I want to share some great information from our friend and colleague, Vince Mallardi, of The Printing Brokerage/Buyers Association International. Vince and I often collaborate on answering reader questions and this batch deserves some sharing with the LaManna Alliance audience.
Q. Should you sell or dump your brokerage?
A. As the saying goes, "Everything is for Sale," but, beware, the same business sold sooner than later will yield much more than by waiting. There are several compelling reasons why.
Any brokerage is as good now as it will ever get. The probability of losing a major customer is many times greater than the potential for replacing it. It's yours to lose.
Also, taxes are favorably low presently and, if Democrats are to prevail in the next election, they promise to eliminate the President’s cuts.
And...you’re not getting any younger.
I get questioned by owners and their accountants and spouses almost daily – and regrettably no one "gets it." Invariably, firms are contacting me after the sales drop or an owner or two become ill. Here are some recent conversations, disguised of course but to the point.
Q. What kind of multiple should be used: EBITDA, SALES, OWNER'S COMPENSATION, OTHER?
A. No one has ever bought a multiple; investors, and wildcatters, buy going-concern businesses where there is a sufficient ROI reward relative to a perceived risk of no or negative returns.
Sellers and their so-called advisors who try to disguise a declining company with add-backs for excessive owner compensation, or net present value capitalization for expected or imagined future earnings, or some other numbers trick only fool themselves. Put yourself in a buyer's position.
Q. Who buys printing resellers?
A. No one, because there's usually no stand-alone value for the corporate entity. An acquirer doesn't want your net loss carryover or anything of your history. The transaction is always a sale of selected assets: Long-term contracts with customers, salespeople, suppliers and even with other brokers. Ad-hoc or "spot" transactions have no value.
Q. So, where does one find an asset buyer?
A. Odds are you know the entity already. Your salesperson, a supplier, a reseller from another city not too distant away, or possibly one or a group of your customers. Beyond the known is of course the unknown. The means that, after exhausting all the possibilities among your contacts, hire a business broker who know print. There are only a small number, and the fees are steep.
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