March 3, 2011 seminar presented by Jeff Bruss of COLE Publishing Inc at the Pumper & Cleaner Environmental Expo on buying and selling businesses in the wastewater industry.

1. The Basics
Of Buying and Selling a
Septic or Sewer Business

2. Why?
• Know your reason for selling.
• Health, retirement, new opportunity, family
obligations, etc.
• With no valid reason, most often times it’s assumed
that you have to sell because you’re in trouble.

3. It Takes Time
• The majority of businesses take more than one
year to sell.
• You should be thinking of selling long before you
make the final decision to do so.

4. It may never sell?
• More than 80% of all businesses that are listed for
sale, never sell.
• Portions may sell - like assets and real estate,
but they won’t sell as a business.
• Why?
• No barrier to entry (except license), poor record
keeping, it’s a dirty job, lack of financing
options, price.

5. Okay, We’re Ready to Sell
• Be thinking about selling long before you actually
make the decision.
• Equipment, paperwork, customer lists, record
keeping!

6. It’s all in the Books
• The most important thing you need to do is keep
good accounting records.
• Every dollar that is spent or earned should be recorded.
• Money that is not on the books doesn’t exist in a sale.
• Maintain a minimum of three years of P&L statements,
balance sheets and/or business tax records. Be prepared to
update records on a quarterly basis.

7. Pay Yourself
• Take an owner’s draw, salary, somehow pay
yourself.

8. No Surprises, No Secrets
• Be prepared to share corporate and accounting
information with potential buyers - the good and
bad.
• Equipment maintenance records, P&L, balance sheets, income
statements, tax returns, licenses, depreciation statements,
equipment inventories, bank notes, etc.
• Document personal or non-operational expenses that impact
the bottom line.
• Personal auto, entertainment, owner’s draws/salary, cell phone, home Internet access, etc.

9. Equipment
• Equipment can only be valued to the extent in
which it can contribute to future profits.
• Equipment that has not been maintained or
updated has little or no value in a sale.
• Your equipment is not as valuable to the buyer as it
is to you - especially in an acquisition to an existing
business.
• Assets are generally appraised at wholesale/auction value for
sale purposes.

10. Customers
• Your customer list is potentially your greatest asset.
• Maintain it. On a computer. Preferably one from
this decade.
• Contract as many customers as possible.

11. So, what’s it worth?
• Every business is different, and pricing involves
many factors.
• Geography, Longevity, Revenue, Expenses, Profitability,
Equipment, Customers, Contracts, Urgency to Sell

12. Geography
• Where you are located can add or subtract value
• Region, state, city
• Texas, Florida, Michigan, California

13. Longevity
• Businesses with greater tenure/history are worth
more than start-ups.

14. The Magic Formula
• Wholesale Value of Assets + 15-50% percent of
gross revenue = value
• Very similar to EBITDA, SDI valuations
• Priced to provide a 35%-45% ROI for buyers
based on 25% down
• Minimum ROI an “experienced” buyer is
going to want to see would be in the 25% range

15. Example
Equipment (wholesale/auction) $200,000
Annual Gross Revenue $1,000,000
Best Case (50%) $500,000
Middle Case (40%) $400,000
Lower Case (25%) $250,000
Worst Case (15%) $150,000
Basket Case (0%) $0
Best - $200,000 + $500,000 = $700,000

16. $700,000 Valuation
• If asking $700,000 and assuming profit of
$250,000 (25% of gross)
• $175,000 down payment (25%) = $525,000
remaining principle
• Setting aside a manager/owner salary of $40,000
leaves $210,000 to go toward paying off the note
• $525,000 @ 5% for 5 years = $120,000 per year in
payments, leaving a $70,000 profit.

17. The R.O.I.
• ROI = Profit/Investment * (100)
• Calculating ROI on your cash investment (the down payment)
• $70,000 (profit)
• Investment = $175,000 (down payment)
• ($70,000/$175,000) = 40% ROI - Excellent buyer return, should have
excellent buyer interest. Priced correctly.

18. $600,000 Valuation
• If asking $600,000 and assuming profit of
$200,000 (20% of gross)
• $150,000 down payment (25%) = $450,000
remaining principle
• Setting aside a manager/owner salary of $40,000
leaves $160,000 to go toward paying off the note
• $450,000 @ 5% for 5 years = $102,000 per year in
payments, leaving a $58,000 profit.

19. The R.O.I.
• ROI = Profit/Investment * (100)
• Calculating ROI on your cash investment
• $58,000 (profit)
• Investment = $150,000 (down payment)
• ($58,000/$150,000,000) = 39% ROI - Excellent buyer return, should
have very good buyer interest. Priced correctly.

20. $450,000 Valuation
• If asking $450,000 and assuming profit of
$150,000 (15% of gross)
• $112,500 down payment (25%) = $337,500
remaining principle
• Setting aside a manager/owner salary of $40,000
leaves $110,000 to go toward paying off the note
• $337,500 @ 5% for 5 years = $77,000 per year in
payments, leaving a $42,000 profit.

21. The R.O.I.
• ROI = Profit/Investment * (100)
• Calculating ROI on your cash investment
• $42,000 (profit)
• Investment = $112,500 (down payment)
• ($42,000/$112,500,000) = 37% ROI - Excellent buyer return, should
have very good buyer interest. Priced correctly.

22. $350,000 Valuation
• If asking $350,000 and assuming profit of $100,000
(10% of gross)
• $87,500 down payment (25%) = $262,500 remaining
principle
• Setting aside a manager/owner salary of $40,000 leaves
$60,000 to go toward paying off the note
• $262,500 @ 5% for 5 years = $60,000 per year in
payments, leaving $0 profit.
• In other words - You just bought a $40,000/year job, not
a business. But...

23. In 5 Years...
• You’ll be making $100,000 annually.

24. No More Money
• Obtaining financing is nearly impossible.
• Be prepared to owner finance.

25. The Buyer
• Inexperienced buyers will pay more than
experienced buyers.
• This goes for both buying experience and
industry experience.

26. Three Wise Men or Women
• You will most likely require three professionals to
assist during the sale.
• Accountant - Broker - Attorney

27. Accountant
• Understand the tax implications in advance of
selling - both personal and professional.
• Prepare necessary paperwork and reports.

28. Broker
• Less than 5% of people who inquire on a business
will develop into a serious buyer. Are you prepared
to deal with the other 95%?
• Is confidentiality important? NDA
• Can you determine the difference between a
qualified buyer and non-qualified? Serious or tire-
kicker? Do you have the time?

29. Attorney
• When an agreement is reached, there will be
paperwork.
• Letter of Interest
• Offer to Purchase
• Non-Compete Agreement

30. Don’t Sell Your Job
• Your business needs to make enough profit to pay
for itself upon a sale AND create a salary for the
buyer or a manager
• If it can’t, you’re not selling a business, you’re only
selling your your job.
• Most buyers aren’t looking to purchase a job.

31. Contact Information
• Jeff Bruss
COLE Publishing, Inc./B2 Business Brokers
800-994-7990
jeffb@colepublishing.com