EFC Shark Tank 06.19.11
-
Upload
skylineefc -
Category
Documents
-
view
770 -
download
8
description
Transcript of EFC Shark Tank 06.19.11
If you want to buy or sell a business, what factors are considered to determine its value?
◦ Price/Revenue Multiple
◦ Price/SDE Multiple
Price: Sales price of business paid for intangible assets (goodwill, location, patents, licenses, customer lists, etc.), furniture, fixtures and equipment
Revenue: Net SalesThe amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any discounts allowed. The sales number reported on a company's financial statements is a net sales number, reflecting these deductions.
Typical is 0.3 to 0.6
Highest multiples >1◦ Coin operated laundries,
◦ Car washes
◦ Accounting/bookkeeping services
◦ Home inspection service
◦ Newspaper delivery service
SDE: Seller’s Discretionary Earnings is net income before:◦ Primary owner’s compensation
◦ Other non-recurring income or expenses
◦ Depreciation
◦ Amortization
◦ Interest
◦ Taxes
CitiKitty--$100,000 for 15%
Pass on Voyage Air Guitar
Stamps & Martin t-shirts--$50,000 for 15%
Jewelry--$180,000 for 45%
Wenzel--$500,000 for 20% convertible shoes http://abc.go.com/watch/shark-
tank/SH559076/VD55126456/week-8?rfr=google
http://www.bing.com/videos/watch/video/week-8/17wz5b5au?q=shark+tank+full+episodes&FORM=VIRE3
Cash
Accounts receivable (really receivable)
Inventory (fairly valued)
Real estate
Other tangible assets
Subtract: Liabilities being incurred with the purchase
Commercial Bakery with:◦ Annual net sales of $1,000,000
◦ SDE $250,000
◦ Equipment worth $200,000
◦ Donuts worth $5,000
◦ Accounts receivable of $120,000
◦ Bakery building valued at $250,000
◦ Taxes due of $15,000
◦ Donut truck worth $15,000
◦ $500 in the till
◦ Loan of $150,000 you would assume
Assume 0.4 Multiple, mid-range
Price is $400,000
5,000 Donuts
120,000 Acct’s receivable
250,000 Building
500 Cash
-150,000 Debt
$625,500 Valuation
Assume 2.4 Multiple, mid-range
Price is $600,000
5,000 Donuts
120,000 Acct’s receivable
250,000 Building
500 Cash
-150,000 Debt
$825,500 Valuation
Range from $625,000 to $825,000◦ Which one is right?
What other considerations are there?◦ Projected earnings
◦ Ideas you might have
◦ Problems you anticipate
◦ Synergies with other businesses
◦ How should these factor in??
Entrepreneurs get asked questions about ◦ Earnings
◦ Sales
◦ Projected sales/earnings
Shark Tank investors have valuation models in mind and fit with their capabilities
Let’s watch
Belt Buckle—Hollywood Washed Up◦ http://www.youtube.com/watch?v=7C0LP1ehmVk&
feature=related 10 min
Natural Soda◦ http://www.youtube.com/watch?v=UDheVH21FMM
&feature=related 8 min
Element Bars◦ http://www.youtube.com/watch?v=BJ-
zSDjJsPQ&feature=related
◦ http://www.youtube.com/watch?v=wt0_9AW3O2c&feature=related