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1. How you can determine the asset value or enterprise value; a typical buyers offering price.

BTF We Bring Buyers and Sellers Together

Ken Roys 866 385-1900 or Ken.Roys@BTFmanagement.com

A business is ONLY worth whatever a buyer is willing to pay for it. The big question is how is that price determined. There is a reason why each year more than 4 million profitable businesses are closed and not sold. Some owners will simply rather close their doors and sell the assets than turn over their life’s work to what they may term a thief and a rapist pretending to be a buyer. Why do some people have a pleasant experience and for others it seems to be an excursion through Dante’s multi leveled Hell? Why are most businesses that are sold merely sold for the assets? The main reason is when a buyer is usually found locally it is either a bargain hunter looking for a deal or a competitor looking for the same thing. Either way the results are disatrous for the selling owner.

Of the business that are sold why are so many sold to foreigners? I know of Solicitors (Lawyers) in Britain that promote home owners to mortgage their British house, purchase an American Business making the Brit an American Tax Payer (the USA is a tax haven compared to Britain). Then the entire family can legally emigrate to the US. The mortgage payments on the family’s UK home are tax deductable here but not so under Inland Revenue (Brit IRS) in the UK. They new owners pay everything off from the revenue of the purchased business and travel between the US and the UK with most everything a US tax deduction and an income stream generated from the business purchased from the equity in the family’s UK home. Why do you think so many small businesses and corner stores are run by foreigners newly emigrated to the US? Simple, the easiest way for anyone anywhere to legally emigrate into the USA is to purchase a business. But you cannot come here to start one from scratch you must purchase an existing viable business.

When over 80% of all businesses sold are sold to buyers that are more than 500 miles from the location of the business. Granted this includes 30% of that number who are foreiners that emigrate into the US but it still leaves us with a majority sold to buyers that are already here. Some want to get away from a city, others want to move into the city. Some are trying to escape the perpetual sun in search of the four season, others are plain fed up with shoveling snow in the winter. People who are moving their family want the right business for them. People that are local tend to have nothing to loose and pray on those who are desparate to sell.

How does a buyer and seller find each other. With much difficulty normally…That is why BTF was created over fifteen years ago. The BTF model has been very successful for both the seller and buyer for more than fifteen years. Assuming you want us to find the right buyers from whom you will choose your buyer, how do you know at what price you should sell your business?

So now how do YOU price your business? The price of all business fall into three main categories:

Discounted Value…which is another way of saying Asset Value or Liquidation Value. Asset Value is the summation of the assets: 1 Cash & Accounts receivable; 2 Inventory; 3 FFE (Furniture, Fixtures and Equipment); 4 Real Estate. Please note that the inventory is at cost not retail; FFE is the replacement value in similar kind, age and condition. (i.e. a four year old forklift is valued at the replacement cost of a similar quality type used four year old forklift is in a similar condition. There is often a discount negotiated in the results. Sometimes the only value a buyer is willing to purchase is for nothing more than the negotiated value of a company phone number or a customer / client list to a competitor. Most unfortunately this is the way most businesses end up being sold although it is not what the owners originally intended.
Current Value…which is another way of saying Enterprise Value. This is the Asset Value plus Cash Flow Value. The Enterprise Value is the Asset Value + Gross Sales ÷ 12 = Net Monthly Revenue x your industry factor (choose the multiplier from chart on the next page and multiply that factor times your net monthly revenue. The Factor is based on the first two digits of your specific SIC Code (can be found on last years Texas Resale Certificate) = value of business cash flow, which is then added to the asset value. This is the next most common value for which businesses are sold. The value of assets and cashflow with minimal or no goodwill nor future growth potential calculated into the formula.
Fair Market Value…which is what every seller wants but usually never receives for one simple reason. The seller cannot justify the price they are asking with any 3^rd party documentation. The buyer will not purchase goodwill and future and/or growth value simply because the SELLER says “Mr. Buyer, take my word for it this business is a great deal at the price!” The buyer will purchase what can be justified and with a lack of any other professional documentation the buyer will use the tax return which show any business in THE WORST possible maner. The better your CPA is at his/her job the worse your business looks to a potential buyer. A Fair Market Value price range is usually only effective and believeable when calculated by an Appraiser that is a third party professional with a license to loose and not an owner or anyone with a stake in the business

You have the two basic formulas for Asset Value and Enterprise Value. Your business is just that…YOURS! We do not dictate

any price for you to sell your business. Some owners are desparate, such as those with medical emergencies like terminal illness for example and will sell at a low Asset Value, others will sell for the top of the Enterprise Value range. Still others wish to sell for full Fair Market Value. We do not require any documentation other than a tax reurn or if and only if you so choose to sell at a higher value justified with some sort of third party documentation. The business must be a viable business as determined by me, Ken Roys, the BTF Certified Field Representative. Which is why I must visit your place of business before you can become a client!

SIC Code	Common Multiples Chart	Low	Medium	High
15	Building Construction, General Contractors, Builders	2.00	3.50	4.50
17	Construction Special Trade Contractors	2.50	4.50	5.50
20	Food, Kindred Food Products - Meat, Dairy Food Processing & Packaging	3.75	7.00	9.00
21	Tobacco Products	3.75	7.00	9.00
22	Textile Mills	3.50	6.00	7.00
23	Apparel & Other Finished Fabric & Similar Materials Products	3.50	6.00	7.00
24	Lumber & Fixtures	3.00	5.00	6.50
25	Furniture & Fixtures	2.50	4.50	5.00
26	Paper and Allied Products	4.50	6.00	8.00
27	Printing, Publishing & Allied Industries Manufacturing	4.75	7.00	8.75
28	Chemicals & Allied Products Manufacturing	3.25	6.00	7.50
29	Petroleum, Refining & Related Industries	8.50	9.50	10.25
30	Rubber & Miscellaneous Plastics Products	4.25	6.75	9.25
31	Leather & Leather Products	5.00	6.00	7.00
32	Stone, Clay Glass & Concrete Products	3.25	5.50	6.00
33	Primary Metal Industries	3.50	5.75	8.00
34	Fabricated Metal Products	4.00	6.50	8.25
35	Industrial & Commercial Machinery & Computer Equipment	4.50	8.25	10.50
50	Wholesale Trade - Durable Goods	2.00	4.00	5.25
52	Building Material, Hardware, Garden Supply & Mobile Home Dealers	1.75	3.25	4.25
53	General Merchandise - Retail	1.00	2.00	3.00
54	Food Stores - Retail	2.00	3.50	4.50
55	Automotive Dealers & Gas Service Stations	1.00	2.00	2.50
56	Apparel & Accessory Stores - Specialties	2.00	3.50	4.50
57	Home Furniture, Furnishings & Equipment Store	2.00	3.50	4.00
58	Eating & Drinking Places	3.00	5.00	5.50
72	Personal Services	4.50	7.00	9.00
73	Business Services	3.50	6.00	7.50
75	Automotive Repairs, Services & Parking	3.50	5.50	6.50
76	Miscellaneous Repair Services	5.00	6.00	7.00

2. Meeting Agenda if and when we meet. Duration: one or two hours.

BTF We Bring Buyers and Sellers Together

Ken Roys 866 385-1900 or Ken.Roys@BTFmanagement.com

I will gladly schedule an appointment with the business owners that meet these three simple parameters:

1. VIABLE BUSINESS: It doesn't matter if you are losing money, will a buyer believe he/she can make it profitable. The business is only a portion of the sale. The Buyer is also buying a business defined by who you are and what you had done. If you do not like the buyer or visa-versa then no deal will be effected.

2. DECISIVE: Are you really ready to sell in your mind! A buyer / investor will not make a serious offer if they believe you may change your mind and back out of the sale during the process. If you are not capable or able to decide and commit to sell, then wait until you are capable and able to make that decision.

3. NOW: The buyer has money and will buy / invest in a business now, if not yours then some other business. Buyers / Investors have choices. The process will take some time but YOU must be committed to the process now knowing it could take a few weeks to a few years before you decide on the right buyer.

Introduction

Brief introduction of all decision makers of the two parties:

1. The Owners or Directors of the Shareholders and all germane decision makers and / or mentors representing your business.

2. Ken Roys, a Certified Field Consultant who has an extensive background of experiences in the M&A Industry

Paperwork Signed

We will quickly review the questionnaire that you received in the e-mail/fax and filled out prior to our meeting. I will sign the Confidentiality Agreement and any Non-Disclosure Agreements that you may have.

Facilities Tour & Photos

Another thing on the agenda is a tour of your business. If I am to be introduced any employees it is simply as a consultant. I will take photos of your business with my camera. I am also interested in any copies of brochures or company advertising that you might have for your portfolio.

Private Meeting, Options & Alternatives

From this point on, the meeting must be conducted and discussed in total privacy. If your place of business is not private enough then you are best served to continue at your home. All options and alternatives that are available to you will be discussed.

Review Your Collection of Data for a Business Valuation Analysis

Next, we review what your Business is worth to a buyer / investor using several different methods for a realistic but general ball park figure. The basics are done by you prior to our meeting. We review the options by you to the basic methods that a buyer may use. A Credentialed Valuation and Pro-Forma Future Business Analysis would require more data, time and a credentialed professional analyst and Appraiser.

BTF

What BTF does and how they do it and have done so for fifteen plus years. BTF Advertising costs for 36 months versus your other options. BTF Valuation options versus competition versus not going that route

Decision Commitment

A decision will be made as to what you wish to do about the disposition of your business. If you cannot make a decision then it is made for you as buyers will only deal with a decisive seller. Since I only meet with owners who are committed to effect a sale of their business either completely or partially, if what BTF does makes sense then we sign an agreement. If it doesn’t make sense today it will not make sense tomorrow. We either have a match to do business or we do not.

3. Basic info on: BTF exactly what we do for our clients and how we do it

BTF We Bring Buyers and Sellers Together

Ken Roys 866 385-1900 or Ken.Roys@BTFmanagement.com

Business owners know how to negotiate or they would not survive in their business. There are only three major components for a business owner to sell their business once they have committed themselves to.actually sell

Decide to sell either partially for expansion and growth OR completely as in retirement.
Discretely find a few buyers that could possibly meet the sellers price, terms and conditions without employees, vendors, competitors or clients know that the business is for sale
Negotiate amongst the few true candidates to select the best deal for you and where the transaction has been deemed acceptable by your CPA and transaction lawyer as terms that are favorable to your best interests.

BTF Management Consultants Inc. represents a large group of qualified buyers and investors. In addition to our base of of qualified buyers / investors currently looking to invest in a business, we qualify hundreds of new buyers / investors. This is done through an aggressive, confidential, Internet advertising campaign. My role is to meet with serious minded and motivated business owners such as yourself and to physically inspect their business on behalf of our buyers / investors.

We are not Business Brokers, we are matchmakers that introduce serious sellers of viable businesses to qualified buyers that have expressed interest in the seller’s business. We do not negotiate the transaction, the seller does that or you may engage the servuices of a business broker.
We bring Buyers and Sellers together through a massive advertising campaign using the economies of scale, which results with a total cost far bellow the services of a Business Broker. Brokers typically charge 10% of the sales price, our fees are a small fraction usually less than 2%.of the sales price. Yet you receive an advertising campaign that has a value of millions of dollars. Because of the economies of scale we can advertise for thousands of owners resulting in an owner receiving an international advertising campaign a a cost less than would normally spent on local advertising. BTF provides professional filtering of all potentetial buyers that respond whom we all know the majority want to steal the business or have no money. We only send qualified buyers that met your basic standards for the sale: type of business, location, price, terms and conditions.
We work with our clients for three years (18 months + 9 months + 9 months = 36 months). If you have not sold byour business in three years with ads circulated in over 80 countries and all of our internet advertising and search engine propriatary placement then something is seriously wrong about your business or how you negotiate the sale. This is why we review your process at the 18^th month stage for a possible revision.
When a qualified buyer / investor expresses interest and receive details on your business, you are also sent the detailed contact information on the buyer / investor.
If you have a Business Broker we will work with them and we will continue to provide qualified buyers for the Business Broker to negotiate the sale of your business. Business brokers cost typically ten percent of the sale price, our costs are typically only a few percent of gross annual sales which is usually less than the sales price. Our 100% Satisfaction guarantee fee is paid at the close of escrow would come out of the Business Brokers 10% fee.
If you want a Business Broker I can suggest several, but most small business owners are quite capable of effecting the negotiations themselves without a broker. You will want your CPA and Lawyer to review your escrow closing documents before you close escrow, which any Business Broker would recommend that you do anyway. If you decide you want a Business Broker you may acquire one later or at any time prior to the close of escrow.

We advertise globally in the internet for 36 months. In the past we have averaged over 80% success ratio at matching buyers and sellers During just a three month period our database of businesses that are for sale, we:

We also have top priority advertised internet search engine placement on enquiries of businesses for sale with top search engines. Pleas type "buy a business" in any three of the following search engines:
AOL; Yahoo, Google, AltaVista, Netscape, MSN, Earthlink, Excite, Looksmart, Ask Jeeves, Alltheweb, SympaticoCA

The results of any of those searches we will typically show up on page one in the first five paid advertising results in anywhere from 50 to over 200 million possible results for "buy a business".

If you require we will help you with an American Society of Appraisers Professional Valuation, and/or a professional pro-forma enhancement on your business' potential growth for a potentially higher sales price justification.

Basic Statistics on Businesses for Sale

Almost 60% of businesses for sale end up closing down and the assets liquidated because a qualified buyer was not found
Over 30% of all businesses sold are sold to foreigners
Over 80% of all businesses sold are sold to a buyer that is more than 500 miles from the location of the business
Buyers want a specific business type with a decisive seller that will sell now and is willing to negotiate in earnest
Sales of businesses between fall into three price ranges:

asset sale, sold for the assets value, basically a deep discounted price due to the fact for whatever reason the seller is desparate to sell at any price.
enterprise sale, assets value plus cash flow value based on tax return reporting or some other form of justification that the buyer is willing to accept, minimal or no goodwill,
fair market value sale, goodwill, current and future potential cash flow based on some form of justification that the buyer is willing to accept usually a valuation or future pro-forma

Please note: BTF does not tell the seller at what price their business sould be sold.. Notwithstanding, whatever price you do come up with will have to be justified in the eyes and mind of a buyer or they will not pay your price. Price can easily be justified by a tax return.. However if the business is to be sold a a greater price than what a tax return justifies i.e. start-up businesses have no tax returns normally. They are justified in other ways that show and verify future cash flow potential. Example: In 1997 Star Furniture was bought by billionaire Warren Buffett's Berkshire Hathaway. Founded in 1912, furniture retailer Star Furniture NOW operates 10 stores in the state of Texas. Warren Buffet did not buy the company because of Star Furniture’s 1997 current cash flow but by the growth potential that had been untapped by CEO Melvyn "Mel" Lee Wolff in 1997 due to financial cash flow restraints. Warren Buffet paid $5 million more than the asking price if Mel would stay and run the company properly financed. Today Star Furniture is many times the size it was in 1997. Buying a stock on the Stock Market is buying ownership of a company with the same circumstances present. Most sellers sell because they can no longer expect the stock to go up yet buyers are buying because that is exactly what they expect or they would not buy. Most buyers of small businesses will not buy to do exactly what you are doing. They expect to do better than you did. Foreigners and only a handful of Americans will expect to do what you are doing. What a buyer is willing to pay is based 100% on how the buyer feels they can justify the price paid against future earnings realized.

BTF’s buyers are pre-qualified to meet the above listed characteristics prior to ANY introductions to any of our sellers. Therefore, you as the seller of your business would only be negotiating with qualified buyers who are looking for the type of business you have, in the location you have your business, who are willing to purchase a business under the terms and conditions you want to sell, and these buyers have the money with which to purchase your business.

Guarantee

We guarantee in our agreement:

1. To advertise for buyers in Electronic / Digital Non-Print Media i.e. Internet Search Engine Priority Placement Advertising.

2. Forward your professionally designed portfolios to interested parties and provide follow-up with qualified buyers

3. Notify you of every buyer receiving your portfolio

And, we will do so until……your business is SOLD!... Or for up to 3 years, whichever comes first!... Or if you withdraw your business from the market… Or if you sell your business to anyone... your buyer or ours…

Contact: Ken Roys , Office & Mobile 866-385-1900 & 281-948-5334 or Ken.Roys@BTFmanagement.com

4. Business For Sale 101: Where Do I Begin?

A 2001 study found that the more successful the company, the more likely its owner wants a valuation. While only 39% of firms with 1 - 4 employees planned to get an appraisal, 70% of firms with 50 - 99 employees planned to. Does this statistic prove why 3 out of 4 small businesses sell at a liquidated value?

If you were to sell your business today, how much would it bring? Understandably, that’s not a simple question in today’s dynamic market. Every business is unique. Which means it’s not enough to rely on comparisons with other businesses in your area. And clearly pricing your business is a tricky matter. For example, according to a well-known source for business transaction data, Pratt’s Stats, recent revenue multiples for firms in the auto parts industry ranged from a low of .98 to a high of 83 with a median of 2.9. If you were valuing your firm for sale and your annual revenue were $100,000, then the value of your business could be as low as $98,000, as high as $830,000, or somewhere in between. Where your firm lies along this continuum is obviously of the utmost importance and can only be determined by a valuation approach that incorporates academically validated methods with industry-specific valuation factors. The first step for any seller is to have a third party business valuation completed on the business. Make sure you are dealing with a credible individual or firm that is accredited through The American Society of Appraisers.

THIRD PARTY VALUATIONS - Preparing the business for financial negotiations

Many small to medium size business owners don’t know where to begin. There may be too many assets to value, too many changes within their industry during years of operation, or their emotional attachment may bring a distorted view. That’s where an independent business appraiser is a necessity. There are numerous certified public accountants, valuation firms, and investment banking companies that specialize in this area. The cost: Between $3,500 - $45,000 depending on your business. Time to complete: one to two months. The American Society of Appraisers, based in Washington , D.C. can provide names of business appraisers accredited through the trade group. Make sure the valuation firm you choose is accredited. Three out of four small businesses sell well below fair market value and/or at a liquidated price because the owners did not know how to value their business and were not given proper advice by their intermediary to make a small investment into a Business Valuation to defend the highest price possible. In most cases, a business is the largest asset an individual owns, so to leave money on the table makes no sense.

CHALLENGES

Confidentiality - Confidentiality should be considered when preparing your business for the market. If the general public knows you are for sale you can lose value overnight. Do you think your local competitors will take advantage of the situation? Of course they will. Clients might start looking at taking their business elsewhere. Employees might not feel secure and start exploring other employment opportunities. If you have operating lines of credit, a banker’s mentality can change very quickly if they know you are for sale. The list goes on and on. Confidentiality should be very important through this process.

Exposure to Qualified Buyers - How do you get exposure to qualified buyers while maintaining confidentiality? Is there a qualified buyer in your local market? Don’t limit your search for a buyer to your local market. There may be a buyer(s) several states away that are willing to pay you more. If you called your local competitor, do you think they would pay you a fair price? They are very likely to not put any goodwill value on your business. Define how and where to confidentially advertise to find that right synergistic buyer. Is your buyer an individual, corporation or investor?

FINDING BUYERS & SELLERS - What are the industry options?

DO NOTHING -This can be one of the most expensive ways to go. How many times has a potential buyer just walked in to your business with checkbook in hand? It is very unlikely for this to happen...