by Jill Kerr | Oct 20, 2022 | Blog, Buying A Business, SBA - Small Business Administration
BY:
Nimi Natan
Division President & CEO
Gulf Coast Small Business Lending
As a small business lender, I get many questions regarding the state of economy. In the past few months, the overarching theme has been: “should I buy or start a business now and if so, how?” Our economy is facing a near unprecedented number of stress points including persistent inflation; recessionary pressures; high interest rates; supply-chain interruptions; and labor shortages. For the foreseeable future, we will likely experience declining sales and profits. Fortunes are made in times like these so it is absolutely a great time to invest. Good businesses are available to purchase at reasonable prices, vendors are more interested in extending terms and opening new accounts, and while more difficult to find, financing is available.
My suggestions, featured below, are relevant for strong and weak economic conditions; however, the challenges today require a level of precision that is not as critical in a growing economy.
First, buy a good business. It seems obvious, but keep in mind that now is not the time to attempt a turnaround. A good business has decent margins, diverse customer base, tenured staff, and no extraordinary working capital, and/or capital expenditure needs. An established franchised restaurant, for example.
Second, don’t overpay. Small businesses with good margins and growth rates are worth up to 4-5X cash flow, based on average cash flow for the past four to five years. Businesses with proprietary technology or unique and recognized brands are worth 6-8X, with more commodity-type businesses worth 3-4X. Enlist the help of an accounting professional to go over the financials and scrutinize add backs.
Thirdly, finance conservatively. A strong balance sheet is critical for surviving the next few quarters. Use more equity even if it means bringing in partners. Rely on conventional and/or SBA financing, and DO NOT use hard-money and MCA lenders. If the seller offers financing, insist on conventional terms and be prepared to have it subordinated to conventional lenders. If you find that you must use aggressive financing, it is a sign you are overpaying or swallowing more than you can chew and you should consider walking away.
Next, don’t forget working capital. We see it again and again. Buyers think that income and EBITDA or broker’s SDI equate to free cash flow. For most businesses, that’s not even close and you must incorporate the working capital and capital expenditure needs into your projections and financing. If you are not sure what all this means, ask an accounting professional to help you project cash flow.
Lastly, pursue operational excellence. This one also might seem obvious; however, you should only invest in a business you fully understand and in line with your experience. This is critical for assessing the opportunity as well as running the business. If you find a business you think you love but lack the experience, consider bringing in an operational partner.
In conclusion, I’ll use an analogy: you are about to board a ship headed into a storm of unknown magnitude. Be sure that the boat is sound and gassed and that the captain (you!) is experienced. Doing so will give you the best possible opportunity to achieve entrepreneurial success.
For more information about Gulf Coast Small Business Lending, please contact:
Jim Frey, SVP – Business Development Officer
Gulf Coast Small Business Lending
Office: (724) 259-3182
Mobile: (724) 600-4409
by Jill Kerr | Oct 19, 2022 | Acquisition, Business for Sale, Buying A Business, Featured Business For Sale, Richard Stopa
This 30 year-old leading provider of workplace solutions offers conflict management, organizational development and diversity, equity and inclusion consulting, coaching, and training to clients nationwide from their headquarters in Washington DC. Clients include major government agencies, global corporations and non-profit organizations who want to support the health and well-being of their employees and the effectiveness of their organization. The owner wishes to retire.
Key features of the business:
- Solid staff in place and a large network of contractors around the U.S.
- Diverse and highly experienced employees with extensive experience and training
- The Diversity, Equity and Inclusion industry, of which this business is a part, is expected to grow to $15.4 billion by 2026
- Seller who is willing to train and assist the buyer with a smooth transition
Asking Price: $1,200,000
| Financial Summary |
| |
2022* |
2021 |
2020 |
2019 |
| Revenue |
$ 1,314,982.00 |
$982,236 |
$989,164 |
$1,047,812 |
| Cost of Goods Sold |
$388,000 |
$417,472 |
$398,024 |
$566,775 |
| Gross Profit |
$926,982 |
$564,764 |
$591,140 |
$481,037 |
| Gross Profit Percentage |
70% |
57.5% |
59.8% |
45.9% |
| Seller’s Discretionary Earnings |
TBD |
$161,000 |
$163,297 |
$159,323 |
*projections from owner include revenue from two new 5-year government contracts
Please Contact: Richard Stopa (RStopa@harvestbusiness.com or 703-307-1187) to discuss this business in more detail.
Open with Adobe Reader, use their Fill and Sign Feature to complete and electronically sign the document, then return to RStopa@harvestbusiness.com.
We will then be able to discuss financial details and other confidential information about the business with you.
Disclosure: We have relied on information provided and approved by seller and make no additional representations or warranties. Buyers should review with their advisors as needed
Clients choose Harvest Business Advisors for our sage advice on profitably growing their business, accurate business valuations, and when the time is right, a consistent ability to deliver a high price as part of a smooth exit transaction. Harvest Business Advisors provides business brokerage, business valuation, and business succession planning services.
We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at info@harvestbusiness.com or 877-838-4966 to discuss selling your business, ordering a business valuation or buying a business.
by Harvest Business Advisors | Sep 5, 2020 | Baltimore MD, Business for Sale, Buying A Business, Eddie Davis
Serving the Mid-Atlantic marketplace, this company re-manufactures and repairs components for medium and heavy-duty trucks. In addition, they sell related parts.
This company was established in 2004 in an ideal high-traffic location. Their customer base is deep and diversified.
They provide exceptional customer service which has resulted in long-term customer relationships.
Their management team is experienced and loyal. They have seven highly skilled technicians
- No additional capital investment needed.
- Average inventory: $100,000 (at cost)
- Average 3-year revenue: $2,200,000
A strong prospective buyer would be involved in the trucking or repair industry or perhaps in a related industry, seeking growth/diversification opportunities. Experience in business management with sales background would be an advantage.
Please Contact: Eddie Davis (EDavis@HarvestBusiness.com or 301-325-7687) to discuss this business in more detail.
Click here for a Non-Disclosure Agreement and Finance Document.
Open with Adobe Reader, use their Fill and Sign Feature to complete and electronically sign the document, then return to EDavis@HarvestBusiness.com.
We will then be able to discuss financial details and other confidential information about the business with you.
Disclosure: We have relied on information provided and approved by seller and make no additional representations or warranties. Buyers should review with their advisors as needed
Clients choose Harvest Business Advisors for our sage advice on profitably growing their business, accurate business valuations, and when the time is right, a consistent ability to deliver a high price as part of a smooth exit transaction.Harvest Business Advisors provides business brokerage, business valuation, and business succession planning services.
We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at info@harvestbusiness.com or 877-838-4966 to discuss selling your business, ordering a business valuation or buying a business.
by Harvest Business Advisors | Sep 5, 2020 | Business for Sale, Buying A Business
Harvest Business Advisors is pleased to present this Commercial Fire and Water Restoration Cleaning Company for sale.
For over 12 years, this commercial restoration cleaning company has been serving their Mid-Atlantic customers.
All key managers are responsible and will remain with the company. The technician team is well-trained and experienced.
This Company has stayed focused on necessary capital investments; equipment is up to date and modern.
Financial highlights:
Average revenues: over $2,000,000
Average historic seller’s discretionary earnings (SDE): $400,000
2019 SDE: $450,000.
- Growing revenue and earnings history
- Established industry accounts
- Experienced long-term staff
- Nine (9) vehicles including box trucks with lifts, vans, and cars (most less than two years old).
- Extensive modern facilities in central locations
- All equipment, trucks, people, leases, software, and rights to geographic area will convey.
Asking Price; $1,995,000.
The Buyer:
An industry buyer seeking growth opportunities with an established company or individuals with a general management/sales background seeking acquisition of profitable business.
Benefits to buyer include:
- Reputation
- Recurring revenue
- Experienced technicians
- Long term customer relations
- No significant additional capital investment needed
- Location and facilities
Connect with Greg Caruso (GCaruso@HarvestBusiness.com) at 877.838.4966 to discuss this business opportunity in more detail.
Click here for a Non-Disclosure Agreement and Finance Document.
Open with Adobe Reader, use their Fill and Sign Feature to complete and electronically sign the document, then return to GCaruso@HarvestBusiness.com.
We will then be able to discuss financial details and other confidential information about the business with you.
Clients choose Harvest Business Advisors for our accurate business valuations and our consistent ability to deliver a high price as part of a smooth exit transaction.
Harvest Business Advisors provides business brokerage, business valuation, and business succession planning services. We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at info@harvestbusiness.com or 877-838-4966 to discuss selling your business, ordering a business valuation or buying a business.
by Harvest Business Advisors | May 20, 2019 | Acquisition, Buying A Business
You did your due diligence before acquiring a complimentary business entity. Now what is the key to post merger success? Due Diligence.
To achieve the synergy required to create the desired result, greater success requires your follow-through. As you redefine “The Company”, all of the early actions need to clearly express all policies and procedures and expectations. Subsequent frequent tracking is necessary to uncover any weaknesses that may exist and where your attention needs to be directed.
CFO Magazine has some time tested steps for you to take to ensure the smoothest transition. As laid out in this article, Four Keys to Realizing Post-Merger Synergies, directing your post merger efforts will go a long way towards efficiently achieving your target goal: greater success.
http://snip.ly/04x2n3
Clients choose Harvest Business Advisors for our sage advice on profitably growing their business, accurate business valuations, and when the time is right, a consistent ability to deliver a high price as part of a smooth exit transaction.
Harvest Business Advisors provides business brokerage, business valuation, and business succession planning services. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at info@harvestbusiness.com or 877-838-4966 to discuss selling your business, ordering a business valuation or buying a business.
by Harvest Business Advisors | Sep 20, 2018 | Buying A Business, Home Page
A properly crafted Letter of Intent (LOI) is an important step after making the decision to purchase a business.
(Please note this is NOT legal advice. Please retain an attorney familiar with local laws and customs before you finalize any purchase agreement).
The Letter of Intent is drafted by the Buyer and their advisors to inform the Seller (and their advisors) of the Buyer’s decision to formally discuss purchasing the business for sale.
The Letter of Intent is a preliminary document where the Buyer and Seller “agree to agree”. Changes and edits can be made to the Letter of Intent to satisfy both parties.
The Buyer will have disclosed their financial standing and resources to the Seller already and signed a Non-Disclosure Agreement. The Seller will have shared financial information with the Buyer and provided a Confidential Business Review.
The Letter of Intent sets the due diligence process in motion.
“Ten Steps to Increase the Value of Your Business – click here to download today.
Discuss with your advisors what you need to include in your letter of intent. Now is the time to ask questions, receive advice and process information about important decisions.
There is no typical Letter of Intent since each business sale is unique. However, there are some standard features:
Purchase Price: The purchase price is the total amount the prospective buyer will pay for the business.
Financing Specifics: Describes the basic deal terms such as down payment, financed amount (either through bank or seller), and if necessary, contingency details. If you intend SBA financing, all variables (other than payment of a fixed amount note) must be fully determined by one year from the closing date.
Due Diligence: The due diligence clause outlines the length of time the buyer has for their investigation process on the business. There should always be a clear start date and end date
Basic Conditions of the Sale including (but not limited to):
Earnest Money: To confirm the buyer’s seriousness about buying the business, the LOI will include a set amount of money paid to confirm the agreement. This protects the seller if the deal does not happen and time and expenses are lost.
Expenses: Outlines who pays what expenses.
Expiration: Details the termination of the agreement presented
Closing or Conditions of Closing: Usually outlines the high level details about closing the transaction, what the parties anticipate. Some of the items that can be listed here are closing date and any important contingencies, by either party. Decisions about who will write the final contact would be stated here.
We have found that asking what the minimum or maximum of something (price, down payment, seller financing, etc.) tends not to be productive. It is almost impossible to get specific on a part of the transaction without have a reference to the whole offer. The answer will always be – “it depends.”
Connect with Harvest Business Advisors today – email info@harvestbusinessadvisors.com or call 443.334.8000
Often to protect themselves, buyers add earn-out or claw-back clauses. At a high level, this means buyers would tie payments into resulting cash flows. Usually we use revenues because any other cash flow (such as profit) since it is hard to agree on later. An example from a recent transaction is:
- Last 3 years average revenues was $1,300,000. If revenues from the 12 months following closing are less than $1,235,000 then the price will be reduced $1 for every $2 of revenue loss. The price will not adjust beyond the $130,000 note amount and will be offset against the note to the extent the note is outstanding.
Arrangements for sellers to stay involved with the business beyond the closing or other milestones would also be included in a Letter of Intent.
A well-written Letter of Intent should bring parties together and help lay out terms as a way to reduce the risk of litigation and set the course for a successful deal.
We are happy to answer questions about Letter of Intent or guide you through this negotiation process.
It is an intricate dance.
In the end, with patience and perseverance, a Letter of Intent can be created that everyone can live with at the time of negotiation and be quite pleased with one year later.
Clients choose Harvest Business Advisors for our accurate business valuations and our consistent ability to deliver the highest price in the smoothest sale transaction possible. Harvest provides business brokerage, business valuation, and business succession planning services. We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at info@harvestbusiness.com or 443.334.8000 to discuss selling your business, ordering a business valuation or buying a business.
