Yacht Sales

We just worked with a client on a profitable yacht brokerage business in FL.  Long history, seller of retirement age, great lease, decent staff, more than $10M in listings.  BTW listings are the only thing of value in any brokerage.  So, all was right with the world.

Local bank liked the financials, contracts with listing owners (used boats only) and the buyer had the collateral. The seller had done a great job wih SEO and was getting solid inbound traffic/leads from the internet.

As is customary in our firm all businesses get looked at by at least two of us.  Myself, of course, and one intermediary who has experience in the industry.  I sent the package over to Gary and asked him to get back to me with his thoughts (Gary has owned 2 yacht brokerages).  He called me within the hour and said the company was worth less than half what the seller wanted!  Most of the listings were overpriced and therefore the adjusted value of the commissions was overstated.

On behalf of the client we went back to the seller and diplomatically renegotiated the terms of the sale and everyone won.

Daniel

To Buy a Franchise or Not.....

There is a lot of information out there and, predictably, advocates for each side.  In our experience there are only a few reasons to ever consider a franchise.

1. A powerful brand that will drive traffic and where your ad dollars are well spent in support of that brand. McDonalds, Dunkin Donuts, any of the big chain restaurants etc
2. A very complicated business where on-going technical expertise is required and where it is unlikely you, the owner, will ever learn that technical know-how.

DO NOT buy a franchise just becasue they are national or are the 'fastest growing franshise' the previous year.

DO NOT buy a franchise because you are daunted by the amount of up front work required to launch a new business - sure the franchisor will have all the paperwork you need but, frankly, you can find most of it on state websites or go to your local SCORE office.

MLM (new and improved?)

We never thought we would be answering questions about multi-level-marketing (MLM) opportunities until a few potential clients came to us.  Based on what we are hearing MLM has changed its marketing strategy from 'present to friends and family' to posting online ads, job opportunities and own your own business campaigns. People are responding well to these but here's the catch.

The disappointment you feel when you find out it is not a real job or a company for sale is a relfection of the new marketing campaign. That's what you will be doing once you join (pay) to come on board. Posting opportunities that feign a career position or an own your own company opportunity.  Some people make a lot of money most don't - we suspect that if you are as energized as the 'winners' every MLM has you might do well.

If we were to consider an MLM pick one that has a long track record.  Avon, Mary Kay, Amway, have a proven model.  Some of the newer ones like NAA or ACN require more research.  Good luck.

Common Warning Signs

Business Buyers:

Here are some common signs that the business is not what is presented. There are exceptions to this, of course, but these generally indicate a problem.

1. 37 year-old who is 'retiring'
2. Selling due to 'other business interests' - often true but more honesty is needed here.
3. 'Seller is just a simple guy and the business has outgrown his abilities'.
4. 'Pro forma' results (ask if they'll accept proforma cash from you)
5. You are reading a listing in 2013 and the narrative reads: 2011 should finish at....
6. Pre-approved by the SBA - a meaningless statement
7. Seller to hold 50% but only over 3 years.

Just some of the things to watch out for in the acquisition process.

Daniel

Sylvan Learning Center - Hawaii

I am sounding like a broken record here, but 6x earnings in a highly competitive industry (and local market) is ridiculous.  Congrats in advance to the seller if he/she can convince someone to buy at this multiple.  See attached.