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Hey Reader,

(4 minute read)

1. Word on the Street
2. Alice in Wonderland
3. Valuation expert makes mistakes buying a business
4. Rapid Fire Listing Review
5. Pop Quiz:-)

5 Simple Steps to Review a Biz Listing in Less than 5 Minutes Now!

TL;DR (for the highlight lovers)

• Accompanying spreadsheet available.
• Margin and loan payments.
• Cash flow and money left in your pocket.
• Full article below.

Word on the Street🛣️

💬What She Said💬

"You cannot live your life to please others. The choice must be yours."-The White Queen, Alice in Wonderland

📣📣Listen Up!

Let's Buy a Business: Buyer Risk After Doing Over 500 SBA Valuations​

• Buying the business is the easy part.
• Look at your cash flow as your decision making ability.
• SBA loan rates are variable so they will change throughout the life of your loan.
• If revenue were to decrease 10 to 15%, would we still have enough cash flow to help grow the biz?
• Focus more on what can go wrong than on growth projections.
• No matter how thorough you are, you’ll never find every little quirk and problem during due diligence.
• Keep everything the same for 12 to 18 months.
• Too many changes too quickly made all but one of the staff quit within the first year.

5 Simple Steps to Review a Biz Listing in Less than 5 Minutes Now!

You’re not a CPA, right? Maybe you’re not even sure what a Balance Sheet is. Okay. You haven’t reconciled your bank account in…decades? I got you!

I always send people to bizbuysell.com to start looking for businesses to buy. It’s kind of like the Tinder of business buying, swipe left…swipe right… But it’s a great practice ground.

You're scrolling through the website and you see cute puppies for a grooming company and towering pines for a tree trimming business and you keep scrolling and pretty soon they all look alike and you’re dazed and confused and you knew all this business buying malarkey was just a scam. Damn it!

I get it. It can be overwhelming at first. That’s where I come in with my simple-for-everyone-to-use framework. I call it the Rapid Fire Listing Review. 5 simple steps and yes, the calculator on your smart phone. (I even made a spreadsheet to do the math for you, cuz I love you guys!)

​Here is a listing I sent to a new business buying friend a couple weeks ago. (LoopNet.com is very similar to bizbuysell.com.) We were sitting in the sun enjoying a couple of lattes. My friend already has a general contractor’s license and a small remodeling company she started earlier this year. (We met at a seminar meant to help people become better communicators. I’m always learning and trying to be better.) She loved the idea of buying a business, of course, thus the lattes and listings.

Anyhow, I happened to pop onto a listing titled “Commercial & Industrial Electrical Contracting Business”. She got excited knowing that electrical contractors are typically more profitable than some of the other trades.

The listing gave us these basic details:

Asking Price: $490,000

Gross Avenue: $642,000

Cash Flow: $212,000

Established: 2011

Real Estate: leased

Employees: 4
​

Rapid Fire Listing Review

1. Profit margin: cash flow / gross revenue
   • 212,000 / 642,000 = 33%
   • Pretty good (Good does vary by industry)
2. Calculate SBA loan payments
   • $490,000 at 9% over 10 years (no down payment-keep it super simple at this point)
   • Use any amortization app or this spreadsheet.
   • Monthly payment is $6,207
   • Annual payments are $74,484
3. Can the cash flow cover these annual payments?
   • 212,000 > 74,484
   • Yes
4. Can you live on/replace your salary with what is left over?
   • 212,000 - 74,484 = $137,51
   • In my small town, probably so.
5. Multiple: price / cash flow
   • 490,000 / 212,000 = 2.3
   • Decent pricing, depending on factors such as owner dependency, etc.

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Any questions? Hit reply and let me know what you got:-) Reply with RAPID FIRE and I’ll send you the quickie spreadsheet to do the math for you.

The Rapid Fire Listing Review is not due diligence and it doesn’t mean this is a great deal, but it is a quick way to determine if the business is worth taking a closer look.

In this case, we signed the NDA, (because I’m looking for a handful of people to buy businesses with) then quickly determined it wasn’t a good fit after all. It wasn’t actually in the town it claimed to be in, the owner is doing all the heavy lifting, and they only have one electrician on staff.

But it could be right for a different buyer. The numbers work on the surface and that’s the point of the Rapid Fire Listing Review. It answers the question of “Is this business listing worth looking into?”

Peace Out!

🧐Pop Quiz🧐

How many copies of Alice in Wonderland have been sold?

(Reply to this email with your answer. First closest answer gets a mention in the next issue:-)

Last Issue's winner: Amber Fiess

Every year, IHOP serves more than 700 million pancakes. That's approx $1.4 billion worth of pancakes.

Whenever you're ready, there are 4 ways I can help you:

1.Connect with me and other buyers in the FB group.

2. Schedule a business buying strategy session here.

3. Respond to this email. I read them all:-)

4. Join the waiting list for the next launch of Acquisition Expressway, the 5K business buying system!

🏍🏍🏍🏍🏍🏍🏍

Thanks so much for reading... Peace Out!✌🏼

Della Kirkman, CPA
dellak@shift-n-gears.com

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