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No Deal Goes Smoothly; Lessons from An Expert in The Industry

By November 19, 2019No Comments

Our president and owner Gary Rayberg sits down with Business Exit Stories host Marvin L. Storm and recounts the highs and lows of his long tenured career. For over 20 years, Gary Rayberg and his team of brokers at the ROI Corporation have successfully brokered the sale and acquisition of countless businesses as well as real estate throughout 39 states.

What has gone well? What has gone awry? In Business Exit Stories’ 19th episode, recorded on October 28, 2019, Gary and Marvin dive deep into four tales of industry and impart important lessons through experience and excellence. The highlights are below.

Time can kill any deal. Gary discusses working with a seller off and on over three years and how one can work through seller’s remorse and the often unspoken emotional turmoil that goes into selling your business. Gary emphasizes the importance of understanding the structure of a deal after a private equity groups attempts to use the seller’s own funds to purchase the company. ROI Corporation’s eagle eye prevented a loss of 1.4 million and empowered the seller to walk away.

Seller’s dishonesty discovered after sale. Industries are ruled by margins and even 1% change can greatly impact a business. The savviest of buyers and due diligence on the part of three separate entities couldn’t have predicted this erroneous lapse in accounting practice. The buyer thought they were buying a successful food distribution business with a margin of about 20% but soon after discovered bad business practices had inflated those numbers by half. After months of reviewing the numbers, the owner discovered ultimately, the problem lay on the packing floor. Five months after closing the sale and after speaking to operations manager, “tapping” of products was uncovered.

What do buyers think your business is worth? In a bold and outstanding move, Gary takes a medical related service company and placed it in a controlled informal auction setting. Gary invited eight best possibly interested buyers. This provides just enough competition to generate interest.  Seller approves the buyer package and was available to answer questions via conference calls. The result was three offers, two offers in the two to four million range and the third was an offer of ten million. A good business intermediary will be able to determine when it’s a good time to let the market decide what the business is worth.

Repeat income is king. Not two businesses are alike. In this case comparison, Gary discusses two sales brokered roughly in the same time period of similar industries. Although one of the businesses did about 12 million dollars in sales, they also had the challenge of their customer base being 95% one-time business. The other company did significantly lower business of about 4.7 million in sales; however they built their repeat residual income by including service contracts with 1500 of their clients. As a result, they sold in three months versus the three years with the previous company.

To listen to this episode:  https://businessexitstories.com/2019/10/28

To find out more about Business Exit Stories and Marvin Storm please visit his website: https://businessexitstories.com/