1. Successfully sell your ‘Main Street’ business By Andrew Rogerson

2. Goal of this presentation Introduce the many steps to sell a Main Street business: Introduce some of the processes How to research and apply to your business Allow you to create a plan Allow you to decide what’s important

3. What is a ‘Main Street’ Business? NOT: Publicly held companies Privately held companies with sales >$5 million IS: Privately held company with Sales up to about $5 million Generally an owner/operator

4. Why ‘Main Street’? Valuation method Uses Discretionary Earnings – not EBITDA Types of Sellers Types of Buyers Individual or Corporate Executive – control of their life Unemployed – looking for a job Synergistic – competitor or already in your industry Investment – hires a manager & wants a ROI

5. 10 areas to research & understand Tax Planning Accounting Legal review Personal Financial Planning Personal Future Planning Build your Team Financing the sale Valuing your business/assets Sales and marketing plan Other parties in the transaction

6. Tax Planning Entities and their tax treatment C Corp, S Corp, Partnership, LLC or Sole Prop Check your tax consequences if you sell Purchase Price Allocation Seller and Buyer have different needs and this has different tax consequences for each party.

7. Accounting Report ALL earnings at least 12 months prior to selling… So it reflects in your valuation and ultimate sale price Need - Current and accurate Profit and Loss Statement (P&L) Need - Tax Returns (Last 3 years)

8. Legal Planning Check ALL Owners agree to sell Divorce – what does the other ½ get? Broad Agreement on price and terms Legal contracts up to date? suppliers, employees, customers, finance, landlord etc Read existing contracts for “gotcha’s” e.g.: lease, equipment finance leases, franchise agreement etc

9. Legal Planning (cont’d) Documents to sell the business Confidentiality Agreements Asset Purchase Agreement Sellers Disclosure Buyers Disclosure List of Fixtures, Furniture and Equipment (FF&E) Lease Franchise Agreement Profit & Loss Statements, Tax Returns etc

10. Personal Financial Planning How will you invest the sale proceeds once the business sells? Trust: Living, Charitable, Testamentary etc? Retirement account? Health Insurance account? Shares/Mutual funds/Bonds etc Wills/Heirs

11. Personal Future Planning What will you do once the business sells? Play golf? Spend more time with grandchildren? Travel? Join the Peace Corps? Solve world peace? Note: Sellers change their mind about selling because they lose structure and familiarity

12. Team planning Recommend two teams Primary team Spouse and/or family member and one trusted friend Secondary team Professionals you can hire Attorney/Accountant/Financial Planner Business Broker Critical ingredients = Trust and Ethics Try to avoid changing the team for continuity

13. Financing the sale How will the sale be financed? Cash - Highly unlikely Buyer with $300,000 cash will buy a $900,000 business Seller finance SBA loan program Conventional loans from a bank Commercial Real Estate loan Factor accounts payable and receivable

14. Valuing your business Determine what’s being sold and valued Business Machinery and Equipment Real Estate Intellectual Property Main Street businesses sell for multiple of Discretionary Earnings

15. Valuing your business (Cont’d.) Types of business valuations Brokers Opinion of Value (Cost $500 to $1,000) Standard Valuation (Cost $2,500 to $5,000) Full Appraisal (Cost $4,000 to $10,000) Do not overpay

16. Sales and marketing plan Executive summary – Blind Confidential Business Review (CBR) Direct Mail Newspaper Advertising Web Trade Association Newspaper Business Opportunity section Magazines – Inc, Forbes or Trade Association

17. Potential “Deal Killers” Family Landlord Attorney or Accountant Selling a business comes with risk Franchise Check your UFOC or FDD Lender Each business is unique – what’s important to sell your business? Do not forget - Buyers have choices

18. Review your options You’ve done your research and plan – what are the options?: Do nothing Close the business down Sell to a family member or friend Sell the business If you decide to sell …

19. If you decide to sell… Make sure it’s what you want It is not a quick process It is an emotional process It is a complex process

20. Seller V Buyer Remember: Seller and Buyer are looking for different outcomes but cannot close a deal without each other.

22. Provide one week of training

23. One day of Due Diligence

24. Receive an offer and close escrow two days later

26. 6 months training for free then close escrow

27. 4 weeks of Due Diligence

28. 4 week “Test Drive” of the business

30. Seller provides some finance

31. 2 to 3 weeks of free Seller training

32. Two weeks of Due Diligence

33. Close escrow 45 to 60 days after offer accepted

35. 8 reasons a business does not sell Sellers starts process and sees the complexity Seller fears the future Seller receives no offers or lower than expected Sellers next phase of their life less appealing Seller wants all cash and can’t get it Due diligence problem: environment, govt., legal Seller unwilling to accept what the market offers Records do not support income, expenses & profit

36. Conclusion It is: Complex Demanding Frustrating Time consuming Emotional Rewarding & a relief…when it’s done

37. Questions? Phone: (916) 570-2674 Email: Andrew@RogersonBusinessServices.com

38. Thank you Andrew Rogerson Web: http://www.RogersonBusinessServices.com