6 Non-Financial Ways to Increase the Value of your Business

I just wrapped up a week in Detroit where I presented at an industry event organized by a major paint manufacturer. I discussed growth strategies in a consolidating industry. We talked about industry evolution and ways to increase the value of your business by taking advantage of the same trends and using the same corporate[…]

Avoid These Four Common Business Acquisition Mistakes

Pursuing acquisitions to fuel growth is an attractive way to grow a company.  But business acquisitions can appear risky, especially if you have never completed one before. Acquisitions often require a business owner to take on substantial debt. An acquisition-based business strategy also requires a higher level of financial discipline. For unaccustomed businesses this can[…]

Six simple financial KPIs that increase the value of your business

The end of the year is almost upon us. Only 9 full weeks left in 2015. The last quarter of the year always goes fast. There are simply more holidays and outside demands in the last three months of the year.

I wanted to take a break from big, high-level industry analysis for a moment and drill down into the nuts and bolts of financial management. As the year begins to draw to a close it is a good time to take stock of the current state of business. Here are six simple financial KPIs to look at every month to increase the value of your business.

Many of these financial KPIs are similar to metrics that the large consolidators use to evaluate individual locations across their networks. While there are many more complex metrics that are important to evaluate regularly, this is a list of what I consider to be simple financial KPIs that a business owner ought to be looking at on a monthly basis, if not more frequently. […]

How Financially Fit is Your Business: Understanding Working Capital  

Working Capital is something that is scrutinized by almost every company but rarely talked about in the collision industry.

But I guarantee every large MSO in your marketplace is actively managing Working Capital.

It is also something that major vendors will consider if you are negotiating for a pre-bate or other consideration for purchasing their product.

Banks look at it too. If you want to borrow money to grow, they will scrutinize Working Capital to ensure that you can afford the loan.

If you ever sell your business, it will be a hotly negotiated topic as well.

Most business owners do not look at working capital until one of the above situations forces a working capital negotiation. But that is the wrong time to start managing working capital. It is like going on a diet the week before your annual doctor checkup. […]

6 Ways to Maximize the Value of Your Business

Previously we talked about valuation methods. Valuation is great, but like any tool, only as good as the person using it.

Anyone can tell you that your business is worth $10 million. But if you can’t find a buyer at that price, is it really worth that much? An investment banker once told me that a business is only worth what a buyer is willing to pay for it…PERIOD.

In order to maximize what a potential investor or buyer is willing to pay for your business you must be able to demonstrate the value of your business to them.

Understanding valuation methods is important (common valuation models are discussed in this article).

You also need to pay attention to recent comps. Know what other businesses in your industry sell for. If possible, know the profitability and size of those businesses so you can compare them to your own business.

But in addition to the above, here are six more ways to maximize the value of your business: […]

3 Reasons MSO’s Know Exactly What Your Business is Worth

A colleague of mine was recently approached by one of the Big 4 inquiring about his business. After a few brief conversations around his financials they came back to him and offered him a very specific number to buy his business.

He remarked to me, “They knew more about my business and what it was worth than I did. I had no idea.”

Ask 5 business brokers what your business is worth and you’ll get 5 responses. Ask 5 investment bankers and you will get 25 responses.

How do the MSO’s know exactly what your business is worth? How do you value a business?

There are three common ways I see collision businesses valued: by discounted cash flow (DCF), the multiple method, or by asset value.

Let’s break each one down. […]

How Private Equity Makes Millions in the Collision Industry

We’ve talked a bit about the state of the industry and the Big 4, or the Big Boys as I sometimes call them (Boyd/Gerber, Caliber, Service King, ABRA). While they may be in the same business of fixing cars, the way they do things is systematically different.

(Editor’s Note: Keep an eye out for our upcoming article on the role of franchise based MSO’s and their impact on the industry.)

Perhaps the least understood difference is at the core of their business – how they actually make money for their shareholders.

Some people believe they give heavy discounts and make it up in volume. Others believe they don’t actually make money, and are barely holding on.

The reality is that these businesses are making millions upon millions of dollars. But not the way you may realize. […]

What is this EBITDA thing?

EBIT…Huh? What the heck is that?

Say it out loud with me: Eeee – bit – dah.

One more time out loud.

EEEE – bit – daaaah.

 

Did your co-workers just look at you funny? Good.

EBITDA is short for Earnings Before Interest Taxes Depreciation and Amortization. It is a shortcut to estimate cash flow to the firm. It’s also one of the more common financial measurements used to value firms.

EBITDA approximates the cash the business is generating for all stakeholders (owners, investors, debt provides, etc.).

That is important for an investor to know. When someone invests in your business, they want to know what they are getting in return. EBITDA is a good way to measure that.

[…]

What’s a Leveraged Buy Out (Should I even care????)

Previously we talked about the state of the industry. Wall Street has arrived in the collision industry. And Wall Street doesn’t play nice when it comes to money.

The insurance companies we do business with every day are some of the most powerful financial institutions in the world. Even the small ones wield huge influence. Their campaign contribution dollars get favorable politicians elected. Their lobby dollars get favorable laws passed (Obamacare anyone?)

In other words, they get a great return on their investment. […]

Profits Don’t Matter – Why it’s really all about cash flow.

It’s all about profits, right? You can’t survive in this industry unless you mercilessly watch your profit margins. Parts margin, paint margin, labor margin, gross profit margin, overhead expenses, the list goes on and on.

But what if I told you that the big boys don’t care about their margins? […]