Presentation to Buckeye Power Seminar on economic development; November 13, 2012

1. A Quick Primer on how to tell a good
deal from a Dog!
Presentation by Mark Barbash
at
Buckeye Power Economic Development
Workshop
November 13, 2012

2. Provide economic developers with tools to
quickly evaluate development projects for their
viability
– From the perspective of the community
– From the perspective of the economic viability of:
• An operating business project
• A real estate development project

3. How will the project How will the project
benefit the business? benefit the community?
Financial
Feasibility
Are project costs
Is the project timetable
documented and
realistic?
realistic?
3

4. How will the project benefit the
community?
 Job creation
 Job retention
 Research or skills capabilities
 Support industry cluster or technology
 Key community initiative (location)
 Main Street Revitalization
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5. Market Financial
 Identified the market  Profits are nice….Cash pays
for product or service the bills
 Wide market or niche  Customers and suppliers
market
control a business’ success
 Competition
 Owners should have a stake
Management in the business & project
 Business Mission  Growing sales can
 Required skills within sometimes be a problem
top management
 Controlling expenses is
 P & L Manager in difficult
Manufacturing
5

6. Question Ratio Formula Year 1 Year 2
Is the business Sales Growth (Sales Year 2 – Sales Year 1)
growing? ÷ Sales Yr. 1
Is the business EBT Positive? EBT + Sales
profitable?
Does the business Quick Ratio (Cash + Receivables)
have cash to pay the ÷ Current Liabilities
bills?
How well has the Debt to Equity Equity ÷ Debt = Debt to
business managed Ratio Equity Ratio
debt?
How well is the Days Receivable Receivables ÷ Sales
business collecting X 360
from its customers?
How long is it taking Days Payable Payables ÷ Cost of Goods
for the business to Sold (COGS)
pay its suppliers? X 360
May 17, 2012 Mark Barbash WEDA Presentation 6

7. How will the project How will the project
benefit the developer? benefit the community?
Financial
Feasibility
Is the developer How stable is the
experienced in the developer and how firm
market and sector? is the financing?
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8. 1. Most developers are dreamers and story tellers
2. Most developers never saw a project that didn’t
fit the market
3. Look for signed leases
4. Watch out for developers’ fees
5. Who’s calling the shots?
6. Experience in the type of development
proposed
7. Real estate markets can turn bad very quickly
8. Lenders lend on value, not project cost

9. 1. Are they willing to provide business and personal
financial statements?
2. Are they willing to provide references?
3. How do they respond to challenging “devil’s
advocate” questions?
4. Is their answer always “Someone Else was in
Charge?”
5. Do they expect “free money?”
6. Do they have a realistic assessment of the market,
competition and job creation potential?
7. Are they willing to spend money up front?

10. 1. Not all projects can fit with public sector programs
2. Let the program people represent their program
3. Don’t overpromise what the program can deliver
4. Don’t pile on government programs
5. Explain the strings up front
6. Find a willing lender
7. Keep written records of your activities
8. Be prepared to help with the paperwork
9. If it sounds too good to be true, it probably is
10. Take informed risk!

11. 1. Does the developer have site control? If on option,
when does option expire and what are terms
renewal terms?
2. Has an environmental assessment been completed
and have all issues been identified?
3. How far in advance does equipment have to be
ordered? Does payment have to be made on
advance orders?
4. What is the timetable for site prep/ Construction?
5. Does the general contractor have experience with
this type of project in this type of community?

12. • Money:
– Inadequate working capital
– Site problems, Project costs escalate
– The financial strength of the business deteriorates
• Market:
– Defined too broadly
– Unfamiliar or inappropriate business line
• Management:
– Inadequate business skills among principals
– Expanding too fast

13. 1. Has a real estate appraisal been completed?
2. Has an engineering assessment of existing and
needed infrastructure been completed?
3. Has an environmental assessment or Phase I
been completed which shows any remediation
that must be completed?
4. Has an engineering assessment on buildings &
equipment been completed to assure that there
are no structural issues?
5. Have detailed and documented project cost
estimate been done by a third party?