How to Buy your first business - The steps to purchasing a business

Buying Your First Business

Kimberly Deas / William YankeeBusiness Broker904-683-6655

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Agenda• Understanding the Local

Economy• Process of Buying a Business• Avoiding Common Mistakes• Using a Business Broker

2www.SellYourBusinessFlorida.com

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Local Economic Outlook• 96% expect business to grow or be stable*• 92% expect FL economy to improve or be stable*• 80% expect US economy to improve or be stable*

• * BMO Harris Bank Survey published in Jacksonville Business Journal, 1/15/14


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Business Buying EnvironmentBoth Buyer and Seller market (Industry Dependent)Interest rates are lowSteady Flow of New Businesses SellingGood, well organized profitable businesses sell

faster, higher – Be prepared to move quickly4

www.SellYourBusinessFlorida.com 904-863-6655

The Buying Process

www.SellYourBusinessFlorida.com 904-863-6655 5

Buying AbilityPrequalify First!•Cash = Down payment– Friends and Family– 401(k)

•Bank Financing / Non Conventional Loans•Seller Financing


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Financing OptionsBank Lending (SBA)

• Business / Buyer must qualify for Lending

• Lenders 80% with Seller 10% and Buyer 10%

• 60-90+ days to closing• Not available for all

businesses / buyers

Seller Financing• Some industries not

financeable with banks• Seller acts as bank• Affect on price: More

seller financing, higher asking price


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Searching For The Right Business• Online websites• Craigslist• Ask Friends• Approach Directly• Work with a Business Broker

KEEP CONFIDENTIALSign NDA


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3 Steps to Evaluating a Business1. Cash Flow2. Talents3. Opportunity Evaluation


Evaluating Businesses1. Cash Flow Requirements– SDE (aka Cash flow, Owner’s

Benefit, Adjusted Net)– SDE = Profit + Owner’s Salary

+ Personal Expenses + 1 time expenses + Adjustments to normalize to current situation.


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Valuing a Business

Worth what a willing, able buyer is willing to pay!

Common Valuation Methods: 1.Based on Multiplier of Cash flow2.Based on Tangible Asset Values


Evaluating Businesses2. Your Talents / Skills vs. Business Operation Requirements– Sales– Marketing– Operations– CEO


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Evaluating Businesses3. Evaluate the Specific Opportunity / LocationQuestions to ask about business: -What differentiates your business? -How would you grow the business? -What would you do with a windfall of cash? -Why are you selling?


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Reasons Sellers Sell• Burned Out• Retirement – No Heirs• Divorce, Dispute or Illness• Insufficient Capital to Grow• Achieve Estate Liquidity • Outside Investors Want Liquidity• Get Discovered – Receive an Offer

(Order of frequency)


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Offering Memorandum• Narrative About Business (Complete

Disclosure)• Comparative Historical Financials (Recast)• Forecasted Financials • Synopsis of Contracts, Leases & Lawsuits• Given to just a Few Prospective Buyers


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Meeting the Seller• Purpose: Learn the business,

understand the seller• Ask Questions about the

business• Tour the facility, look at inventory• CEO level questions


Making an OfferPoints to Consider:•Price / Earn Out•Seller Financing Terms•Non Compete Terms•Training Period•Escrows•Contingencies

– Financials– Lease– Franchisor Approval


Buyer’s Due Diligence• Goal: Reduce Risk and Verify

Offering Memorandum • Create Priority List of What to

Ask (focus on priorities)• Using Outside Advisors– Attorney– Accountant– Specialists


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Confidentiality• Harder to maintain during Due

Diligence• Shorter time for Due Diligence• Finish Document Review before

contacting Suppliers, Customers & Bankers


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Negotiating & Closing• Maintain Positive – Flexible

Attitude.• Add Addendums as needed• Focus on what’s really

important


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Post Closing• Indemnifications:

Representations & Warranties• Earn Outs, Escrows & Offsets• Seller to Buyer Transition– Extending Courtesies Pays Off– Play Nice.


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Common Buyer Mistakes• Overlooking Talent

Requirements• Incomplete Due Diligence• Gotta-Do-This-Deal Mentality• Over Paying – Too Much Debt• Under Capitalized


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Advantage of 1 Broker vs. Many Brokers For Buying a Business

1 Broker• FOCUS, FOCUS, FOCUS!!• Broker completely knows you and

your needs• Accumulated knowledge of your

interests• Business Advisor to guide process• Insight to Early Listings

Many• No Focus• Keep retelling your story• No broker looking for you• If talking to every broker,

some brokers might not work for you.



Working with a Broker• To Qualify– Complete intake interview– Complete Personal and Financial Profile– Provide Resume

• Pre-qualify for purchases (as needed)• Complete NDA’s in timely fashion• Provide feedback on each business evaluated


Why Use Us? • High Level Professionalism• Confidential• Dedicated Networks of Brokers to

find Listings• Responsive• Experienced• Partnership Creates more Results


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Search for businesses for sale

http://bit.ly/1dpJHiS

Contact us for Intake Interview:

Kimberly Deas / William YankeeBusiness Brokers

Questions: [email protected]@murphybusiness.com

904-683-6655

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mailto:[email protected]


Search for businesses for sale


Contact us for Intake Interview:

Kimberly Deas / William YankeeBusiness Brokers

Questions: [email protected]@murphybusiness.com

904-683-6655

28


