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SPECIALIZING IN MERGERS AND ACQUISITIONS, VALUATIONS AND ADVISORY SERVICES

 

It took blood, sweat and tears to build the business you’ve created, but how much is it worth to someone else - for instance, a prospective buyer?

As a seller you need to determine what your business is worth and which valuation method makes sense for your situation. Exodus Business Solutions understands the differences and how to apply them to your specific industrial sector.

Asset valuation method

Add the value of your assets and subtract your liabilities to calculate how much your business would be worth if it were to be sold today. This method does not take into account any future earnings potential or any intangible value, such as the goodwill of the business. Goodwill may or may not be transferred along with new business ownership. Goodwill might include the business location or the owner’s personal reputation, or a special relationship with customers. An underperforming business may not have goodwill, so net asset valuation might accurately reflect its value.

Capitalization of earnings or cash flow

The capitalization rate represents the rate of return a buyer would require on an investment when compared to the market rate for other investments that have comparable risks. A buyer would need to determine the annual earnings trend.

Gross income multipliers

When business expenditures are predictable or in a situation where the buyer intends to drastically cut expenses after a business sale, it can be reasonable to base the business value on a gross revenues multiplier. However, this method, along with using a capitalization rate, doesn’t take into account that businesses within the same industry may have differing profit margins, based on expenses.

Assets and Earnings Valuation

The IRS recommends this method, which bases a company’s value on both assets and historical earnings. After calculating the expected returns from your business assets, then compare this total with your historical earnings. If your annual earnings are higher than the return from your assets, the difference is your excess earnings, which can be divided by a capitalization rate.

Attracting the Right Buyer

There are generally four types of buyers in the marketplace and it’s important to consider their motivations for acquiring your business.

Strategic buyers usually are interested in investing in larger businesses, often with revenues over $20 million, and are often attracted to entering new markets that offer new technologies, proprietary processes or products. Most small businesses don’t meet the criteria to attract these types of buyers who are focused on future earnings and market share.

Industry buyers often lack strategic or synergistic motivations for purchasing a business. Their goals are to locate and secure raw materials or products and negotiate the best possible price to benefit their company or organization.

Financial buyers often are interested in cash flow. They have money to invest, and are looking for a variety of different businesses within varying industries. If they don’t have the experience, they may need significant training and assistance from existing management after the sale, which should be reflected in the purchase price.

Corporate, or sophisticated, buyers are an attractive buyer for most businesses. They often take into account future earnings when assessing a company’s value. This financial information should be well-documented with credible and supportable assumptions to attract these types of buyers.

To receive a fair and accurate market value for your business, enlist the support of an expert in the field, like Exodus Business Solutions By hiring a professional to create a detailed valuation report, it demonstrates to potential buyers that you understand the market and your company’s true worth.

Contact Exodus Business Solutions at (619) 688-0007 or visit www.exodus1.com to get your questions answered and a business valuation started TODAY!

Being one of the leading firms in our industry, we are best equipped to help you because of our background and years of experience in working with business buyers and businesses of all sizes and types. This includes retail shops, restaurants, franchises, service businesses like distributing and printing, all kinds of manufacturing, laundries and many others Exodus Business Solutions can help you find just the right small business for sale.

Helping Buyers Find the Right Choice

If you need some assistance or advice in reviewing a listing, formulating an offer; negotiating a certain part of the deal, investigating or valuing a particular business, reviewing the financials, or if you simply want an unbiased expert opinion about a particular situation where you’re not positive what strategy to use, we will immediately provide you with our experienced input and assessment.

Your business purchase or sale information will be handled by experts and conducted in a confidential manner. We aim to help these buyers find a business quickly and efficiently.

With this service you’ll have immediate and unlimited access to our team of business buying specialists to help you with situations or challenges you encounter. Our experience extends across a wide variety of industries and company size including manufacturing, distribution, retail, medical (hospital-based, primary care, internal medicine, surgical, other medical specialties & dentistry), financial services-broker/dealers, investment advisors, financial planning, and architectural, engineering, accounting, legal, and other professional firms, hi-tech and non-technical firms.

If you want to go about this the right way, these are the four critical steps you must follow:

• Step 1 – Educate and prepare yourself fully for each stage of the buying process.
• Step 2 – Determine with absolute certainty what type of business is right for you and then focus your search strictly on businesses that make sense.
• Step 3 – Negotiate all of the details to ensure that you put together a deal that makes sense today and down the road.
• Step 4 – Investigate every aspect of the business for sale, the industry, the customers, the financials, the suppliers, the employees and the competition to be sure that you learn everything before you buy!?

Let an Exodus Business Solutions professional help you find the most appropriate business opportunity. Click here to learn more.

If you are a business owner considering your options, you may be in the stage of determining how to sell a business. Being one of the areas leading firms in the industry, we are well equipped to help you with your questions. Your business information will be handled by experts and conducted in a confidential manner. Below is an outline of some of the issues you should expect when selling your business.

The Many Aspects of Preparing to Sell

Even if you think you’re many years away from selling out, you should consider what your heirs or successors would have to do if you died unexpectedly. If you don’t have a workable exit strategy in place, you (or your heirs) may have no choice but to liquidate the business and sell off the assets piecemeal, getting nothing for the goodwill you’ve built up over the course of the years.

Initial issues in selling out – how should you time your decision and choose experts to help, and what legal/ethical pitfalls do you need to avoid?

Valuations of small businesses – how does the market put a price on a small business, and what can you do to maximize your own business’s value?

Finding a buyer – what do you need to know about working with a business broker, creating a selling memorandum, and other marketing concerns? If you work with us, we already have pre-qualified buyers, and one of the first steps in selling your business is to see if we have potential buyer matches in our database.

Tips during the listing process:

•Have up to date financial information available
•Prepare a current list of fixtures, equipment and inventory (if any)
•Maintain normal business hours
•Dress up the business premises
•Be prepared to negotiate
•Gather all of the information a buyer might like to review (see below)

Structuring the deal – what are your options as to terms, paying particular attention to the tax implications of various alternatives? For a brief recap, the following will need be reviewed by potential buyers:

•Financial information (including tax and liabilities)
•Premises and assets (condition, value, etc)
•Intellectual property (trademarks, copyrights, etc)
•Employees (roles, key members, etc)
•Management (effectiveness, etc)
•Products and services
•Customers (relations, reliability, etc)
•Suppliers (relations, cost, etc)
•Licenses and contracts (staff, leases, customers, etc)
•Sales and Marketing (methods, costs, success, etc)
•The industry itself (history, present and the future)
•You

Financing the deal – what should you know about seller financing, and third-party financing through leveraged buyouts?

Completing the deal – from the Letter of Intent through due diligence to the closing, what are the typical steps you can expect to go through in the sales process? When you sell the business, there are expenses in the selling process and you will not receive the exact amount that you sold it for. Below is a summary of what you can expect to receive (cash) from the sale. This is for guidance only as it will be different for everybody depending on what approach was employed to sell your business.

SELLING PRICE

(Less)
Cost of Solicitor
Cost of Accountant
Cost of Business Broker (can be high as 10% of the final sale price)
Any accounts payable
Payment of any outstanding loans, leases, contracts, etc
Cost of bringing the business up to speed (repairs, refurbishments, etc)

(Plus)
Prepaid rents, insurance, etc

(Equals) SELLERS EXPECTED PROCEEDS

After the sale – have a plan in place for what you plan to do with your life!

Let an Exodus Business Solutions professional help you with the sale of your business. Click here to learn more.

The goal of most entrepreneurs is to be successful, watch the bottom line, reduce the tax burden, and eventually sell their business for a premium. Unfortunately, most entrepreneurs will not end their career so illustriously. The fact is most business owners will not make the decision until its to late. According to the Small Business Administration, your business will transfer to family, be sold, or closed down. Statistics show that one out four of businesses will sell in the United States. The biggest reason businesses do not sell is because the ownership never made the decision.

Helping Businesses Make the Right Choice

Exodus Business Solutions specializes in preparing small and medium size businesses for sale and implementing a sophisticated sales effort to obtain a premium price for your business. By conducting a valuation and preparing a professional marketing package before marketing efforts begin, we quickly attract qualified buyers. Our experience proves, the valuation and marketing package facilitates buyer financing, a critical component of most business transaction.

We believe our business model will be the standard model for most business brokers and intermediaries in California. Buyers are becoming more sophisticated and expect the financial records to be compiled in a professional manner. This will limit the amount of time buyers spend gathering and examining company records and allow for smooth and timely transaction. Everyone wins under this scenario.

Buyer Profiles

The Industry Buyer is typically a competitor and knows your business, customers, and industry. Many times they stand to gain the most by acquiring your business, but as often as not they are among the lowest price bidders and buyers of last resort. They generally determine price based upon the value of the business assets. They are the best buyers when they have a strategic reason to buy and know that you know the reason. Our job at EBS is to know the strategic reason and to drive the price they pay above asset value

The Financial Buyer is typically an individual looking to be his own boss. They expect a living wage and take pride in building upon your success. Our experience indicates the majority of these individuals are hard working family types with excellent credit ratings. These buyers constitute the largest pool of buyers for the vast majority of US businesses that gross less than one million dollars a year. These businesses form the backbone of the US economy. EBS has access to a large pool of these Financial Buyers. These buyers typically base value on the company’s historical cash flow.

The Strategic Acquirer is generally a larger business that has identified a strategic reason to be in your business. They currently may or may not be a competitor. This buyer is our buyer of first choice as they pay the highest prices. However, we base our valuations upon what Industry, Financial, and Corporate Buyers will pay to avoid the distortion caused by Strategic Buyer methods

The Corporate Acquirer typically comes from a large company background. They include high net worth individuals or group of individuals, investor groups, and small corporations. They are usually familiar with your business and quite sophisticated. Their primary focus is on current and future earnings. EBS maintains a database with many of these corporate acquirers.

We love helping people prepare for the most important decision for their business. Doesn’t our careful approach make a lot more sense?

Have you entertained the thought of buying a business or franchise or are you an owner looking to sell your business?

Business brokers, like real estate brokers, bring the buyers and sellers of businesses together. More business owners nationally choose to use a broker than to sell a business themselves, but some business owners do handle sales on their own. Try to use a business mergers and acquisitions specialist who focuses on business sales — in other words, avoid someone who does it part-time while selling real estate. A broker is an agent employed to effect bargains and contracts, as a middleman or negotiator, between other persons, for a compensation commonly called brokerage.

Finding the right business specialist is important if you are thinking about selling. Attention should be paid to success rates and experience, and determine how committed the professional is to selling your business. A business intermediary can bring more prospects to your business than you could ever do on your own. They’ll also separate the buyers from the lookers, which can save you valuable time. And, in most cases they will get you a better price than you could on your own — more than justifying the fees for service.

What type of professional should actually handle the sale?

What is your background/experience? It takes time and experience to be able to understand the nuances of businesses. The average Mergers and Acquisitions Specialist is 55, and for good reason. A competent professional needs experience in valuation, a fair amount of accounting experience, knowledge in the legal aspects of selling a business, salesmanship, and patience. In short, the firm or person you are looking for has been around the business block before entering the profession.

What services do you provide? – The M&A specialist should offer to help you price the business, and should be able to show you how to package and market your business. After you’ve heard two or three proposals, you’ll get a good idea of the type of services available to you. Remember you are hiring a sales professional with strong financial skills, so look for signs that your M&A specialist is just that.

Can I talk to the owner? – If you’re not personally dealing with the owner of the firm, it may be a good idea speak to him or her. Ask him or her the questions you asked of the person whom you initially contacted. Do you get the same answers? Also, ask what kind of recourse you have if you’re not getting any activity on your business.

What kinds of tools do you use to research buyers? Before the Internet, if you wanted to sell your business, you were probably stuck looking for buyers in your city or area. Today, the Internet has made the world smaller for sellers, and a good M&A specialist takes advantage of that. Additionally, the M&A specialist should have at his or her disposal research tools and use them to find buyers and general information about the profession or industry in which the seller is active.

How will you market the business? – Discovering what tools a firm has in its marketing arsenal will help you determine just how committed they are to selling. Every business needs a little different approach to its marketing campaign and every business brokerage firm is a little different, so there are many combinations of campaign strategies that might be appropriate.

Look for a variety of ways to that the broker reaches sellers – ads in local papers and trade publications, listings on Web sites as www.bizben.com. It’s also a good idea to get on the Internet yourself, act like a buyer, find out where listings for businesses similar to yours show up, and then ask the broker if they list there.

Ask to see the printed marketing materials the broker puts out for clients. Look at their brochures and presentations, assessing completeness and how well-written they are. Ask whether they approach similar or complementary businesses about mergers, which shows you they are casting a wide net for buyers.

There are many business brokers in California but Exodus Business Solutions can help you with their unique expertise to sell or buy a business in Southern California and beyond. At Exodus Business Solutions we can also help you price your business properly, tell you how you can make it more saleable, and simply be there as a resource throughout the sale.

For additional information call 619-688-0007

Business mergers and acquisitions are commonplace in our economy. One of the main reasons given for a merger is that it draws on the strengths of each company, who together can offer more than they can alone. Benefits of an acquisition typically include lowering risk by avoiding the start-up period’s initial losses and less capital depreciation.

Reasons for a Merger
Consolidation is everywhere and in all industries. Mergers are being announced at an unprecedented rate, and we can expect to see many more mergers during the next few years. An increase in the size of a firm can mean greater financial resources to cover the additional costs that may be necessary for the business to succeed in today’s business environment. Some of the factors which may encourage a merger…

Buyers may be motivated to merger activity for:
• Economic Efficiency Considerations: Companies want to gain (i.e., reduce average costs) from larger-scale operations. Merged firms can also have greater specialization of equipment and operators, high-speed automation, and high-tech equipment.
• Risk Spreading Through Diversification: Reduce risk of loss and/or failure by spreading risk throughout more companies and capital.
• Growth and Personal Aggrandizement: Some managers make it their personal goal to be the largest and most powerful company and achieve this through mergers.
• Monopoly Power: Firms merge to create or enhance monopoly power. Incentive? All of the individual firms worth more as a group than as individual firms
• Perhaps as a result of a general change in business climate
• Management retirement considerations
• Business succession planning
• To gain newer technologies and methods more quickly to keep up with their industry
• Larger market share through eliminating the competition (growth)
• Access to other markets – regional or channel marketing (growth)
• Additional, complimentary products or services which “fit” with the acquiring company

Tips for companies considering a merger.
• Deal from a position of strength. Don’t wait till things are bad and you need the money.
• It’s important to find a like-minded company which is a good match in terms of culture and personality.
• Explore many possible partnerships. Whether you’re shopping for a buyer or looking to buy, establish your criteria for evaluating deals.
• You need to explain how each employee’s role will change and communicate as things evolve.
• Let employees know what you are up to. During the exploratory phase, you don’t have to give details, but once the deal is done, explain the reasons behind the merger.
• Pay attention to employees. Once the deal is done, every employee wonders, “What will happen to me?”
• Once the papers are signed, the task of integrating the two organizations should be quickly handed off to the managers. Firms considering a merger should however take considerable care. The worst form of merger is inevitably where two firms with significant difficulties merge without proper planning, potentially causing their problems to be magnified. You will want to retain an experienced, professional firm to help manage your merger. For additional information call 619-688-0007.