Quality Bike Products
Frostbike 2011
Friday February 18, 2011
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©2010 LarsonAllen LLP
Building
Enterprise Value
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Square footage
Layout
City
School district
Neighborhood
Unique features
Upgrades needed
Décor
Seller motivation
Interest rates
Housing market
©2010 LarsonAllen LLP
How much is it worth?
A simple view of home value
Location:
• City
• School district
• Neighborhood
• Unique features
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Buyer’s Perspective:
Move-in Ready:
• Upgrades needed
• Décor
©2010 LarsonAllen LLP
Environment:
Fundamentals:
• Seller Motivation • Square footage
• Interest rates
• Layout
• Housing market
Example
Location:
• Detroit
Fundamentals:
• 4,000 square feet
• 5 brdm, 5 bath
Move-in Ready:
• Kitchen outdated
• Old electric & heat
Asking Price: $170,000
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©2010 LarsonAllen LLP
Environment:
• Low interest rates
• Very motivated
seller
• Terrible economy
Translating to Enterprise Value
Markets &
Location:
Customers
• City
•• Growing
markets
School district
•• Concentrations
Neighborhood
•• Wide
moat
Unique
features
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Buyers
Fundamentals:
Buyer’s
Perspective:
Financials
• Family
Squareearnings
footage
• • Strong
Layout
• • Consistent
earnings • Management
• Working capital mgmt • Strategic Buyers
• Private Equity Groups
Move-in
Infrastructure
Ready:
• Management
Upgrades needed
team
• Asset
Décor maintenance
• Operating System
©2010 LarsonAllen LLP
Environment:
• Seller Motivation
• Interest
Access to
rates
Capital
• Housing
Economymarket
What is My Business Worth?
• Sale of a retail bicycle shop can be a
tricky business
• No certain formula
• Rule-of-thumb
– 1 x gross sales
– (2 x earnings) + inventory
©2010 LarsonAllen LLP
• EBITDA example
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EBITDA Example
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Sales Revenue
Cost of Goods Sold Expense
Gross Margin
Operating Expenses
$ 4,100,000
$ 2,300,000
$ 1,800,000
$ 1,200,000
EBITDA
$ 425,000
Depreciation Expense
Interest Expense
Earnings Before Income Tax
Income Tax Expense
Net Income
$
75,000
$
81,000
$ 269,000
$ 100,000
$ 169,000
©2010 LarsonAllen LLP
Bike Shop Inc.
December 31 2010
©2010 LarsonAllen LLP
Operational Excellence
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What are you Selling?
• Location
• Established
Events
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Consistent Revenue
Higher Margin
Cash Flow
Strong Brands
• Great Staff
• Building
©2010 LarsonAllen LLP
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How do you Sell?
• Investment banker
• Business broker
• Trade publications
• Other
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©2010 LarsonAllen LLP
• Internet
The Sale Process
• Letter of interest
• Letter of intent
• Due diligence
©2010 LarsonAllen LLP
• Closing
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©2010 LarsonAllen LLP
•Questions?
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THANK YOU FOR JOINING US!
Contact Information
Dudley Ryan 612-376-4710 dryan@larsonallen.com
Virginia Harn 612-376-4718 vharn@larsonallen.com
Sandy Young 612-376-4517 syoung@larsonallen.com
©2010 LarsonAllen LLP
Craig Arends 612-397-3180 carends@larsonallen.com
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