Red Flags When Buying a Business [THA 383]
Episode 383 •
6th June 2024 • Remarkable Results Radio Podcast • Carm Capriotto, AAP
00:00:00
00:44:31
Shownotes
Thanks to our Partners, NAPA TRACS, AutoFix Auto Shop Coaching, and Today's Class
Join a discussion with multi-shop operators Dwayne Myers and Rick Levitan, as well as CPA Hunt Demarest, on the intricacies of purchasing a business. They cover the necessity of due diligence, understanding financials, and the emotional aspects of negotiation. The panel shares personal experiences, highlighting the importance of realistic financial projections, environmental assessments, and the role of goodwill in valuations. They advise on building strong banking relationships, scrutinizing financial statements, and respecting sellers' emotional ties, emphasizing patience and strategy for successful acquisitions in the automotive industry.
Hunt Demarest, CPA, Paar Mellis and Associates, Business by the Numbers Podcast
Dwayne Myers, Dynamic Automotive, 6 locations, Maryland. Dwayne’s previous episodes HERE.
Rick Levitan, Managing Director, Auto Stream Car Care, MD.
Show Notes
Thanks to our Partner, NAPA TRACS
NAPA TRACS will move your shop into the SMS fast lane with onsite training and six days a week of support and local representation. Find NAPA TRACS on the Web at http://napatracs.com/
Thanks to our Partner, Auto-Fix Auto Shop Coaching
Proven Auto Shop Coaching with Results. Over 61 Million in ROI with an Average ROI of 9x. Find Coach Chris Cotton at AutoFix Auto Shop Coaching on the Web at https://autoshopcoaching.com/
Thanks to our Partner, Today's Class
Optimize training with Today's Class: In just 5 minutes daily, boost knowledge retention and improve team performance. Find Today's Class on the web at https://www.todaysclass.com/
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- The challenges of obtaining accurate financials (00:02:03) Discussion on the challenges of obtaining accurate financials when buying a business.
- The importance of common sense in business acquisitions (00:06:30) The panel discusses the importance of using common sense and avoiding emotional attachment when considering a business acquisition.
- Legal and financial considerations in business acquisitions (00:08:24) The panel discusses legal and financial considerations, including the importance of asset purchase, non-compete agreements, and the quality of real estate.
- Financing Considerations (00:18:13) Discussion on the critical role of financing in business acquisitions and the advantages of using banks or owner financing.
- Bank Relationships (00:19:09) Importance of building a relationship with a bank and leveraging the bank's confidence in the buyer's ability to expand.
- Financial Statement Analysis (00:20:27) Importance of thoroughly analyzing financial statements, including understanding expenses and discretionary non-recurring expenses.
- Negotiating the Deal (00:22:24) Strategies for negotiating the price and terms of the acquisition, including considering the concerns of the seller and assessing the facility's assets.
- On-Site Q&A (00:23:31) The checklist and tactics for conducting a site visit to assess a potential acquisition, including evaluating equipment, employees, and the owner's future plans.
- Pro Forma and Business Plan (00:25:23) The necessity of creating a pro forma and business plan for the bank, including the importance of conservative projections and understanding the return on investment.
- Challenges of Multi-Shop Expansion (00:30:34) Discussion on the challenges and missteps often encountered by individuals expanding into multi-shop operations, emphasizing the need for patience and learning from experiences.
- Gas Station Red Flags (00:32:41) The importance of environmental assessments.
- Emotional Aspects of Buying (00:34:08) The emotional nature of buying a business.
- Goodwill and Equipment Allocation (00:38:49) Discussion on goodwill, equipment, and the allocation of the purchase price in a business acquisition, including tax implications.
- Understanding Multiples in Business Valuation (00:39:32) Explaining the concept of multiples in business valuation and the factors that influence the multiplier, such as location, equipment, and reputation.
- Negotiating Purchase Price (00:42:23) Negotiating the purchase price based on business valuation and real estate factors.
- Final Thoughts on Business Acquisition (00:44:03) The importance of staying positive and finding creative solutions during negotiations, leaving deals on good terms, and expressing appreciation for the insights shared.
