Heather Endresen

Tweeting about SMB M&A |
Owner @ Viso Business Capital |
Dedicated to assisting Acquisition Entrepreneurs
SBA 7(a) | SBA 504 | CA iBank | USDA

[Heather Endresen @EndresenHeather]

SMB Buyers, join me Tuesday morning for a value-packed 60 minutes:
☑️ 5 stages of acquiring a small business and what you need to be prepared for in each stage;
☑️Get the tools and information to know how to write offers that will qualify for SBA financing;
☑️Know the terms and interest rate you can expect based on deal characteristics;
☑️Benefits of getting your loan through Viso vs. on your own or other loan brokers;
☑️Access to special offers from Viso's trusted service provider network
https://t.co/fpt1zpnIBc

[Heather Endresen @EndresenHeather]

This chart from @BarlowResearch has been telling us something important about entrepreneurship in the US.

As the % of business owners >65 ys old continues to incraese every year, it means that younger founders and buyers are entering the market at less than 1:1 to aging owners.

I'm working on a blog post about this now. The ratio has not hit 1:1 or better yet because these businesses are not getting the right kind of advice to prepare for sale. When that happens, we might actually see something closer to the long-promised, but yet unrealized Silver Tsunami.

[Heather Endresen @EndresenHeather]

@Doctrepreneury Thanks!

[Heather Endresen @EndresenHeather]

@beardedbestie Thank you!😀

[Heather Endresen @EndresenHeather]

Check out our new website

[Heather Endresen @EndresenHeather]

@dennis_unrein I’m all for getting deals done. Just don’t see the logic in paying a multiple for a salary in a very hard job. I’d pay for a lot of other things, just market those things to me instead.

[Heather Endresen @EndresenHeather]

My 🔥 take for today:

SDE is BS

Do you want to pay a 3-4x multiple of your salary to work in a business (which is most assuredly NOT passive)?

[Heather Endresen @EndresenHeather]

@morgantate_ Let's come together on this...better quality earnings info leads to more closed deals.

[Heather Endresen @EndresenHeather]

@danny_salzman @ClintFiore Right, it's this: "SDE to make the numbers look better" which is why I feel it's in the category of BS. 😀

[Heather Endresen @EndresenHeather]

@ShowMeYourCIM I don't care what you label the number, just please present the information on a seller replacement salary or salaries. Then I will declare that it is not BS!

[Heather Endresen @EndresenHeather]

When the listing doesn't deduct seller replacement salary anywhere or even tell us how many sellers need to be replaced, buyers are starting out guessing. Better info up front = better quality offers. Not saying your listings don't do that, but the vast majority do not include this info.

[Heather Endresen @EndresenHeather]

@ShowMeYourCIM Ok, just deduct it please rather than make buyers guess. If 2 or 3 sellers need to be replaced, deduct more.

[Heather Endresen @EndresenHeather]

@ClintFiore yes, I get it, but it's kind of smoke and mirrors math. We could just go straight to EBITDA, and value on a multiple of that. We don't need two different "earnings" numbers that have different price multiples. Just my 2 cents.

[Heather Endresen @EndresenHeather]

It's just not a good valuation metric. If I need a salary to run the biz (sometimes we need more than one replacement salary when multiple sellers are leaving), then why would I pay a multiple of the salary? Just deduct the replacement salaries and call it EBITDA rather than make buyers do separate math.

[Heather Endresen @EndresenHeather]

@jonjfarb Fair enough, just don't pay a 4x multiple for your future salary.

[Heather Endresen @EndresenHeather]

@millenrastogi True! 🎯

[Heather Endresen @EndresenHeather]

No, I don't think it's worth Zero. 😆

I simply deduct a "market" salary to replace the seller from SDE. So, maybe that's $100k, and now I value it on $400k EBITDA. That is also how I figure out how much I can borrow on it, the loan amount will be a multiple of EBITDA not SDE because buyer needs wages for food and shelter before they pay the bank.

[Heather Endresen @EndresenHeather]

@TheFlorenceFund Most of the businesses being marketed on SDE are in the "buy a job" category.

[Heather Endresen @EndresenHeather]

@Scotcockroft Exactly! We need to put 3 things together to decide if an offer is bankable: 1. Seller/biz financials and info 2. Buyer financials and resume 3. Offer and capital structure. That’s what the Viso Bankability Score does.

[Heather Endresen @EndresenHeather]

Working on a deal and want to know how SBA-bankable your offer will be? How about a Viso Bankability Score to present with your LOI?

Request a Viso Pre-Flight review and find out within 24 hours (no exclusivity required for the first Pre-flight)👇

[Heather Endresen @EndresenHeather]

@shawngorham I could be her first client. I’m going to redo my kitchen next year. 😀

[Heather Endresen @EndresenHeather]

@paulcrane DSCR plus the fact that the owner is now a proven entrepreneur in the industry. Buyers pay a hefty premium when it’s their first rodeo.

[Heather Endresen @EndresenHeather]

Interesting SBA to SBA refi scenario:

We have a client doing very well with the biz 3 ys post-close, and are able to get them an interest rate of Prime -1% (6%).

Buyer had wanted out of the PG, but still can't qualify for conventional refi, so is taking the SBA refi w/great rate but adding Personal Gty insurance for a cost of a little over 1%.

Total cost of capital is still being reduced by over 2% from original rate, and the risk to the owner is also cut by 80% with the PG insurance.

Win-win.