eNewsletter
August 2018

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

- Pair of Highly Profitable Fitness Centers #318 & #418
- Historic Full Service Bar/Restaurant, SBA Pre-Qualified #1318
- Electrical Service & Repair #218

BUYER FREQUENTLY ASKED QUESTIONS
   
Thinking about buying a business? More and more investors are considering the acquisition of an existing business as the best way to control their own destiny and accumulate wealth. It is estimated that over 80% of the millionaires in the United States own their own business. Below are some questions that are frequently asked by entrepreneurs considering the acquisition of a business:
 
  • How are businesses valued?
There is no simple method and there are numerous formulas for valuing a business. Our experience has shown that there are three key components that are used in computing valuation models: 1) earning power; 2) value of the tangible assets being sold; and 3) marketplace demand.
Earning power is a function of annual earnings. For larger businesses, particularly those with audited financial statements, an EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) calculation is used. For smaller businesses, the calculation is adjusted to SDE (Seller Discretionary Earnings) by adding back the expenses attributable to private ownership and accounting for the salary of one owner.
  • Value of Assets
The appraised or fair market value of the assets being transferred, as well as other value drivers unique to the specific business, are also  considered. These factors are overlaid on industry and transactional market data to come up with an appropriate capitalization rate, which is then applied to calculate a range of value for the business.
  • Marketplace Demand
We are arguably in the best M&A Market in history and Colorado is generally recognized as being one of the best markets in the country. 
  • Should it be a Stock or Asset Sale?
Although each transaction must be reviewed on a case by case basis, most Purchasers acquire the assets of an existing company, rather than the stock of the corporation being sold. This is due to tax purposes and for the Purchaser to avoid assuming unknown liabilities of the selling corporation.
  • Should you consult an Attorney and/or Accountant when buying a business?
Yes, buying a business can be very complex. We advise all Purchasers and Sellers to avail themselves of professional help when involved with the transfer of a business. Usually professional advisors do not get called in until the Purchaser selects a business and is reasonably certain that the Seller will sell on terms acceptable to the Purchaser. Attorneys are used to review contracts and prepare closing documents with appropriate protection for the parties involved. Accountants are consulted for tax advice and verification of existing financial data. In selecting an attorney and accountant, try to retain an advisor with prior experience in business transfers.
  • Is it better to buy an existing business or to start a business?
There are many advantages to investing in an existing business, but the reduced risk of failing is usually the most compelling. An existing business will have an established track record and customer base already in place. This existing customer base provides immediate cash flow and improves the probability of obtaining acquisition financing.
  • Why should you consult a Business Intermediary?
Unlike selling a house, when a Seller elects to sell a business, in order to maintain confidentiality, the Seller typically does not place a sign on the property or list the business in a multiple listing directory, unless appropriately "camouflaged". Consequently, Purchasers may have difficulty locating businesses that are for sale. At The FBB Group, we represent numerous businesses in a variety of different types and sizes. This selection, appropriate financial and operational data in our files, and our considerable experience in negotiating transactions can save Purchasers substantial time, effort and expense in locating and acquiring a suitable business. Additionally, as a result of the volume of transactions that we complete, we have lender contacts in place to provide the Purchaser with options for obtaining a competitive financing package.

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!
Pair of Highly Profitable Fitness Centers #318 & #418
These two well established, non-franchise fitness centers have demonstrated increased profitability year after year.   Location #1 opened its doors in early 2009, became profitable very quickly, and continues to consistently generate good cash flow.   Location #2 opened its doors a few years later, has been profitable the last three years, and has plenty of room for growth.   Both locations have well-trained managers and staff already in place taking care of the daily operations.   The management team prides itself in having a clean and friendly environment, which explains the high use and membership retention rates.    The asking price reflected below is for both locations, but the sellers will entertain the sale of each location separately.  
  • Purchase Price...$2,795,000
  • Down Payment...$440,000
  • Gross Sales...$1,942,944
  • SDE...$679,858

For more information contact Rob Amerine rob@fbb.com.
Historic Full Service Bar/Restaurant, SBA Pre-Qualified #1318
This well-known southern Colorado sports bar and restaurant is consistently voted one of the best in the city.  Operating at the same location for nearly 40 years, this unique establishment has become a locals' favorite, as well as a great place where tourists frequently visit on their way through this historic area.  As in previous years, sales and profitability remain steady in 2018 while local customers and tourist alike continue to offer great online reviews.   With an experienced head chef in place and a seasoned wait staff, we believe a new owner/operator with restaurant experience and training or an industry buyer looking to add another great location could successfully operate this proven and profitable business (real estate is also available).  
  • Purchase Price...$625,000
  • Down Payment...$125,000
  • Gross Sales...$1,502,395
  • SDE...$192,756

For more information contact Rob Amerine rob@fbb.com.
Electrical Service & Repair #218
This well established electrical contracting business has an excellent reputation in the market and increasing sales.  The company's employees include two master electricians.  Although service work is a very important part of the business, the company also contracts with property owners and general contractors. We believe this business would make a nice acquisition candidate for an industry buyer or an electrician looking to own their own business.  
  • Purchase Price...$195,000
  • Down Payment...$195,000
  • Gross Sales ...$758,365
  • SDE...$65,324

For more information contact Lynn Lage lynn@fbb.com.

Congratulations to Ron Brasch! 

Congratulations to Ron Brasch, our senior Merger & Acquisition Specialist, who has been with The FBB Group for 20 years. Ron has a great passion for the arts in our community. He and his wife, Una, will be recognized as the Grand Honorees at the upcoming September 8 Gala for the Colorado Springs Fine Arts Center. 

Ron has also been recently named to the Board of Directors of the Colorado Springs Philharmonic, where he will serve as the Treasurer. Ron will also serve on the board of their newly established Colorado Springs Philharmonic Foundation. 
**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.)
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