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Giving Your Business ESP SM Chris Andersen President 425 Market St., #2200 San Francisco, CA 94105...
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Transcript of Giving Your Business ESP SM Chris Andersen President 425 Market St., #2200 San Francisco, CA 94105...
Giving Your Business ESPSM
Chris Andersen
President
425 Market St., #2200
San Francisco, CA 94105
415-648-5517
What is Business ESPSM
Exit Strategy Plan
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Business ESPSM Essentials
1. Determine When and Why to Sell.
2. Understand Valuation Drivers for Your Industry.
3. Prepare the Business for Sale.
4. Know Who Can Buy Your Company.
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1. Why to Sell
Burnout Approached by Buyer Diversify Wealth Other Venture Reached Limit of Resources Retire Death, Divorce or Disability
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2. Valuation Drivers
Buyers Competing for Your Company Differentiated Products or Services Outlook for Your Industry Transaction Structure Type of Buyer Strength of Your Business (Financial &
Operational)
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Example: Little Things Make a Difference
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Company A Business Services Revenue at $10.3M, +3%/yr. $1.25M EBITDA $950K assets (poor
controls) Loyal employees Limited management team
Company B Business Services Revenue at $9.7M, +12%/yr. $1.5M EBITDA $400K assets (good controls) Loyal employees Good management team
Valued at 4.0x EBITDA, or $5.0M
Valued at 5.5x EBITDA, or $8.25M
Company B Worth 65% more, or $3.25 million.
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3. Prepare, Prepare, Prepare
Tell a Credible Story that Holds Up Through Due Diligence.
1. Makes the Process Easier
2. Leads to a Higher Price
3. Time the Market for Your Industry
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Tell the Story
Good Growth Prospects Strong Key Performance Indicators - Industry Proven Trends & Profitability Good Management Team Repeat Customers w/ Low Concentration High Employee Retention
Prepare for Diligence
Well-maintained Financial Records & Controls Including Inventory or Materials
Strength of External and Internal Agreements Documented Policies and Processes Mitigate Litigation or Environmental Issues Compliance – Regulatory, Accounting, etc.
No Negative Surprises.
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Build a Team
Advisors Merger & Acquisition (M&A) Advisors Transaction Attorneys Tax Planning Accountants Financial Advisors
Facilitate Meetings to Communicate
Your Goals with Entire Team
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4. Types of Business Buyers
Financial Acquirer – Private Equity Group (Complete or Partial Sale)– High Net Worth Individual
Strategic Acquirer– Competitor– Company in Complimentary Industry
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What Strategic Buyers Want
Sell All of Co. Innovation (New Products, Services or IP) Looking for Synergies Customers Grow Revenue or Cash Flow Geographical Expansion
Expect a New Culture
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What Financial Buyers Want
Sell All or Part of Co.
Returns on Invested Capital (20+% irr) Strong Company with Growth Opportunities Continuity/Succession for Management
Culture Often Preserved
… And in Conclusion
1. Determine When You Want to Sell
2. Understand the Drivers (and Detractors) of Value
3. Prepare Your Business For Sale
4. Position Your Company to Appeal to the Right Buyer