In This Issue
New Year's Resolutions for Business Owners Contemplating a Sale
CLIENTS
Exclusive Colorado Country Grocery/Pharmacy
#1015
This small town supermarket and pharmacy is located within a 35-minute drive of Denver, Colorado. It is the exclusive provider in the area and serves a fairly large territory. Gross revenues are consistently around $7,000,000, with the pharmacy accounting for about 44% of the total. The pharmacy has been growing. It features newly upgraded software that increased capacity to 1,400 prescriptions a week. The grocery store is very well-positioned, with little competition and a loyal base of customers. The geographic region served is growing due to its proximity to Denver, affordable land prices, quality of life, and new economic development. The owners also own 10+ acres of land adjacent to the store. It is available to purchase for the new owner to develop and/or build an expanded grocery store/pharmacy. This business should be appealing to an industry acquirer.
Purchase Price.....$1,500,000 Down Payment...$500,000 Gross Sales....$7,033,643
SDE.......$185,776
For more information,
contact Ron Brasch
Custom Fabrication
#2115
This business designs and fabricates carts and kiosks for distribution throughout the United States, Mexico, Puerto Rico, and Canada. It also provides custom millwork and stainless fabrication services. Products are used in various public facilities, such as malls, stadiums, arenas, amusement parks, and airports. There is an experienced staff in place, which includes engineers, designers, department leads, sheet metal and wood workers, welders, and assemblers. Down payment assumes SBA financing. Gross Sales and SDE reflect the 10-month period of January - October 2015.
Purchase Price........$795,000
Down Payment......$200,000
Gross Sales...$1,942,564
SDE........$162,963
For more information,
contact Lynn Lage
Automotive Service & Repair - Growing Profitability!
#1715
This automotive service business sets the local standard for customer satisfaction, employee retention, and overall profitability within the industry. With a great location proximate to a major thoroughfare, the company is continually attracting new customers, as well as serving its loyal base of local customers. The company has grown steadily year after year, set to exceed the anticipated $1M threshold in 2015! The real estate for this location is being sold (in addition to the business price) at the asking price of $925,000 (provided estimated down payment and financing terms assumes purchase of both business and real estate).
Purchase Price....$1,770,000
Down Payment.....$274,000
Gross Sales....$925,496
SDE.........$303,673
Business Summary
For more information,
contact Robert Amerine
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THE FBB GROUP, LTD.�
719-635-9000
800-395-7653
Email: fbb@fbb.com
www.fbb.com
 
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January is customarily the month noted for people making resolutions. If you are a business owner and contemplating the sale of your business within the next three years, let me suggest a few resolutions that might assist you with making your business more valuable and attractive to the marketplace.
1. Start running your business like a business; not your personal checkbook. No one likes to pay taxes, but profits are important to buyers and lenders to prove that the business will be able to pay back debt and generate an appropriate income to sustain the buyer. The more income that you can show, the more your business is usually worth. When you consider that most businesses have a value that is approximately 3 to 5 times earnings. (Please note that there are other important factors, such as balance sheet items, earnings' trends, and industry attractiveness that also impact value, but bear with me on this.)
For our example, let's also assume a multiple of 4 times earnings. Let's also assume a combined Federal and State tax rate of 40%. In this example, by not accounting for $10,000 of income, you save $4,000 in income taxes. However, you lose $40,000 in the value of your business. Acknowledging that you would also pay taxes on that $40,000 increased amount, let's assume a tax rate of 30%, which results in $28,000 of after tax gain. (Note: The lower tax rate of 30% assumes that the increased $40,000 at the time of sale will involve long-term capital gain rates, which are lower than the ordinary income rates applied to operating profits.) Therefore, the result of "investing" the $4,000 in taxes is $28,000 in value as a result of the sale. Most of us would be happy with a 700% return on an investment. Although the actual results may vary, I believe that the concept is apparent.
2. Let your advisors, particularly your accountant, intermediary, and attorney, know that you are planning to sell your business and ask for suggestions for improving your business to achieve a better outcome. For example, we have a document, Positioning Your Business for Sale, that might be of assistance to you.
3. Look at your business through the eyes of a buyer. Do you have appropriate staffing? Is your equipment and software up to date? Is your documentation in order? What type of first impression is conveyed when parties call on the phone, walk in the door, or access your website?
As it usually takes some time to "turn a battleship around" and most buyers, lenders, and advisors will generally go back at least three years in the due diligence process, it is better to implement your resolutions sooner, rather than later.
We wish all of you a healthy and prosperous 2016.
The majority of our business is derived from referrals. Please consider referring our services if you encounter a situation involving the potential purchase or sale of a business.
Ronald V. Chernak
President
Inspiring business relationships since 1982!
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