PPB March 2020

compiled by Danielle Renda It’s Time For An Exit Strategy—Any Advice? I’m the owner of a home-based distributorship, and I’m thinking of selling my business. How should I go about this to get the most value? Q A DISTRIBUTOR ASKS: It’s time for us to consider an exit strategy. Given that our distributorship is home-based, we have very little in the way of equipment, buildings, etc. I was wondering if there is a basic formula that one could use to approximate the value of the distributorship (client accounts, files, etc.). Depending on the type of customers, your valuation could be one times the gross profit or four to five times earnings before tax, depreciation and amortization (EDITDA). Again, depending on your customers, you may get some money upfront, plus an earnout for up to three years, depending on customer retention. DAVE LARUSSO President DVL Enterprises, Inc./MPGTandem Whittier, California PPAI 603237, D2 There are lots of different ways to do valuations, but like everything, the final value will be what the seller and buyer agree on. Client relationships, processes and procedures, and good bookkeeping have value, but are hard tomeasure. I would recommend seeing if you have a Small Business Development Center in your area. They are federally funded, but run differently in each state. Look at what you want out of the exit and be willing to think outside the box. You can hire them as an employee and let thembuy you out, you can contract to consult or do sales for them after the sale, you can owner-finance and spread the payments out, and there are lots of other options, too. Each has its pros and cons and there are tax implications, so talk to your accountant before even talking to buyers. A business owner determines what “success” looks like for their business and also for their exit. TONY PARAMORE Sales and marketing The Athens Printing Company Athens, Georgia PPAI 771774, D1 Many things should be considered when selling your home-based distributor business. Here’s a list of five: 1. What exactly is your exit strategy? Do you plan on selling and exiting the business completely, or staying on for a certain length of time to help the buyer with the transition of ownership to your customer base? That would bring much-added value to the sale of the business. 2. Howmany years have you been in business? What is the city and state, and local competition of businesses in the area? 3. Howmany established customers do you have? (This includes having done business with that customer for two or more years.) 4. What are the annual sales and profit margins for the business over the past five to seven years? A short answer is: the past two years of profit equals the sale price for the business, providing you have been in business for more than 10 years. DOUG SPAIN Owner PRO IMAGE SPECIALTY ADV. Southington, Connecticut PPAI 284704, D3 12 | MARCH 2020 | INNOVATE