK

Tuesday, May 23, 2017

Article Review: 10 Days to LOI — How Investor Jacques Gliksberg Quickly Found and Closed an Add-on Deal | Axial

Kari Lukovics, Axial | May 17, 2017

Jacques Gliksberg, a former banker and Northwestern MBA, executed a roll-up of laundry businesses in the State of Florida including Crown Linen.

Jacques subscribes to Axial, came across the teaser for Laundry Plus, decided to pursue it, and had an executed NDA in 10 days (Note: Edison Avenue posts $500K+ EBITDA and select niche businesses on Axial that may be add-on acquisitions for larger buyers like Jacques).

Jacques' secret to moving quickly on deals is to only inquire on those they are truly interested in. They don't have the staff to comb through deals.

Because of their narrow focus and quick yes/no decisions, brokers, bankers and business owners are far more cooperative.

Add-on acquisitions are much easier than platform acquisitions. You only need to fill a product or geographic niche with an add-on; whereas, a platform acquisition criteria needs to be much more specific.

Jacques advice for sellers is to 1) commit to selling -- no cold feet; 2) be realistic in who the buyers are and what the business is worth -- don't get greedy in the middle of the process.

Jacques greatest source of pride is the fact he bought a company with 20 employees and grew it to 800 employees in 10 years.

Article LINK

Monday, May 22, 2017

Article Review: Avoid These 7 Mistakes When Selling Your Business | Axial

Jane Johnson, Business Transition Academy | May 18, 2017

Key Takeaways:

The vast majority of businesses that go on the market for sale never sell. The most important factors are under the owner’s control. Owners need to address potential problems early in the planning process. Here are seven ways to assist in the sale:

Knowing the value of your business. Hire a broker well versed in valuing businesses, e.g., a CBI or CM&AI/CM&AP.
Understand the perspective or intentions of potential buyers. Ask questions and understand the buyer's needs as they will differ from your own.
Have the proper advisory team in place prior to starting process. Experienced advisors add value.
Sell to the right people. Experienced advisors will be able to help identify legitimate prospects.
Properly position the company for sale. Experience advisors will be able to fairly communicate selling points and defects.
Prepare for the due diligence process. Buyers pay for the history, but buy the future. Communicate potential, but don't expect to be paid for it.
Planning for life after sale. Work with a financial planner to understand your post sale financial needs.

Article LINK

Friday, May 19, 2017

Article Review: How to Tell Employees You’re Selling the Business | Axial

By Meghan Daniels, Axial | April 4, 2017

Key Takeaways:

Make a plan. Walking onto the plant floor and saying we sold the company can be a huge mistake.
Involve the buyer in the plan.
There are two change management plans, ADKAR and Leading Through Transitions. ADKAR is based on "the accumulation of individual change leads to organizational change" and Leading Through Transitions is based on "the human side of change: grieving, letting go, building hope and learning."
Assess your employees to see who will be an advocate and who will be a problem.
Identify a core group early as they will be involved in due diligence, etc. who will be advocates.
Avoid spreading the news beyond the core group to avoid distraction. Communicate clearly to the core group the deal could easily fall apart.
Consider employee roadblocks, e.g., a strategic buyer who will eliminate overhead may create resistance. People who may be eliminated won't be good core group members.
Shock and awe is no way to change the culture. Make a plan.

Article LINK

Thursday, May 18, 2017

Article Review: What Is My Electronic Manufacturing Business Worth? | Divestopedia

Jock Purtle , March 15, 2017

Key Takeaway: Learn the best valuation methods to asses your electronic manufacturing services business before you sell.

What Is My Electronic Manufacturing Business Worth?

Source: tcareob72/iStock

Other Notes of Interest:

A broker should be able to give you a good valuation (I recommend finding a broker with a CBI and/or CM&AI/CM&AP who has been trained in valuation methods and has access to the necessary tools).
There are three methods typically used for valuations: Asset, Future Earnings and Comparable Sales methodologies.
Future Earnings and Comparable Sales methodologies use multiples of Discretionary Earnings (DE) or Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA). See graphic below for the DE Multiple.

The Average Multiple

What Is My Electronic Manufacturer Worth?

Calculating the value of your business requires a bit more sophistication than simply applying a multiple; hence, the need for a broker with valuation expertise.
Their are many different sizes of electronics businesses for sale and any given time. See chart below for 2010 to 2015 transaction values by size.

For assistance selling your electronics busienss, you have three options: Use a Business Broker for deals under $1M, an M&A Advisor for deals between $1M and $50M, and Investment Banks for larger deals. (Edison Avenue handles deals less than $50M).

Article LINK

Tuesday, May 16, 2017

Article Review: The Importance of Projections in Determining Business Value | Divestopedia

By George D. Abraham , May 10, 2017

Key Takeaway: It's no secret that valuations are a big part of the business selling process, and it's a critical step. Weighing future projections is a key component to determining the fair market value.

The Importance of Projections in Determining Business Value

Other Takeaways:

Many involved in business transactions and appraisals avoid future projections and thus may render lower values for fear of litigation.
To assume a business will do the same as it did in the past is to assume the future. Past performance must be analyzed by the appraiser and projected into the future. This look at the future gives the appraiser a view through the buyer's eyes, and that is what appraisal is all about.
Buyers will claim their future actions and success will stem from their hard work and they will not pay the seller for this. However, in reality, it is the seller that gave them the opportunity and the momentum to accomplish their perceived goals.
If the appraiser cannot tell the future, then a buyer will not risk their money. Therefore, they will want their money back very quickly requiring a higher capitalization rate or a lower multiple of earnings. That equates to a lower price.
Another reason for projected earnings is the moral obligation to the buyer. Assume research identifies the business lost its most profitable customer or that legislation was passed to adversely affect business performance.
Banks look at the company's financials and industry data to forecast what the company's ability to pay back a loan. If the bank forecasts the company will be able to service the debt, then the will approve the loan.
Temporary issues, e.g., the business suffered for a quarter due to construction in front of the business, may greatly impact past performance, but have a positive impact on future performance.

Conclusion: To show projections to a buyer is potentially risky. However, an appraisal is an opinion of value ordered by the seller. Your client is the seller and is paying for your opinion on the market value of their business. Prepare projections for the seller.

Article LINK

Monday, May 15, 2017

Better With A Business Broker | IBBA

Friday, May 12, 2017

Article Review: 75% of Owners Are Ready for Their Exits, But Their Businesses Aren’t | Axial

Article by John Brown, BEI | March 30, 2017
Image result for axial

Key Takeaways:

75% of business owners answered yes to the question, "If a buyer offered you enough cash for your business to provide you with complete financial security, would you sell today?"
Only 26% of surveyed owners believed they are ready to exit their businesses successfully.
Prepare your business for sale before you feel the need to exit.
An exit plan provides you with flexibility, leverage, and negotiating power.

Determine the likely sale price of your business before you go to market.

Business brokers will provide you with an estimate of your business’ value today, at no cost.
Make sure you hire a Certified Business Intermediary (CBI) or Certified Mergers & Acquisitions Professional (CMAP) to conduct the valuation.
If the value is insufficient for you to exit your business, begin planning to create sufficient value.

Increase transferable value.

Transferable value is what a business is worth to a buyer without the owner’s continued involvement.
If a business requires the owner’s presence to maintain and increase cash flow, the company, without the owner, has limited value.
If a business can continue without the owner, it has transferable value.
I could take 5–10 years to create adequate value.

Preparing your business for a sale before you prepare yourself positions you to sell your business when you want, for the money you need, and to the person you choose.

Article LINK

Thursday, May 11, 2017

Podcast Review: Why Don't Business Owners Embrace Exit Planning? | Divestopedia

Key Takeaway: "Just because you have a business that produces a lot of income, doesn’t necessarily mean you have a business that is transferable or has any value."

In this podcast, Chiris Snider, CEO of the Exit Planning Institute, talks about:

Why exit planning is considered a "blue ocean market";
The importance of setting goals and teamwork in business exit planning;
Emotional aspects of selling a business;
The current state of exit planning and where it is headed; and
The real meaning of the word, "exit," and why it is important to your business.

Listen here:

You can also get the podcast by:

Other Takeaways

Blue Ocean Strategy: Blue Ocean Strategy is one of the top strategy books. A blue ocean symbolizes a new market vs. say a red ocean which is an existing market. Exit Strategy Planning is a blue ocean market.

The Market: Two-thirds of privately held businesses owned by baby boomers, the youngest of which is 50 now, the oldest is 68. A survey that EPI underwrote last year for business owners, 76% of those owners that were surveyed indicated they wanted to transition their businesses in the next 10 years, 48% in the next 5 years, others roughly 6 million businesses with payroll. So that equates to about 4.5 million businesses transitioning in the next 10 years.

Goals: For an exit plan to be successful, you have to make sure that all three - your personal goals, your business goals, and your financial goals - are all aligned.

Teamwork: You have to have a successful team in order to exit successfully, and what we find is that a lot of the advisors are not working as a team.

Article LINK

Wednesday, May 10, 2017

Article Review: The Four Main Reasons Acquisitions Fail | Divestopedia

Key Takeaway: Mergers and acquistions are hard enough without these surprisingly common reasons they can fail. Learn how to avoid these mistakes and strengthen your M&A strategy.

Source: Jurij Boiko/Dreamstime.com

Two More Takeaways:

70% to 90% of acquisitions fail to deliver the value the buyer anticipated.
It is nearly impossible to build a world-class company on organic growth alone.

The Four Failure Modes:

Cost of the acquisition greater than the benefit. Look beyond valuation at what you need to give up to complete the deal, execute the transition, etc..
Not understanding what you bring to the deal. Successful acquirers focus on the internal capabilities they can leverage to transform the target company.
Inexperienced in M&A. Studies show that more frequent acquirers have more success than less frequent acquirers.
Lack of a Defined Process. Acquisitions fail when a company does not have a defined M&A process.

Conclusion

Your best bet is to seek outside assistance during your M&A process (someone who perhaps has done several, or is a repeat advisor or buyer for this process). However, if you are performing your own acquisition, make sure you are avoiding these four common pitfalls and planning for the future.

Full Article LINK

For additional information regarding Florida business sales, acquisitions and valuations, please contact Eric J. Gall at Eric@EdisonAvenue.com or 239.738.6227. Also, visit our Edison Avenue website at www.EdisonAvenue.com. To search for Florida Businesses for Sale: CLICK HERE

Tuesday, May 9, 2017

Article Review: Exits Are Inevitable; Failure Is Not | Divestopedia

Key Takeaways: Planning for a successful exit ensures that you will not be caught unaware when problems come up. We all have to exit our companies someday, but whether we do it well or poorly can be decided by some good planning.

A good exit plan starts with your objectives and can be adapted to changing economic, business and personal circumstances.

Source: ALLVISIONN/iStock

Failure to plan can be the difference between liquidation and a successful sale to a third-party.

Key Elements of a plan:

Plan Ahead
Set Measurable Goals
Incorporate Flexibility

Seven Step Exit Planning Process

Setting Exit Objectives: Do you know your retirement goals and what it will take — in cash — to reach them?
Determining Business Value: Do you know what your business is worth today, in cash?
Increasing Business Value: Have you identified the best ways to increase your company’s value and cash flow?
The Third-Party Sale: Do you know how to sell your business to a third party without having to pay exorbitant taxes?
Transfer Your Business to Insiders: Do you know how to transfer your business to insiders (family members, co-owners, or employees) for cash, rather than give it away?
Protect Your Business: Do you have a continuity plan for your business should you die or become disabled?
Protect Your Family: Do you have a plan to secure your family’s financial security should you die or become disabled?

Conclusion

The thought and actions that go into answering these questions constitute your unique exit plan. For more information about how to begin answering each of the aforementioned questions affirmatively, contact us today.

Article LINK

Thursday, May 4, 2017

JUST SOLD: Florist Business in Southwest Florida

May 1, 2017

Another business SOLD by

Eric J. Gall of Edison Avenue!

Award Winning Florist Business
in Southwest Florida

For additional information regarding Florida business
sales, acquisitions and valuations, please contact:

Eric J. Gall
Eric@EdisonAvenue.com
239.738.6227

Tuesday, May 2, 2017

Edison Avenue’s Eric Gall Awarded Top Producer for SWFL | Edison Avenue

May 2, 2017 Bonita Springs, Florida

For the second time in the past three years, Eric Gall, Managing Partner of Edison Avenue, received the Business Brokers of Florida 2016 Top Dollar Producer #1 Award for the Southwest Florida Region. Gall finished seventh overall in the State of Florida with 13 transactions totaling over $13.3M and was the only broker in the top 10 from outside of the large market Miami-Fort Lauderdale, Orlando and Tampa regions. The Business Brokers of Florida is the nation’s largest State-based association of business brokers with over 1,400 members.

Monday, May 1, 2017

The Value of a Valuation | Divestopedia

Source: phongphan5922/iStock

Key Takeaways:

Takeaway 1: Take the time to understand the factors that drive the valuation of a company.

Takeaway 2: Understand what dictates the multiplier attributed to the valuation of a company to answer the quesiton, "What is my business worth?"

Takeaway 3: Companies in industries that are in high demand will command higher multiples vs. companies in industries in out-of-favor sectors. Healthcare, education, technology and business support & service are high demand. Oil & gas and construction are low demand.

Takeaway 4: Companies with high potential growth rates will command a higher multiples. A business plan is the best tool to project and defend plans for future growth.

Takeaway 5: The buyer's perceived risk plays a large part in what they are willing to value the business. Talk to me about the 15 risk factors that can devalue your business.

Takeaway 6: Try to find strategic buyers. Strategic buyers generally look for larger projects, $1M+ EBITDA, that are a great fit for their existing customer base, product line, or an untapped geographical region, i.e., they believe they can easily scale up revenues while simultaneously streamlining back office support.