BUSINESS...SELLING, BUYING AND RAISING CAPITAL 3 Stages of Business 1. Growing (on way up) 2. Selling ( on way out) 3. Nothing (on way back) Business Value • Business Value = Earnings

BUSINESS

SELLING, BUYING AND RAISING CAPITAL

3 Stages of Business

1.  Growing (on way up)

2.  Selling ( on way out)

3.  Nothing (on way back)

Business Value

• Business Value = Earnings x Multiple

• Future Maintainable Earnings •  Normalised accounts

• Capital Requirements •  Initial

•  Ongoing

•  Replacement

Earnings / Profits – What do we mean?

• Operating Profit?

• Net Profit (before or after tax)?

• EBPITD / Return to one working owner ?

• EBITD?

• EBIT?

Some Hurdles to Selling your Business

1.  Do you have a business to sell?

2.  Do you want to sell?

3.  What will or can you do next?

4.  Accountants and Lawyers

5.  Timing

6.  YOU

Some Reasons Businesses won’t Sell

1.  Overpriced •  Wrong buyers looking / numbers don’t stack up

•  Right buyers are not looking / Can’t afford the price

2.  Due diligence / Critical business analysis •  Attitude

•  Lifting the “corners of the carpet”

3.  Non-completion of terms and conditions

What can you do to get your business ready for sale

1.  Determine you have a business to sell

2.  Not too easy / Not too hard

3.  Systematise the business

4.  Get accountant and lawyer on board early

5.  Get your “ducks in line”

6.  Sell you business when you don’t want to

Some Hurdles to Buying a Business

1.  Vendor is “too good” / Can’t replicate

2.  Paralysis of Analysis

3.  Can’t or won’t make a decision

4.  Too risk averse

5.  Finance / Funding

6.  Due Diligence

7.  Finding the “ideal” buyer

“

” Everyone wants to buy the perfect business,

but doesn’t want to pay for it

Andrew Larsen

.

Due Diligence / Critical Business Analysis

1.  What should be your focus?

2.  What has been swept under the corner of the carpet?

3.  What’s going to bite you in the backside?

4.  Risk minimisation •  Customers / revenues •  Supply, leases and legal obligations •  Competition and technology •  Related party transactions

“

” Opportunity lies in Imperfection

Alex Smith, Tabak, 2016

.

Capital Raising

1.  After the 3 “f’s” – friends, family and fools

2.  Start Ups and Growth •  “Fill the fridge” •  Growing Pains

3.  Debt •  “Security” and Obligation

4.  Equity •  Ownership and Control

Capital Raising Debt vs. Equity

DEBT (“Bank”)

1.  Term: Fixed, Known

2.  Rate: Fixed, Known

3.  %: None or “all”

4.  Security: GSA / Assets/ House / “Touchable”

5.  Governance: None- financial restrictions

6.  Exit: Repay / Refinance / Replace

EQUITY (“Investor”)

Set, Unknown, event dependent

Projected, future, unknown

“The less the better?”

Little, if any (“Backing” the entrepreneur / “personal”)

Expertise

Trade Sale / Other investors (growth)

Questions?? .