7 key strategies for coaching a business owner who wants to sell presented by susan rosner
TRANSCRIPT
7 Key Strategies For Coaching a Business Owner Who Wants To Sell
Presented By Susan Rosner
Copyright 2006 Rosner Resource Group, LLC
THE OWNER WILL EVENTUALLY LEAVE
There Is Only One Thing in Business That Is Certain
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Potential Exit Strategies
Sell to a Third partyBe AcquiredMerge
Go PublicHave a family member take overEmployee Buy-outGo out of Business
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Current Situation
Only 25% of businesses that are “For Sale” actually sell
Privately Held Business with Sales of $500K to $25M
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WHY?
Unrealistic expectations Business isn’t marketable
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7 Key Strategies1. Align Personal and Business Goals with the market
reality2. Educate the business owner on what drives a
company’s value and how they can control it 3. Conduct an in depth Business Analysis from the
“outside in”4. “Quarterback” the development and implementation
of a realistic exit plan with key advisors5. Implement value enhancement strategies6. When the time is right-Implement a strategy for
selling the business7. Keep the business owner focused on what’s important
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Strategy #1Align personal and business goals with the market reality
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Key Alignment Areas
Financial Does the owner know how much they have
to “net” after taxes to support their lifestyle after the sale of the business?
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Key Alignment Areas
Business Is the business ready to sell for premium
value? Is the owner ready, willing and able to
implement enhancement strategies to increase value?
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Key Alignment Areas
Emotional What’s the “After business” plan? How will family/partner dynamics influence
the decision to sell?
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Actions:Financial Review current personal financial plan Determine how important the sale of the business is to
the personal financial planBusiness “Quick review” of financials to determine potential
range of valueEmotional Develop options for transition and post-sale plans Uncover impact on sale to family and partners
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Take a Moment
To write down your questions about Strategy #1
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7 Key Strategies1. Align personal and business goals with the market
reality2. Educate the business owner on what drives a
company’s value and how they can control it
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Case Study
Revenues Company A Company B
2005 $12,000,000 $12,000,000
Net Profit on Tax Return $ 225,000 $225,000
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Case StudyRevenues Company A Company B
200320042005
$6,000,000$8,000,000$12,000,000
18,000,00015,000,00012,000,000
Total Debt $1,000,000 $400,000
Average age and value of equipment
3.5 years -$1,500,000
10 years-$100,000
Owner’s vacation 8 weeks 1 week
Owner’s Salary and Benefits $1,500,000 $200,000
Net Profit on Tax Return $ 225,000 $225,000
Adjusted Net Profit $1,725,000 $425,000
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Adjusted Net Profit
Net profit from Tax return Plus Owner’s discretionary income Plus non-cash deductions Plus rent (if owner owns the property) Less reasonable salary to replace the owner Less market rent
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Desirability Measures
Financial health Industry Competition Local economy Management Employees Customer base Condition of FFE Reputation
Customer Orientation Sales Management Ease of operation Technology Legal
Requirements/Licenses
Location/lease Product and Service
Offered
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What this all means……
To drive value you must attend to those things
which Builds revenue and profit Build long term desirability
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Actions:
Calculate adjusted net profit for last three years Review financial trends for at least three years with the owner
Look at year over year comparisons available from internal accounting system or their accountant
Complete the business check-up assessment with the owner Use owner’s industry knowledge to benchmark performance Identify missing critical information and develop a strategy
with the owner for collecting (internal or external) Explore areas that drive company value and how the business
owner controls these areas
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Take a Moment
To write down your questions about Strategy #2
Copyright 2006 Rosner Resource Group, LLC
7 Key Strategies1. Align personal and business goals with the market
reality2. Educate the business owner on what drives a
company’s value and how they can control it 3. Conduct an in depth business analysis from the
“outside in”
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Strategy #3
Conduct an in depth business analysis from the “outside in”
Market valuation Marketability assessment
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Market Valuation
14 valuation methodologies Valuations may vary depending on the
buyer Valuations for business sale are different
than valuations for other purposes! Businesses over $1,000,000 in sales
must have a business valuation
Copyright 2006 Rosner Resource Group, LLC
In Reality
Valuations are an art and a science Valuations are a critical negotiation
tool Price must pass the test of
reasonableness A buyer must be able to have an
acceptable ROI after debt service and buyer requirements
Valuation Methodologies & Valuation Methodologies & TechniquesTechniques
Forced O rderly
Liquidation Approach
Asset Based
CapitalizedEarnings
EarningsM ethods
CapitalizedCash Flow
DiscountedCash Flow
Cash FlowM ethods
EarningsBased
M arketCom parables
G oing Concern Approach
Valuation Approaches
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Marketability Assessment
Strengths Weaknesses Opportunities Threats
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Types of Buyers
High Net Worth Buyer Strategic Buyer Synergistic Buyer Investment Buyer
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Actions: Complete a market valuation Complete an industry benchmark
analysis Use a SWOT analysis to assess the
company from different buyers perspectives
Develop value enhancement strategies
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Take a Moment
To write down your questions about Strategy #3
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7 Key Strategies
1. Align personal and business goals with the market reality
2. Educate the business owner on what drives a company’s value and how they can control it
3. Conduct an in depth business analysis from the “outside in”
4. “Quarterback” the development and implementation of a realistic exit plan with key advisors
Copyright 2006 Rosner Resource Group, LLC
Strategy #4
“Quarterback” the development and implementation of a realistic exit plan with key advisors
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Exit Planning Getting the business owner started is the
hardest part Exit Planning should be started at least 3 to 4
years before the owner wants to retire
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Exit Planning
Select advisory team Facilitate a strategic exit planning
meeting with advisory team Document the specific tasks to be
required to achieve objectives agreed to Assign responsibilities for each task Set dates for completion Make sure everything gets done Review Yearly
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The Advisory Team Accountant Tax attorney Estate attorney Transaction attorney Business consultant/coach Business intermediary
Business broker M&A advisor Investment banker
Exit Planning Consultant*
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Actions: Review the importance of Exit planning with
the Business Owner Research and Select Exit Planning team Initiate initial meeting
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Take a Moment
To write down your questions about Strategy #4
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7 Key Strategies
1. Align personal and business goals with the market reality
2. Educate the business owner on what drives a company’s value and how they can control it
3. Conduct an in depth business analysis from the “outside in”
4. “Quarterback” the development and implementation of a realistic exit plan with key advisors
5. Implement value enhancement strategies
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Can the Business be Replicated?
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Value Enhancers
Clear vision and plan Management depth International exposure Growth opportunities Competitive advantages Properly capitalized History of profitability
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Value Detractors
Lack of management depth Lack of focus Personal goodwill Concentration risk (i.e. customer
/geography) Over-leveraged Too small
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Actions:
•Review the SWOT analysis results
•Review Value enhancers and detractors
•Review the Business Check-up Assessment
•Identify priority actions
•Develop and Implement Plans for Implementation
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Take a Moment
To write down your questions about Strategy #5
Copyright 2006 Rosner Resource Group, LLC
7 Key Strategies1. Align Personal and Business Goals with the market
reality2. Educate the business owner on what drives a
company’s value and how they can control it 3. Conduct an in depth Business Analysis from the
“outside in”4. “Quarterback” the development and implementation
of a realistic exit plan with key advisors5. Implement value enhancement strategies6. When the time is right-Implement a strategy for
selling the business
Copyright 2006 Rosner Resource Group, LLC
Ready To Sell
READY TO SELLsm
Tax Planning
Legal Review
Personal Financial Plan
Human Resources Audit
Valuation and
Deal Structure Analysis
Industry Trend Analysis
Analysis ofPerformance Indicators
Financial PerformanceAnalysis
Ready To SellSm
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Ready to Sell
Pre-Due DiligenceThird Party ValuationAdvisory Team AlignmentMarketing Package Development
Offering MemorandumProspectus
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Best Offer Marketing
Best Offer MarketingSM
Best Practices• Targeting the right buyers• Creation of a compelling future story
for:– Blind Business Profile– Confidential Memorandum
• Support of Business Advisors• Best Offer Program• Screening buyers for motivation and
financial qualifications • Confidentiality
Search
Approach And
Attract Best Buyers
Target
Research
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Partnering To Close
SELLER GOAL Maximize return
BUYER’S GOALMinimize Risk
DEAL
STRUCTURE
Desirability of Business
TheHUMANFactor
Partnering To CloseSM
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Timeline
Activity Timeframes
Ready to Sell Month 1
Marketing Implementation
Month 2
Buyer Visits Month 3 thru 6
Due Diligence Period 60 days from LOI
Closing 60 to 90 days from end of Due Diligence
TOTAL TIME 10 to 18 monthsTimeframes are estimates only
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Actions:
•Meet with Key advisors•Help the owner select a business intermediary•Align the advisory team
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Take a Moment
To write down your questions about Strategy #6
Copyright 2006 Rosner Resource Group, LLC
7 Key Strategies1. Align Personal and Business Goals with the market
reality2. Educate the business owner on what drives a
company’s value and how they can control it 3. Conduct an in depth Business Analysis from the
“outside in”4. “Quarterback” the development and implementation
of a realistic exit plan with key advisors5. Implement value enhancement strategies6. When the time is right-Implement a strategy for
selling the business7. Keep the business owner focused on what’s important
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Best Practices For The Entrepreneur
Focus on Extraordinary Execution Demonstrate
Adaptability Persuasion and Negotiation Open mindedness Ability to deal with set backs
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Critical Shifts
FromMaking a livingWorking in your businessMeasuring FinancialsWorking HardManagingSelf employed
ToBuilding an EnterpriseWorking on you businessMeasuring Strategic ValueWorking SmartLeadingBusiness owner
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Actions: Coach the owner on Best practices Coach the owner to work “on” the business
focusing on growth! Coach the business owner that the sale is not
made until closing papers are signed and money is in the bank!
Copyright 2006 Rosner Resource Group, LLC
Take a Moment
To write down your questions about Strategy #7
Copyright 2006 Rosner Resource Group, LLC
7 Key Strategies1. Align Personal and Business Goals with the market
reality2. Educate the business owner on what drives a
company’s value and how they can control it 3. Conduct an in depth Business Analysis from the
“outside in”4. “Quarterback” the development and implementation
of a realistic exit plan with key advisors5. Implement value enhancement strategies6. When the time is right-Implement a strategy for
selling the business7. Keep the business owner focused on what’s important
Copyright 2006 Rosner Resource Group, LLC
Q & A
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Thanks For Attending!
To request a link to this Presentation, Business Check-Up Assessment and Audio send me an email with your
feedback about the session:
Mergers and Acquisitions, Consulting, Exit Planning
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THANKS!