| If you're planning to acquire a quick printing | | | | with knowledge about some common ratios, is |
| business for sale, you probably know most of the | | | | able to ask the right questions. If the seller shows |
| questions to pose to sellers, so you can learn, for | | | | annual earnings before interest, taxes, depreciation |
| example, terms of the lease, whether employees | | | | and amortization (the EBITDA formula widely |
| are covered by union contract and value of the | | | | used in analyzing business opportunities) that fall |
| equipment. | | | | outside the range of 10% to 20% of gross |
| But there are more probing questions to ask so | | | | revenues, some careful analysis should follow. |
| you can avoid a company that looks good on the | | | | Certainly not all companies in the industry meet |
| surface, covering hidden problems. Three issues | | | | that ratio. But knowing the number makes for a |
| to explore in depth when evaluating companies in | | | | good starting place to form questions about the |
| this industry relate to: | | | | company's profitability. |
| 1. Recoverability--Like most companies in the | | | | An informed buyer knows to investigate the |
| current economic environment, some or all of the | | | | reason a company is, for example, showing |
| quick printing business for sale offerings show a | | | | earnings of seven-and-a-half cents for every |
| decline in revenues over the past couple of years. | | | | dollar generated. Is there a fixable problem such |
| This industry was hit hard by the recession as | | | | as a bloated staff? Or does the pricing structure, |
| customers--many of them small businesses--cut | | | | necessitated by the highly competitive |
| back on their printing orders or even closed their | | | | environment, mean the company is doomed to |
| doors. | | | | underperform? |
| It's critical to know which of these categories | | | | Meanwhile, the seller who reports keeping 25 |
| applies to the majority of clients for a business | | | | cents of every dollar generated, may be |
| being considered as a purchase candidate. The | | | | "forgetting" to mention that, for example, the |
| answer to questions on this topic will reveal | | | | business has a special rent deal from the seller's |
| important clues about how quickly and effectively | | | | mother-in-law, or that relatives are "employed" in |
| the company will recover as the economy gets | | | | the company but not paid. |
| healthier. Clearly it's more encouraging to learn | | | | Alternatively, the quick printing business for sale |
| that most customers are still in business and will | | | | you're investigating might enjoy |
| have more printing requirements as their fortunes | | | | better-than-average earnings because it has |
| improve. | | | | developed just the right menu of services offered |
| 2. Income or inconvenience--While a quick printing | | | | at high profit-generating prices to a loyal following |
| business for sale looks particularly appealing if it | | | | of affluent customers. |
| incorporates other enterprises like scanning and | | | | Why are the company's earnings above average? |
| large format services, those operations don't | | | | It's the buyer's job to find that out. |
| always generate adequate returns to justify their | | | | And the seller of a particularly profitable company |
| equipment and employee costs. The seller should | | | | might be justified in setting an asking price higher |
| be asked to separate, from company's totals, the | | | | than 50% of annual gross revenues--the |
| income and expenses associated with each | | | | rule-of-thumb valuation for this business. |
| "profit" center. | | | | One such justification can be the seller's willingness |
| The statement that peripheral enterprises are | | | | to finance 25% to 35% of the price. |
| profitable should be proved with the figures. And | | | | In any event, if you understand what a buyer |
| if the seller points out how associated activities | | | | typically pays for a quick printing business for sale, |
| attract customers for the main part of the | | | | what the P&L should look like, and what are |
| business, further questions should be asked to | | | | potential problems that may not be obvious to |
| determine if those claims are rooted in | | | | the uninformed purchaser, you are well equipped |
| assumption or in fact. | | | | to identify a desirable business and know what it's |
| 3. Comparing with industry averages--The buyer | | | | worth. |
| evaluating businesses in this industry and armed | | | | |