"Coaching Winners...Mentoring Success!"
"It's good doing business with you and at AMG. Your team
appraised and marketed my privately held business in
a very confidential and professional manner."
The two principals of American Marketing Group, Inc., also known as AMG, have experience in starting, operating, franchising, selling and investing in small and medium size businesses. Because of their over seven decades of both corporate America and entrepreneurial experience they are ready, willing and able to share their expertise with their clients, which is the real benefit of working with AMG. Also, they are both well connected in the St. Louis community because they have collectively volunteered their time as a founder, officer or advisory board member to over seventy business, civic, charitable and political organizations. Because of their involvement they know the right lawyers, accountants, bankers, investors and consultants who can help AMG help their clients on an as-needed basis. They make a great business team because they complement each other with unique talent and abilities, which ultimately benefit their clients.
Cicardi A. Bruce, our Chairman & CEO, took over his family printing business out of college, increased the revenues from $500K to over $6M, took it from 30 employees to over 250, negotiated with six different unions and sold the company to a large printing firm in St. Louis. He retired from that industry in 1991 and became an 'educated investor' who manages his own stock, bond, mutual fund and real estate portfolio.
Richard T. Pisani spent over seven years at Xerox Corporation in St. Louis out of college before becoming an entrepreneur. At Xerox he was an Area Sales Representative, a Major Account Marketing Specialist, their Branch Sales Training Manager and their Area Sales Manager.
In 1978 Rich left corporate America and launched American Business Brokers, Inc. (ABB), which was a firm that specialized in appraising and confidentially marketing privately held businesses. The concept quickly expanded to twenty three franchise offices in the Midwest and his franchise team helped train and support the entire system. The ABB franchisees helped hundreds of clients start, buy or sell hundreds of businesses that ranged in sales prices from a $15,000 restaurant in St. Louis to a $27M auto after market firm in Detroit. During this period Rich and two partners, Steve Caby and Mike Clayton, bought and sold nine of their own listings, which included both independent businesses and franchises. In 1981 our he sold his interest in ABB to a privately held firm in St. Louis. He then formed American Marketing Group, Inc., also known as AMG, to continue handling ABB as a client for an additional year to help them with their expansion, training and support efforts to twenty nine offices. Because of his experience and background in business and franchise brokerage AMG became well known for its consulting, coaching and mentoring services.
The primary mission of AMG's principals is to now share the successful track record and experiences of its two current principals with individuals who want to become a more effective business owner and have the desire to be a better leader and manager. Not only will you as an individual become a better entrepreneur, but your company will become the beneficiary of better decision making, which will have a positive impact on the overall health of your business...the ultimate goal and benefit of working with AMG.
Are you going up or going down in life's business elevator? Do you want to keep working for someone else or do you want to participate in the American dream and be your own boss? Should you start a business from scratch or is it wiser to buy an existing business? Or, if you own a company, do you want to sell it in the future at a fair price and move on to something different?
"Going up or down in the
elevator of the business world is your choice."
Individuals who want to start, buy or sell a business can have a very rude awakening if they try to embark upon either of these three journeys on their own and without professional help. Launching a brand new start-up independent business or a even a new franchise opportunity requires you to wear many hats, which you've never done before because you worked for someone else. Do you know what to look for when purchasing a business opportunity for yourself? Then, once you have learned to own and operate your own company on a daily basis do you know what to do if you want to sell it for fair market value?
When a seller is seriously thinking about an exit strategy and selling their firm themselves or listing it with AMG the first two questions they typically ask is "how much is my business worth and how do I sell it confidentially?" If they want our help AMG first has to appraise the business to find out the actual value based on the last three fiscal years on statements from the company's CPA, plus any current quarters that are available. It's not like listing a home in a subdivision where most of the homes have a 'price range' and the seller at least have an idea of its fair market value. AMG has to analyze EBITDA, which is 'Earnings Before Interest, Taxes, Depreciation and Amortization', which is an approximate measure of a company's last three years of positive cash flow based on data from the company's income and expense statement, which also is finalized by their CPA. Plus, AMG needs to figure out the ODCF, which is the 'Owners Discretionary Cash Flow' to find out how much the business owner(s) are actually taking out of the company's cash flow, which includes their W-2, bonuses and any tangible (car, country club memberships, education, etc.) or intangible (family health insurance, travel, food, lodging, etc.) benefits that are paid for them by their company. As an example, it's very possible to see that a business owner is only paying personal taxes on a total W-2 income of $50K, but has another $100K that's being run through their business as legal expenses...with the owner as the beneficiary. In this example AMG may be able to add the total of $150K to the EBITDA to ascertain the Positive Cash Flow (PCF) of the company in broker to determine the actual Fair Market Value (FMV) of the company in order to establish a listing price.
This is how AMG has a prospective buyer of a business approach a possible purchase of a privately held business...it's called 'due diligence. We have both the buyer and the seller take reasonable steps to satisfy legal requirements so there are no surprises before the 'closing'. We have the buyers investors, accountant, banker and attorney review a minimum of the last three fiscal years profit and loss reports and statements, the balance sheet, loan commitments and legal agreements or litigation that the firm has. Also, AMG has them look for three specific projected income and expense line items to determine if the business can be purchased. One is the ability of the business to pay all of its current expenses, plus any new expenses and debt service. Secondly, the company must be able to pay the new owner a 'living wage.' And finally, the business needs to be able to give a good 'cash on cash' return of the down payment made by the purchaser. Other factors include, but are not limited to, industry trends, gross revenue and expense trends, the condition of the hard assets and operating equipment of the business, current customer list, the new client add-on trends, client cancellation rates, competition, changes in technology, leases, employee issues, current and pending legal issues, etc.
So, as you can see from the information above, it's impossible to give a 'comparative analysis' in the business of selling a business. There's no rule of thumb so to speak. Every business valuation is dependent upon a lot of factors beyond just Positive Cash Flow (PCF), which is when you add the EBITDA + ODCF together to determine the Fair Market Value. You also have to consider franchise agreements, employment agreements, client service agreements, landlord leases, road rerouting, construction business interruption, patents, management, unions and a host of additional items that can affect the outcome of the actual FMV. The gross sales and net profit trends need to be carefully analyzed for the last three years too in order to find out if the company is trending downward, staying flat or moving upward in its industry and during the current economic conditions. When you do finally arrive at the Fair Market Value then that gives you the basis for the 'listing price' the prospective seller is normally disappointed because they always think it's worth more. Sellers think this because they have put in their own money, plus an unbelievable amount of blood, sweat and tears. So, you can almost bet on the client being upset with the findings and you have to deal with a very difficult attitude from the get-go. We expect it and simply deal with it in a professional manner...it's the nature of our business.
Now...here comes the good part. If the client does list their business with AMG the first thing they say to us is "don't tell any of my employees, customers, competitors or vendors that we want to sell our business, ok?" So, how does AMG sell their business and not tell anyone? Unlike listing and selling residential or commercial real-estate we don't place pictures of the business with financial details on the internet for the public to view. We don't put out yard signs or banners showing drivers-by that the business is for sale. We do exactly the opposite when listing and selling a privately help business. We have to run 'blind ads' with general information to make the phone ring, but we never give out any details during the conversation...we set an appointment. We must keep the listing information totally confidential and must have each prospective buyer we visit with go through a qualifying interview, review their resume' and check their personal financial statement before moving forward too hastily. Then, if they have the talent, ability and financial strength we have them execute a Confidentiality & Non-Disclosure Agreement Agreement before releasing the name of the company for sale. We do all of this before pursuing an introduction of the buyer to the seller because it's a very confidential and private process. Many times even after all the closing documents are approved the new owner doesn't want to make it known that the business is "Under New Management". When a buyer purchases the company name, employee base, client list and approved vendor contacts they also have the seller agree to stay on as a business consultant on an as-needed basis during the transition period, which can be up to one full year. "Don't try to fix something if it's not broken" is the motto that is normally followed in the quest to keep everything 'steady as she goes' after the closing takes place. They do this to continue the good reputation of the firms name, stop good employees from stealing and leaving, keep existing clients doing business and to keep current vendors calm. Plus, if all goes well, the direct competitors will not be alerted so they can't make disparaging remarks about the company because it's ''up for sale.'' AMG is a 'stealth' broker of businesses for obvious reasons.
Many believe that the real way to wealth is to own and operate a company and write your own checks. Many of the 312M citizens in the U.S. are entrepreneurs and are amongst the one percent (1%) of the wealthiest people in American that hold forty percent (40%) of the almost sixty (60) Trillion of our nations net worth. Wealth distribution in our country is completely out of balance as you can see in this YouTube video.
When you attempt to start a company or purchase an existing business here are some very basic questions to ask yourself before you terminate your current employment and become an entrepreneur.
Answer as many of these questions as you
can before you make any decision to become an entrepreneur.
1) What is my very first step to becoming a business owner?
2) Should I start my own independent business or buy an existing one?
3) Do I need a lawyer, accountant, banker, active partner or silent investor?
4) Should I hire a consultant or join a peer advisory board to help me?
5) Should I start my new business part time while I still keep my job?
6) Should I leave my job and start full time launching my new business?
7) Should I work out of my home or use an executive office suite part time?
8) Should I get a full time office with a long-term lease?
9) What kind of furniture, fixtures and office equipment do I need?
10) What kind of computers, tablets, software and technology do I need?
11) Should I join networking sites like Linkedin, Twitter or Facebook?
12) Should I join networking groups like BNI, Rotary, Lions or the MAC?
13) Do I need a company trademarked name, logo and tag line?
14) Do I need business cards, letterhead, envelopes and brochures?
15) Do I need a business email address, website, internet or satellite service?
16) Do I have a universal or niche' concept that will for-sure work?
17) Should I hire a 'focus group' to find out if I have a marketable concept?
18) Do I need a 5 year plan with financial projection to raise capital?
19) Do I need a power point to make individual or group presentations?
20) Do I need a personal financial statement showing my net worth?
21) Do I have the appropriate amount of capital to launch the business?
22) How much reserve capital do I need to keep the business floating?
23) Do I need investors capital that is a loan or an equity investment?
24) Do I need a Private Placement Memorandum (PPM) to raise money?
25) Do I need a bank loan and can I get one during these economic times?
26) Do I need an SBA guarantee for a bank loan?
27) What kind of credit rating and collateral do I need to secure funding?
28) Do I need to sign a personal guarantee for funding, a franchise or lease?
29) Can I take the firm through lean financial times during the first year?
30) How much income do I need to survive personally during my first year?
31) Should I hire a manager, sales people, employees or start by myself?
32) Who's my target market and how do I reach them?
33) What kind of advertising should I do?
34) How do I drive people to my website?
35) Do I need to conduct a focus group study for my product or service first?
36) Who are my competitors and what am I up against?
37) Should I offer a better product or service?
38) Should I offer a 'lowest price' guarantee to get my initial customers?
39) What am I selling, where do I sell it and how will I sell it?
40) Should I be a sole proprietor or incorporate my firm?
41) Most businesses fail due to lack of funds and poor management...will I?
42) Should I just keep my job and forget about becoming a business owner?
43) Seriously...what should I do? Stay put or believe in myself?
In the case of purchasing a franchise you are buying the franchisors name, logo, business system and recipe for success. In essence you're buying their 'learning curve' of the franchisor so you find out what to do...and more importantly what not to do. Franchisees are protected by the Federal Trade Commission (FTC) and their own State Franchise Division with numerous franchise rules, regulations and laws that the franchisor must adhere to in order to conduct business. The laws are there to give the consumer protection and keep franchisors on a very legal and auditable track. It's similar to the rules, regulations and laws established by the Security & Exchange Commission (SEC) to protect investors in the stock, bond and mutual fund market. On the first personal meeting to check out buying a franchise the franchisor must review a Federal Disclosure Document (FDD), a copy of the actual franchise agreement and audited financial statements to be in compliance with the FTC. Then a franchisee will will pay a franchise fee (@ $10K to $50K for basic training and an on-going royalty percentage (@ 3% to 8%) of gross sales to receive continued support. Also, they receive an amendable franchise operations manual to find out exactly how to operate their franchise. Additionally, the franchisor has an entire management team and administrative staff dedicated to their franchise system in order to answer franchisees questions and give the franchisee immediate field support. And finally the franchisee gets the benefit of a continual advertising campaign financially fed by the entire franchise system in order to build brand name and logo recognition like McDonald's, Subway, Century 21, etc. Finally, franchisees are the beneficiary of not only advertising clout, but buying power and research and development to keep the system on the leading edge. If you've read this and still want to open your own company or buy an independent business then check out the list of things to ponder below.
The above items, topics and questions do not comprise the entire list of all the things that have to be asked, answered and considered when starting, buying or selling a business. It just gives a person an idea of how big a decision it really is. Plus, if you have a spouse, potential partners, hopeful silent investors and family members that may want to be involved in the venture then "it's a whole 'nother story!"
"There is a light at the end of the tunnel and
we can help you get through it successfully"
Cicardi A. Bruce & Richard T. Pisani