Sunday, February 22, 2015

Considering the sale of your reprographics company? What to do and what not to do.

Recently, I came across an advertisement for a business for sale:

“10 year old Blueprint & Printing company. Capable of doing large format printing & scanning, blueprints, vehicle wraps, signs, photo reproductions, digital graphics and display work.”
-Gross Income (i.e., Sales): $240,000
-EBITDA:  $150,779
-# of Employees:  2
-Asking Price:  $420,000

Being the curious sort, I reached out – to the listing broker - to find out the name of the company for sale, and, after signing a non-disclosure agreement, I received a file titled “Presentation”.  The “presentation” file included, among other information, an income statement for the first six months of 2014.
I’m not going to tell you the name or the location of this business, because I did agree to not disclose that information.
And, anyway, that’s not the purpose of this blog-post.  The purpose of this blog-post is to, very briefly, talk about “what to do and what not to do” when attempting to sell your business.
1.    Be able to initially provide prospective purchasers a very recent, up-to-date, annual P&L for the business. (Most will want to see more than that, but that should serve as a starter.)  In the case above, in spite of the fact that annual sales were stated in the business-for-sale ad, the P&L included in the presentation file was only for the first six months of 2014. 
2.    Make damn sure that whatever numbers are stated in the ad tie to numbers that are in the P&L.  Whenever numbers don’t tie in, that immediately raises questions.
3.    If you’re going to state in the ad (or in the financial information you furnish) that the “Owner’s Benefit” (meaning the Owner’s “take” from the earnings of the business) is such and such, list out the specific line items and amounts that were used to arrive at the “Owner’s Benefit.”  In the case of the presentation file I looked at, the “net income” was stated to be $81,579 (for the full year 2014) and the Owner’s Benefit was stated to be $150,779, with no detailed explanation as to what items were added back to net income to arrive at the amount stated as the Owner’s Benefit.  And, as I previously pointed out, the presentation file did not provide a P&L for the full year.

The point being that, if you are going to put your business up for sale and are serious about selling, know that it’s vital to put your best foot forward regarding the information that you initially present to prospective buyers.

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