1. LIVE YOUR DREAM

2. BUILD YOUR WEALTH

3. CREATE YOUR LEGACY

4. GROW YOUR EMPIRE4. GROW YOUR EMPIRE

� Savings

� Stock i.e.Apple –no matter how many IPADs

you buy, you won’t change the stock value

Buying homes – Florida is still seeing declines � Buying homes – Florida is still seeing declines

in values and has been for years

� Commercial Real Estate – Around the Globe,

developed land sites un-occupied

� Businesses

� Influence means you can affect the outcome

though not everyone does well

� Plan and prepare well

Seek wisdom of trusted advisors� Seek wisdom of trusted advisors

� Use your vision and wisdom

� Inherit

� Start up

� Franchise

Existing – existing franchise and existing non-� Existing – existing franchise and existing non-

franchise

� Fred Hervey

� Ray Kroc

Howard Schultz � Howard Schultz

� Cy Ansary

� 1951 when Fred Hervey purchased three

Kay’s Food Stores in El Paso, Texas.

� one of the nation’s leading convenience store

chains w over 6,000 stores

� Read: Behind the Golden Arches � Read: Behind the Golden Arches

� April 15, 1955,[8] the ninth McDonald's

restaurant overall. Kroc later purchased the

McDonald brothers' equity in the company

and led its worldwide expansion

� Read: Pour Your Heart Into It

� 1987 acquires Starbucks

� a private, real life tale

Presented by

Legacy Venture Group Business Intermediaries

� Over 50% close up in the first four years

according to an SBA.gov report

http://www.sba.gov/advo/stats/bh_sbe03.pdf� http://www.sba.gov/advo/stats/bh_sbe03.pdf

� Realize it can still take years before the

franchise matures, if at all, to yield a profit

� Just because you love the product does not

guarantee successguarantee success

� Do your research before selecting a franchise

� Visit sites like:

http://www.wikidfranchise.org/

� You can tell how well a business is doing up

until you purchase it

� You should be able to improve the business

You “can” start making money right away� You “can” start making money right away

� Note: you must still run it right – there is no

promise it will continue as is

� Have personal control (avoid layoffs,

ceilings…)

� Be your own boss

� Your efforts and investment help you� Your efforts and investment help you

� Excellent potential

� It can be exciting

� Satisfaction (workers less happy)

� Flexibility to meet your needs & desires

� Lack of knowledge and / or experience

� Under Capitalized (Remember Working Capital)

� Wrong Location

� Competition (Present & what is to come)

Asset investment too high� Asset investment too high

� Rent too high

� Cash Flow Challenges

* from SBA.gov – a great site for entrepreneurs

� Advantages

� You can create

just what you

want

� Disadvantages

� May need to do a

great deal of

researchwant

� You don’t pay for

someone else’s

efforts

� Total control

research

� System and

location unproven

� Tough to get

financing

� Advantages

� It’s a “proven

system”

� Quick to start up

� Disadvantages

� No success

guarantee

� Upfront costs and � Quick to start up

� May have

financing

� Upfront costs and

Royalties

� Limited control

�Chances of you “discovering

the next McDonald’s is very

unlikelyunlikely

� But just because it’s a franchise does not mean

you will be successful

� Check out: � Check out:

http://www.bluemaumau.org/6776/25_worst_f

ranchises_buy

� Advantages

� Cash flow may

start immediately

� Existing

� Disadvantages

� The initial

purchasing cost

� Unseen / hidden � Existing

customers

� Easier financing

opportunities

(*if, if, if)

� Unseen / hidden

problems

� Customers may

not stay …

Time Period % Sold

1 to 3 months 9.7%

4 to 6 months 28.3%

7 to 9 months 38.0%7 to 9 months 38.0%

10 to 12 months 15.9%

13 to 18 months 7.6%

19+ months .7%4 to 12 months to sell 82% of businesses

7 to 9 months to sell 38% of businesses

� Many hunt for months

� Some find what they seek in days

� But 90% of shoppers never buy � But 90% of shoppers never buy

� Financing can take weeks or months

“Understanding the business that is “Understanding the business that is

right for you” right for you”

begins and ends with You!begins and ends with You!begins and ends with You!begins and ends with You!

� Personal background

� Personal interests

� Risk tolerance

Limitations� Limitations

� Financial resources

� Credit report

� Risk Tollerance

If married, these questions apply to you and to

your spouse:

� How comfortable are you with debt?

� Do you have a strong belief in yourself?� Do you have a strong belief in yourself?

� Do you believe it is a business you can

handle?

The answers relate to how much business

you can buy

If married, these issues apply to you and to

your spouse:

� Geographic

Cultural� Cultural

� Industry type/knowledge

� Education

� Lifestyle change

� People skills

Write out your life priorities and put

in writing what you are and are not

willing to sacrifice of a business

i.e. Time from family, investment

limits, character of the business…

� How near to home?

� How many hours?

� Maximum

investment?

� Don’t just get stuck

on an industry at

first but open you

mind to any investment?

� Minimum return on

investment?

� Type of tasks?

mind to any

business that meets

your needs and

desires!

� Put together your financial summary

� Be aware of ways to finance your business

� Did you know you can use your IRA/401K for

your business without penalty and taxes?

Contact us for advisors who can help with this service.

You will want information

about the businesses you

investigate; investigate;

be prepared to share about

yourself to them.

1. Understand your cash requirements

2. Make sure you have appropriate.

Working Capital set aside!!!Working Capital set aside!!!

3. Remember there are other expenses

such as rent and utility deposits.

Request a Buyer Cash Requirement Form from our offices!

� Business broker/intermediary

� Attorney (as opposed to a general

practitioner)

CPA� CPA

� Commercial lender

Evaluate the business – and yourself –

regarding:

� Absentee ownershipAbsentee ownership

� Generation of personal income

� Management style

� Growth expectations

� Self-image

� Physical requirements

Continued…

� Family involvement

� People skills

� Travel requirements

� Training requirements� Training requirements

� Demand for extra hours

� Weekends

� Day or night work?

� People are successful at lots of things

� Kroc and Schultz were salesmen

� Mike Lewis – MBA owns plumbing co

Sam Champala – PHD runs many gas stations� Sam Champala – PHD runs many gas stations

� Kris VanOlst – Accountant owns restaurants

� Cy – Attorney owns Logistics Company

� Live Your Dream

� Review preliminary written information

provided by the seller

� Personally interview the seller to:▪ Verify preliminary written information▪ Verify preliminary written information

▪ Establish a rapport

▪ Review business facilities and location

▪ Observe business operations during normal work hours

(if permitted)

▪ Collect additional data to determine value of business

What business should I buy?

Look for owner’s to say

� you can't get good help

the equipment is no good� the equipment is no good

� the competition is too fierce

� the economy

� Has good records

� Has good earnings (or is very well priced)

� Has bank or owner financing offered

�Be wary of “Owner to Prove”

�Look for numbers from Taxes

and Profit/Loss statementsand Profit/Loss statements

�Request 4506T

Call to discuss more things to watch out for when buying a

business!

You will probably have to sign a

NonDisclosure Agreement (NDA)or

Confidentiality Agreement (CA) of these Confidentiality Agreement (CA) of these

to get more details on a business.

*Read carefully and do not get locked into a buyer

fee obligation! Request a sample from our offices!

Make an initial determination of business worth based on:

� Written information provided by seller� Interviews with seller and/or seller’s broker� Personal observations of the business� Personal observations of the business� Analysis of historical records of the business� Additional independent and outside

investigations of the business

� You should see evidence of earnings but you

typically don’t get copies of taxes, leases,

contracts and private details until you get to

the Due Diligence Phase following an the Due Diligence Phase following an

accepted, written contract to purchase the

business

Include in your Contingencies the right to have

acceptable evidence of claimed earnings

Research values including what

ratios similar businesses have

sold for –sold for –

NOT what For Sales are priced at!

A good brokerage can proved two or more

resources on what similar businesses sold for!

Or Owner’s BenefitWhat did the business

generate for owner, generate for owner, assuming one (1) full time

working owner.

Profit on Income Taxes+ Nonrecurring Expenses- Nonrecurring Income+ Non-operating Expenses- Non-operating Income- Non-operating Income+ Depreciation+ Amortization+ Interest Expense+ One Owner’s Total Compensation= SDE

Unless buying a discounted distressed business:

� Must cover debt service

� Should return 15-20% on down payment

investmentinvestment

� Should provide a return on time (annual

salary)

� Should meet the lender’s debt ratio

requirements

� In some cases a “letter of intent” (LOI) might

be acceptable (See Letter of Intent)

� You should submit a formal written “offer to � You should submit a formal written “offer to

purchase” (earnest money contract) with

contingencies to the seller or seller’s broker

(See Purchase Offer)

An offer to purchase specifies price, terms, and

payment:

� Cash due at closing

� Assumption of debt (if any)� Assumption of debt (if any)

� Bank and/or seller financing: term, etc.

� Non-compete agreement

� Consulting income or earn-outs

Continued…

The offer to purchase usually has contingencies

satisfied prior to closing:

� Due diligence and confidential information not

disclosed by the seller that the buyer still needs disclosed by the seller that the buyer still needs

to review

� Lease assignment or negotiation of new lease

� EPA compliance

� Licensing requirements

� Franchise approval

Continued…

Other issues that are addressed in the offer to

purchase Agreement:

� Buyer and seller warranties

� Training� Training

� Allocation of purchase price

� Desired closing date

� Date by which seller must respond

� Legal and tax Issues� Litigation

� IRS audits/state sales tax

� Accounting� Accounting� Accurate picture of financial position

� Accounting method used (cash vs. accrual)

� Inventory valuation

� State regulations� Environmental

� Purchase/sales agreement� Promissory note� Security agreements � Bill of sale� UCC filings� Board of directors resolution (authorization to sell)� Board of directors resolution (authorization to sell)� Real estate documentation (if appropriate)� Lease agreements� Other side agreements� Closing statements (prepared by attorney and/or

title company)

Pre-acquisition steps:

� Create buyer’s corporate entity and/or

register fictitious name

� Federal ID number� Federal ID number

� Corporate bank account(s)

� Obtain appropriate licenses

(occupational, state sales tax, local, etc.)

� Obtain insurance

NEVER CLOSE WITHOUT A CLOSING ATTORNEY

� Execute (sign) the pre-approved closing

documents

� Transfer proceeds of the sale to the seller� Transfer proceeds of the sale to the seller

� Transfer ownership of the Business to the buyer

� Sellers will usually train

you for 2 weeks to 6

months

� Anything beyond 2 weeks � Anything beyond 2 weeks

is generally part of a

consulting arrangement

QUALIFYINGQUALIFYING

PROCESSPROCESS

SEARCH SEARCH

BROKERBROKER

DATABASEDATABASE

DEAL MAKINGDEAL MAKING CLOSINGCLOSING

Explain Buying ProcessExplain Buying Process Business InterestBusiness Interest Buyer/Seller First MeetingBuyer/Seller First Meeting Coordinate Due Coordinate Due

DiligenceDiligence

Financial/Credit worthinessFinancial/Credit worthiness Qualify Buyer for Qualify Buyer for

A specific BusinessA specific Business

Tour BusinessTour Business Loan Request PackageLoan Request Package

A specific BusinessA specific Business

Business Business

ExperienceExperience

Review 1Review 1--Page Business Page Business

SummarySummary

Probe Buyer’s continued Probe Buyer’s continued

InterestInterest

Lender IntroductionsLender Introductions

LicensingLicensing Determine Buyer InterestDetermine Buyer Interest Motivate Buyer to Act Motivate Buyer to Act ––

Offer to PurchaseOffer to Purchase

Assist in Resolving All Assist in Resolving All

IssuesIssues

Life style changesLife style changes Nondisclosure AgreementNondisclosure Agreement Facilitate NegotiationsFacilitate Negotiations Formal ContractFormal Contract

GeographicGeographic

LocationLocation

Review CBRReview CBR

/Data Package/Data Package

LOI or offer to purchaseLOI or offer to purchase Review Final DocumentsReview Final Documents

Close!

� Hire professionals who deal with buying

and selling businesses on a full-time basis

� Do your homework

� Know what you are willing to pay� Know what you are willing to pay

� Prepare yourself for the purchase

� Enjoy the process and …

Legacy Venture Group Business Intermediaries

Call for more information on subjects covered in this business buying overview

Request listing updates or to get our e-newsletter.Info@BuyBizUSA.com

813.571.7700