Hello Friends!
Let’s walk in the shoes of a potential buyer of your business with our 8 Secrets for selling your business checklist, Your Above The Business Score, and our Short Due Diligence Checklist.
1. 8 Secrets For Selling
2. Above The Business Score
As a special thanks for subscribing, get your free Above The Business Score to prioritize what you need to work on to improve the value of your business.
The Above The Business Score is a crucial step in optimizing your business's future. Whether you are planning to exit now or in many years, getting your Business Fitness Score today will allow you to:
Diagnose what's holding you back from creating a company that can prosper without you.
See your business from the eyes of a prospective acquirer.
Identify what's hindering the value of your business.
Verify what makes your business valuable.
And it only takes 14 minutes.
3. DUE DILIGENCE CHECKLIST - Short Version
Mandatory Requirements:
Number of employees (at least 10 is best): ______________
Years in business: ______________
Location: ______________
Revenue ($10M is ideal): ______________
Gross Profit: ________________
EBITDA/SDE (20% is healthy): ______________
Cash Flow: ______________
Desired multiple (1-4 is best): ______________
Asking Price: ($) ______________
Cash on hand: ($) ______________
Acct. Receivable: ($) ______________
Note Receivable: ($) ______________
Securities: ($) ______________
Raw Materials: ($) ______________
Work in Process: ($) ______________
Inventory: ($) ______________
FF&E: ($) ______________
Vehicles: ($) ______________
Real Estate: ($) ______________
Sales: ($) ______________
ARR: ($) ______________
Last 4 years' balance sheets, cash flow statements, and P&Ls
If it’s a small deal under $10M tax returns and Bank Statements help
Set Planned Exit Date: _____________________
Good To Know :
Tech Stack?
Growth Lifecycle?
Moat (Certifications/IP/Tech/Sticky Contracts)?
Culture (For example, team focused vs lone wolfs), and core values?
Market Cyclicality?
Soft Assets?
Asset Marketability?
Supply/Demand Risk?
Socio-Political Risk?
Capacity w/o Capex?
Reason for selling?
If Real Estate Is Involved:
- The most recent appraisal that's available.
- The deed for purchase documents.
- Tax bills
- Leases
- Service contracts
- Financial statements and reports
- Title insurance policy
- Any surveys, building inspection reports, and environmental studies
- Any site plans
- Architectural drawings
- Zoning documents
- Governmental permits
- Approvals and certifications
- Disclose the existence of any property or building-related litigation
Bonus Can Your Company Support A Buyer’s Debt?
Calculating DSCR
How to calculate debt coverage service ratio (DSCR), to see if a company can support debt. A DSCR under 1.5 is a red flag.
Google “mortgage calculator” and scroll past the first ad.
Enter the total loan amount
Enter the loan term, an example SBA loan would be 10 years
Enter the interest rate
On the right you’ll see your monthly debt service. So, the target companies free cash flow should be at least 1.5x $1,449, but a 1.5x DSCR would only leave $724.5 to run the business. An even better 2x DSCR would be 2 x $1,449 = 2,898 in monthly free cash flow.
The DSCR equation = (free cashflow) / (monthly debt service) = DSCR.
So, if the below company had $10k in monthly free cash flow you would do: $10,000 / $1,449 = 6.901 DSCR. This means that the company could support this debt 6.9 times per month.
Post Of The Week
"You can find all the best M&A information in just one place, this is a very professional Magazine." - Sebastian H. Amieva
Visit Our Website Now & Grab the Latest Copy of Acquisition Aficionado Magazine Free!
https://acquisitionaficionado.com/
Deals Of The Week
Here are all of our off-market companies for sale and a list of vetted business buyers:
https://docs.google.com/document/d/1wU2ZctV_KZnNDPpS_NNpLNp2nhNMLxOn5YbVZIwlyQU/edit?usp=sharing
Best viewed on PC for a clickable table of contents on the left.
And bookmark the link. It's a live Rolodex!
Financial Architecting Tip Of The Week
The ASE Fleet's Financial Architecting Tool #3
At first, we thought Gulp was too good to be true, but they turned out to be a great funding option for data-heavy tech companies.
Gulpdata.com - Fast, Dilution-Free Funding by Leveraging your Data.
With Gulp, a copy of your data is used to borrow money without giving up equity.