eNewsletter
October 2017

Featured Clients this issue:
**Details of each client below article

- Full-Service Interior Design Business #1217
- Relocatable! Digital Media Services Provider #317
- Automotive Repair and Service with Great Reputation #1715


The Aspens are changing colors, which means that fall is upon us.  It also means that as business owners, we should start planning for year-end tax strategies, assuming that your tax year ends on December 31st.  (For those of you that have fiscal years ending on dates other than December 31st, read this article and then put it away until about three months prior to your tax year-end.)  Developing your tax strategy should start with visiting your tax advisor and often includes discussions about deferring income and accelerating expenses.  However, if you are considering selling your business within the next three years, you should share that information with your tax advisor, and you may want to consider modifying that strategy.

With the understanding that no one, including yours truly, likes paying taxes, the potential sale of your business may alter your tax planning.  Although your most recent tax return and year-end financial statements may be the most important documents impacting the value of your business, businesses are rarely valued based on one year's performance.  Buyers and lenders typically look at a minimum of three to five years (and  sometimes longer) of past performance in determining value.  In fact today, I was talking to two different Private Equity Groups interested in acquiring one of our clients in the building products industry.  Both groups inquired about our client's performance in 2008 and 2009 to determine vulnerability during an economic downturn.  Many lenders look at the most recent two years as part of a stress test to determine the company's ability to meet debt service payments.  Having consistent accurate financial performance usually results in a higher price with better terms for the Seller.  Internally, we describe this as "investing in taxes."

Aside from the realization of income and expenses previously discussed, there are other considerations that you may want to discuss with your tax advisor.  We typically advise our clients to run their business as if it were not being sold. However, there may be some exceptions such as the following:

Buying Equipment -  It is fairly common for us to talk with potential clients that tell us that they bought new equipment at year end in order to reduce income and taxes.  If the equipment is truly needed, you may want to consider leasing the equipment instead of an outright purchase and having the buyer of your business assume those leases.  If the new equipment is not truly needed, you should consider deferring its acquisition.  Sellers will not typically recapture the full cost of the new equipment when the business is sold.

Moving the Business -  Similarly, if truly needed, do what needs to be done, but take a deep breath before acting.  Prior to buying the building at our current location, I moved my business on a couple of occasions, due to outgrowing the then current location or obtaining better productivity from the new location and configuration of the facility.  In addition to the actual dollar cost of the move, there was disruption due to planning, packing, getting reoriented in the new location, and the cost of advertising to let past, current, and future customers know that we moved to a new location.  It might take a year or longer to recapture the lost productivity.  Additionally, if you are a location sensitive business such as a restaurant or retail business, a move injects an element of risk into the equation for the Buyer and lender.

The above are just a few examples of situations involving tax planning.  While your accountant is probably the best source of guidance, and we may be able to "recast" some of the expenses relating to a move or other event, my team would be willing to consult with you, if you have specific questions that you would like to address.  Our consultations are confidential, without obligation, and usually without cost to you, unless the situation requires an extensive engagement of time.  

The majority of our business is derived from referrals. Please consider referring our services if you encounter a situation involving the potential purchase or sale of a business.


Ronald V. Chernak
President
 
Inspiring business relationships since 1982!
Full-Service Interior Design Business #1217
This well-established (1980s) full-service Denver area interior design studio and interior finishes company has a long history of growth and strong, secondary management in place.  The company not only provides residential and commercial installation services with field supervision, but also interior design, design center management, account management, warehouse services, administration services, and top notch customer service.  Products include various types of flooring, cabinetry, countertops, wall finishes, and window coverings.  Customers include builders, property managers, contractors, and homeowners.  Real estate available to purchase for $3.2M.  Jan-July 2017 sales of $8.49M up 20% over previous YTD; Adjusted EBITDA of $816k up 232%.    
  • Purchase Price...TBS
  • Down Payment...TBS
  • Gross Sales...$16,185,860
  • SDE...$1,397,183

For more information contact Lynn Lage lynn@fbb.com.
Relocatable!  Digital Media Services Provider  #317
Th is organically grown web services business continues to generate great profits by providing both local and national brands with website design, custom coding, mobile application development, online marketing, and paid advertising services.   The company prides itself in being "all things digital," allowing it to work with selective clients alongside other more traditional marketing agencies.    With a distributed work force and low overhead, this business could be easily run and scaled by an individual owner with a marketing background or by a synergistic buyer looking for a profitable add-on opportunity.   The business just signed a long-term contract with a national brand client with an annual budget of approximately $600K for services and is poised for more growth under new management.
  • Purchase Price...TBS
  • Down Payment...TBS
  • Gross Sales...$1,600,302
  • SDE...$246,553

For more information contact Rob Amerine rob@fbb.com.
Automotive Repair and Service with Great Reputation #1715
This independent automotive repair and service business sets the local standard for customer satisfaction, employee retention, and overall profitability in the industry.  Having a great location proximate to some major thoroughfares, this business continually attracts new customers, as well as serving its loyal base of local customers.  This profitable company continues to grow exceeding the $1M threshold in both 2015 and 2016 with 2017 revenues showing strong growth compared to previous years.  This is an excellent opportunity for a business or technical-minded buyer who can benefit from a proven, customer centric business with immediate cash flow and capitalize on the long-term benefits of this coveted location in the city.
  • Purchase Price...$790,000
  • Down Payment...$203,000
  • Gross Sales...$1,029,750
  • SDE...$252,610

For more information contact Rob Amerine rob@fbb.com.
**Terms & Definitions

TBS (To be suggested by Purchaser) - Seller, in his/her sole discretion, has the right to accept or reject all offers.

Seller's Discretionary Earnings (SDE):  A term used to denote a business's cash flow or the amount of pretax money a buyer can expect to earn in first-year operations.

EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization):   All interest, tax, depreciation and amortization entries in the Income Statement are reversed out from the bottom line Net Income (It purports to measure cash earnings without accrual accounting, canceling tax-jurisdiction effects, and canceling the effects of different capital structures.)
Quick Links 







BBB Logo 
MA Source Logo CABI logo


       IBBA Logo