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Business Acquisition Process - Successfully Acquire A Small Business No Money Down - YouTube
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welcome to this YouTube channel on how
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to buy businesses no cash down I'm Carl
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Allen and I'd be buying businesses for
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almost 25 years more than 250 deals in
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17 countries this playlist is all about
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deals specification so what type of
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business do you want to buy the sector
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location the size of the deal your
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desired role in the business and how you
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bring your passion your business skills
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and experiences to bear here's the next
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video in the sequence there are five in
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total now remember this slide from the
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original webinar once you acquire a
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business whether you're Boulter's into
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it or not grooming it for sale by
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systematizing it and then making it
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irresistible to others will jack up your
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exit multiple and just to remind you
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some businesses do sell for crazy
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multiples because they are so highly
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coveted by the wider market and when you
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snap better competitors heels it'll just
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take you out for a big number microsoft
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paid eighty two times e bit d profit for
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skype i've paid forty four times in the
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past for mercury interactive when I was
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at HP and Johnson and Johnson got tired
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of a clarin eating its lunch and set
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them out for 63 times operating profit
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or e bit D the Facebook whatsapp deal
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defies all logical thinking but 1000
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times the profit was very very nice for
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the founders I'd love you to get a
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thousand ex as a multiple for your
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business eventually but chances are it's
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not going to happen a dismal 5x for now
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will still put you in the 0.2% bracket
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now finally let's quickly look at how we
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translate this back to the current size
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of business visa target this will be
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calculated in terms of annual sales
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revenues currently and as you recall
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this is one of the two important filters
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we apply to all the opportunities
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originated over the next few weeks the
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first data point that you need is the
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average profit margin for your
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particular niche you may already know
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this however if not you need to find out
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if you're working for a business in the
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niche already go get a copy of your
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business's latest accounts a look for
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the operating
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profit or the e bits D number this is
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the profit from normal operations so its
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pre-tax and before the deduction of any
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interest all depreciation charges now in
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this example the average EBIT d margin
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is 15% so divide this into the profit
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number so $800,000 divided by 0.15 or
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15% and you have five point three three
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three million that's the size of the
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business you need at the time you want
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to sell it and in our case here it's at
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the end of 2017 so just under three
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years if you can't get any accounts
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you'll need to do some research online
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later in the training we'll look at
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specific online databases for financial
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information like doodle monta Hoover's
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etc but since this analysis is just to
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give you an initial steer for your
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wealth creation plan and the definition
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of the approximate size filter we only
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need an approximate number one very
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quick way you can do this is go and look
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at the operating profit numbers for
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public companies so pick several
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publicly traded businesses that do
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something similar to your optimal
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expertise passion combination let's
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assume you're looking at the IT hardware
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sector so let's take Cisco now you can
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find this data on hundreds of free sites
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but I often use Yahoo Finance it's free
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Dunn's got lots and lots of great data
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so type Cisco in the search bar and
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you'll see the snapshot now down at the
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bottom left side of the screen you'll
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see a section for financials so click on
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the income statement and that will tell
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you the operating profit
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so you'll need to calculate the margin
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percentage of a bit D or operating
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profit to sales revenue so in Cisco's
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case take the nine point three four five
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billion dollars of operating income or
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profit number four 2014 that's the
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latest published full set of accounts
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then divide it into the total sales
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number which is forty seven point one
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four two billion so if you do the math
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that's 19.8% now if you do this for
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several public companies in your niche
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then take an average that will be more
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than good enough for this exercise when
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we do get into the financial modules in
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week four we'll go into this in much
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more detail now before we leave this
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exercise just out of curiosity let's
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calculate Cisco's valuation as a profit
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multiple we've talked about 5x has been
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a very conservative place to start
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let's see where Cisco are you'll see
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here that Yahoo kindly gives us Cisco's
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p/e or price earnings ratio sixteen
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point nine six for valuing the business
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now that's great for a public company
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but it's not the way that private
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companies are valued we use operating
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profit the e bit D number now you'll see
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that Cisco's market valuation is just
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under a hundred and forty nine billion
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dollars now ordinarily there are some
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adjustments that we need to do this
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number and we'll cover that later but
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for now as a proxy let's calculate what
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that hundred and forty nine billion
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dollar value is as a multiple of Cisco's
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operating profit so if we take the
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hundred and forty nine billion market
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cap or value which is the share price
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multiplied by the total number of issued
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shares and divide it by the nine point
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three four five billion dollar current
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annual operating profit the multiple is
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fifteen point nine X so way more than
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five x obviously cisco is a great
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company and that's reflected in its
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public valuation but it just goes to
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show how you are regarded by your
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industry goes a long way in setting your
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valuation multiple so I just wanted to
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give you that favor for
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now and as I said we'll go much much
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deeper into valuation and financial
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analysis later in the course so
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returning back to our size filter for
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the wealth creation plan we ended up
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with a five point three three three
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million dollar revenue number in three
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years from now so the final step is to
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translate that back to today's numbers
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now you may want to be conservative and
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apply no growth whatsoever and so you
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know exactly what your target business
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looks like however in this example the
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business was in IT storage software for
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small businesses and the acquirer was
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very very confident over 33% total
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growth over the three-year period so
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that translated back to four million
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dollars today was just the five point
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three three three million divided by one
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point three three so that's it for this
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module next I want you to what is the
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financial planning module for the
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existing business owner since if this is
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your first business you will see how a
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bolt-on acquisition can turbocharged
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your wealth creation plan so that's it
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for this particular video the next video
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in this playlist will follow and please
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check out all the other playlists and
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videos for everything you need to know
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to learn how to buy a business no cash
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now in fact i've crammed everything that
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you need to know into a special
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90-minute webinar title three insider
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secrets to buy a profitable business
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inside of ninety nine days without cash
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or knowing how to run a business and
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here are the three big secrets the three
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killer training topics think of these as
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hurdles to you becoming a business owner
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first I'll share exactly what the ten
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steps are to buy a business and you must
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follow these in order it's really
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critical second I'll show you lots of
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case studies of deal structured using
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OPM other people's money and it's nor
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more difficult than high-skilled math
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and finally I'll show you how you can
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get others to operate their businesses
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for you so you can do other things like
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spend time with your family or buy other
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businesses whilst enjoying the cash flow
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that your new business is generating for
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you so to register for this
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groundbreaking training just click on
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the link underneath
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on YouTube or type in this link into
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your browser it's and I'll see you on
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air sometime in the next week until then
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bye for now
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