If you\'re even considering selling your midsize company in the next couple years, here\'s the bottom line: you should start the process now. No kidding. That does not mean you should officially list your business for sale. It means you as the business owner should start some of the "behind the scenes" efforts (that is, preparation) that will enable you to maximize the value of your company during a sale and enhance the terms you\'ll negotiate as early as possible.

1. Growthink’s “Bottom Line” Guide to Selling Your
BusinessFebruary 2009 Terms
on the Best
January 7, 2010 1

2. What’s in This 45 Minute Presentation?
• Our recommended approach to help you sell your private
firm on the best terms
• Our Bottom Line?
• Start as early as possible. Focus on four key areas to
maximize your price and the terms of the sale.
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3. Today’s Presenters
• Troy Centazzo
• Managing Director; Group
Lead, Investment Banking
• Per Larson
• Managing Director; Group
Lead, Consulting
• Decades of combined integrated
entrepreneurship, consulting and
investment banking (M&A)
experience
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4. Who is Growthink?
• Integrated strategic consulting,
investment banking, and market
research practice
• Practice focus on gazelles and mid-size
companies
• Founded in 1999, more than 2,000
client engagements to date
• Team of 40 finance & consulting
professionals
• Offices in Los Angeles, New York, San
Francisco
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5. Our Credentials
• Member FINRA, SIPC
• Inc. 100 Fastest-growing Business
Services Company in U.S.A.
• Better Business Bureau “A” Rating
• Recognized for our thought
leadership regarding business
planning, growing and selling
comapnies, & entrepreneurship
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6. Webinar Format
1. 45 Minute Presentation and Q&A
2. Questions/comments as we go:
– Type in utilizing GoTo Webinar chat-box
3. After Call:
– We will provide contact information
– Survey feedback
– You will receive, via email, copies of the review
slides and a recording of the presentation
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7. Agenda
• Who Will Likely Get the Most from this Seminar
• Why Value is Often Left on the Table by the Seller
• The Growthink Four Pronged Approach to Selling a Business
• Ideal Timeline for This Process
• The 800 Pound Gorillas in the Room: Tax Changes and the Economic Climate
• To Learn More
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8. This Seminar is Ideal For
• Business owners who
– Have greater than $5 million annual revenue
– Pre-tax earnings greater than $1 million
– Have at least 2 years of operating history
– Considering a sale within 3 years
– Considering a transfer of leadership to the ‘next
generation’
– May have been approached by intermediaries
(investment banks) to represent the company in a
sale transaction
– Have received offers in the past to sell
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9. How Most Midsize Private Businesses Are Sold… And
Why Value is Often Lost by Sellers
• Many private businesses are sold in this fashion….
– Selling to another company or executive based on a first
offer
– Not starting early enough
– Choosing the wrong – or no – professional advisors
• This process is too often marked by:
– Failure to appropriately plan to invest in value-
increasing projects
– The company’s best attributes are not optimally
presented
– Company records, financials, processes not addressed
– Deals structured without considering tax and other
implications
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– Unprepared sellers

10. What is the Growthink Approach to Selling
Businesses?
1. “Getting the (Business) House in Order - Early”
• “Cleaning up” financial statements, accounting practices, outstanding
legal and other situations, and “dotting the I’s and crossing the T’s”
2. “Maximizing Your Value by Re-energizing Your Company’s Business Plan”
• Enhance the price you command by implementing a few
strategic initiatives – Business Planning 101
3. “Run a Professional-Level Sales Process”
• Creating a professional offering package, targeting the
right buyers and a leading a well-run process
4. “Structure, Structure, Structure”
• Choose the right transaction structure that maximizes your return 10

11. Selling Your Midsize Business – an Example Timeline (24 - 30 Months)
January 2010 January 2011 January 2012 June 2012
1. Getting the (Business) House in Order
Due
Documentation/Records Financial Models and Statements
Diligence
2. Enhance the Company’s Strategy and Plan to Maximize Valuation
Understand Success
Factors
Strategic Planning Execute strategic initiatives
3. Run a Professional Level Sales Process
Develop Sales
Commence outreach process
“Package”
4. Execute Proper Structure
Understand all Tax and Create list of possible Close Transaction
Legal Requirements deal structures
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12. Prong 1 - Getting Your (Business) House in Order
• What are the key issues that owners of private businesses often face
when they decide to sell?
`
Record Keeping
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13. Prong 1 - Getting Your (Business) House in Order (cont.)
The Importance of Pre-Sale Preparation and Planning
• Often private – and especially family – businesses have
intertwined legal structures and agreements developed over
the years. These should be addressed.
• Legal and Documentation
• Review legal and incorporation documents, contractual
agreements and outstanding legal issues, make any
necessary changes (see due diligence list)
• Fix issues on D&B Report and/or outstanding owner
situations that affect business
• Work with counsel or a financial advisory group to create a
plan to clean up your capitalization table
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14. Prong 1 - Getting Your (Business) House in Order (cont.)
Lower income/higher expenses = lower taxes.
BUT,
It also generally means a lower price for your
company.
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15. Prong 1 - Getting Your (Business) House in Order (cont.)
• Financial Statements, Accounting and Taxes
• “Cleaning up” Your Balance Sheet
Assets:
• Get rid of “dead” inventory to avoid adjustments to the
price
• Eliminate “personal assets” – avoid adjustments during
due diligence
• Excess cash – either dividend or use for growth and
valuation enhancing initiatives
• Liabilities:
• Pay off notes and other liabilities to shareholders
• Make sure all liabilities are accounted for (accruals, etc.)
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16. Prong 1 - Getting Your (Business) House in Order (cont.)
There are likely local accounting firms that specialize in
pre-sale services. Ask for referrals.
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17. Prong 2 – Maximizing Value by Re-energizing Your Business
Plan
• Every Business Can Enhance its Strategy and Plan
• In the stock market, businesses are judged on the future potential
of a company, not just the past. Yours should too.
• Understand the value drivers of your sector
• Generic sources of value in any industry:
• Size of company
• Strength of firm compared to competition
• Profitability and cash flow; contractual ongoing (“sticky”) revenue
• Growth rate and sales pipeline
• Size of market and industry trends
• Market share
• Uniqueness of products and/or services
• Patent/intellectual property protection
• Identify and execute on key strategic initiatives that will drive the
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value of your firm

18. Prong 2 – Maximizing Value by Re-energizing Your Business
Plan
Lots of value left on the table by the seller
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19. Prong 2 – Maximizing Value by Re-energizing Your Business
Plan
• Every Business Can Enhance its Strategy and Plan
• Lead a strategic and business planning process at your
company, asking the following:
• Do you really know your
• Customers and their needs?
• Products’ and/or services’ benefits?
• Industry and its opportunities and value drivers?
• Competition and how you compare?
• Staffing needs and expertise?
• Operations and whether they’re efficient?
• Focus on executing a few select initiatives to maximize
results…quickly.
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20. Prong 2 – Maximizing Value by Re-energizing Your Business
Plan
Lots of FREE content on our website: Conducting Market Research **
Business Planning **
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21. Prong 2 – Maximizing Value by Re-energizing Your Business
Plan
• Case Study – Media and Technical Staffing Company in Mid-2009
• About $6M in revenue, four years old, only a few full-time employees
• Connected to established production company
• Strong growth rate
• Intends to sell within 18 to 24 months
• Several “brand name” clients
• Minimal sales and marketing expertise and effort
• Unique expertise
• Tough market conditions to raise capital
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22. Company Example – Media and Technical Staffing Company
A Quick Sector Check – Big Market Shares, Stock Prices Down
Company Stock Price 2 % of 52 Wk. High 2 Market Cap ($mm) 2 TEV ($mm) 2 LTM Total Rev ($mm)
Manpower Inc. (NYSE:MAN) $41.31 58.4 3,236.8 3,315.7 21,552.8
Kelly Services Inc. (NasdaqGS:KELY.A) $10.80 46.6 375.6 372.5 5,517.3
Robert Half International Inc. (NYSE:RHI) $22.75 75.9 3,454.0 3,101.3 4,600.6
Volt Information Sciences Inc. (NYSE:VOL) $7.04 44.4 146.7 138.5 2,346.0
MPS Group Inc. (NYSE:MPS) $8.04 63.0 743.7 662.6 2,222.3
Spherion Corp. (NYSE:SFN) $3.70 59.7 191.0 222.8 2,189.2
Watson Wyatt Worldwide, Inc. (NYSE:WW) $52.17 84.1 2,222.2 2,208.9 1,773.9
Administaff Inc. (NYSE:ASF) $25.70 80.9 653.5 401.6 1,724.4
TrueBlue, Inc. (NYSE:TBI) $9.39 53.7 410.9 304.0 1,384.3
Monster Worldwide, Inc. (NYSE:MWW) $11.80 40.2 1,453.7 1,285.0 1,343.6
Industry Overall - Human Resource and NA NA 65,213.8 70,713.2 175,338.6
Employment Services
Equity Valuation Enterprise Valuation
Industry Performance Industry Market Cap. 65,213.8 Industry TEV ($mm) 70,713.2
($mm)
P/E (LTM) 12.4x TEV/Total Revenue 0.4x
Information about firms in your sector yields Price/Book 2.3x TEV/EBITDA (LTM) 6.5x
a gold mine of information about the “value Price/Tangible Book 9.7x TEV/EBIT (LTM) 7.7x
Margins Profitability
drivers” in your industry
Gross Margin % 22.6% Return on Assets % 8.6%
EBITDA Margin % 6.2% Return on Capital % 15.0%
Net Margin % 3.0% Return on Equity % 19.3%
Leverage Coverage
Total Debt/EBITDA 1.2x Current Ratio 1.4x
Debt/Equity 43.9% EBITDA / Interest Exp. 13.9x
Debt/Capital 30.1% (EBITDA-CAPEX) / Interest 13.5x
Exp. 22
Yahoo Finance, EDGAR, Yahoo/Google Business News

23. Company Example – Media and Technical Staffing Company
Technical Staffing Industry Overview – Key Drivers of Value
(Price)
These Conclusions Were All Derived from Publicly Available Information
• Threshold revenue number and growth rates
• Scale, market share
• Customer list, including “types” of customers (recognizable?)
• Gross margin
• Success in a tough sales environment with a long sales cycle
• Reaching critical size
Key Business Plan Issue – How to Grow Quickly with Limited
Access to Growth Capital? 23

24. Company Example – Media and Technical Staffing Company
Short-Term Initiatives to Drive Value
Strategic Initiative 1 – Build up the Pipeline…and Fast
• Every Business Can Enhance its Strategy and Plan
• Implement a sales and marketing outreach strategy
• Target prospects by conducting simple “Google News” searches on key terms like
“media technical staff” and reviewing online job postings
• Create a 20 minute PowerPoint presentation that provides the prospect with
valuable information about their needs, “pain points,” and options
• Implement an online “first pitch” to quickly qualify leads and set up meeting
• Reach out to non-competing, complementary providers of products/services and
ask for referrals
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25. Company Example – Media and Technical Staffing Company
Short-Term Initiatives to Drive Value
Strategic Initiative 2 - Increase Gross Margin Percent and Gross Profit
Amount
• Every Business Can Enhance its Strategy and Plan
• Implement a sales and marketing outreach strategy
• Focus on adding high margin services for existing clients (company already had
those available but did not focus on them)
• Focus on incremental high margin services on every new proposal and
relationship
• Identify the most profitable clients and focus on delivering additional
services/products to them
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26. Company Example – Media and Technical Staffing Company
Short-Term Initiatives to Drive Value
Listen To Your Existing
Customers
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27. Company Example – Media and Technical Staffing Company
Potential Outcome of Strategic Initiatives
Increased Valuation and Enhanced Attractiveness as Acquisition
Even 2 – 3 additional clients and a robust pipeline will significantly enhance this
company’s valuation and attractiveness to a (strategic) buyer
Each incremental $1M Will add between $500K and
in annualized revenue $1M to valuation
Each incremental Will add between $4 - $8M
$500k to valuation
in annualized EBIT
Projected revenue from Will be discounted but will
late stage pipeline add to valuation and
prospects attractiveness
Value of marquee client Always adds to
list to strategic partner attractiveness of firm
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28. Prong 2 – Maximizing Value by Re-energizing Your Business
Plan
• Key Take-Away
• This does NOT require a several month management
consulting study that results in a report
• Focus on a few basic – but important - initiatives
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29. Prong 2 – Maximizing Value by Re-energizing Your Business
Plan
Analysis-Paralysis by Your Friendly
Neighborhood Management Consultant
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30. Prong 3 – A Professional-Level Sales Process
• All signs point to hiring a third party (as well as business advisors) to assist
you in the sales process
• A professional advisor will understand the value of your firm, the tax
issues you face, and how to market your firm during a sale
• Packaging is key, and takes hundreds of hours to do well: financial
statements, company overview, projections, due diligence materials
• Keep the process as confidential as possible
• Creating a targeted buyer list to increase demand
• Full time process to contact and communicate with this list
• Third party intermediary allows owner to focus on the company
• The sales process can be extremely distracting and is not guaranteed
to be successful
• Statistics show that hiring a third party increases valuation
• Professional negotiator – this is what an intermediary does
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31. Prong 3 – A Professional-Level Sales Process (cont.)
• Types of third parties (intermediaries) and advisors
Advisor Types Description
Business Brokers – “Main Street Represent small businesses and may specialize in a sector.
Businesses (list price for business) Contingent fees about 10%+. Advertise your business.
Investment Banks – “Middle Develop strategy for company sale and prepare sales package (memo,
Market” (receive bids) presentation, financials, due diligence docs). Lead process.
Retainer plus success fees.
Unregistered “brokers” and intermediaries with
Consultants – Individuals and little experience
Miscellaneous advisors to prepare company for sale, find buyer, etc.
Firms, including Business Appraisers value businesses.
Appraisers
Accountants Enhance accounting processes, create financial statements (recasts),
assist in due diligence. Advise on structure and tax issues.
Lawyers/Law Firms Review company documents and other agreements. Advise on tax
issues. Review and negotiate purchase documents.
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32. Nominee:
“The Busiest, Most Confusing Slide in History”
Prong 4 – Optimizing Deal Structure and Terms
Deal Structures, Description Pros/Cons
Terms
Asset Sale Sell assets of your company and retain Often preferred by buyer (to leave (hidden}
liabilities. liabilities and create step-up basis), but can create a
large tax burden for seller. C-corp double tax –
corporate tax, plus capital gains tax (more than
50% of sale).
Stock Sale Purchase stock of company from Most buyers prefer asset sales, but taxes may be
shareholders higher
Recapitalization Option of selling to current employee and
remaining active in business
Seller’s You “loan” part of the purchase price to the Allows for the deferral of taxes. Third party equity
Note/Financing and buyer, which isHuge you over time. Not investors often like this approach. But, want to be
A paid to Tax Hit By
Installment sales. tied to business?
Installments Planning Ahead
Ongoing Royalty Additional payments post-close (e.g., % of
revenue)
Consulting Ongoing relationship with purchased Additional income post-transaction.
Agreements company
Miscellaneous 1. Accept stock from buyer. 2. Tax free There are so many alternatives, sellers should seek
transfers to heirs. 3. Use of proceeds from sale. extremely qualified and experienced advisors
structures/terms/ 4. Use of “goodwill”. 5. Annuity guarantees
issues with installments. 6. Company structure (LLC,
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C Corp, S Corp). 7. Depreciation recapture.

33. The 800 Pound Gorillas in the Room – Current Issues
• There are a few evolving conditions to closely follow
Services What’s Going On?
Capital Gains Tax Increases Potential increase from 15% to 20/25.4% in 2011 when tax cuts
expire (ordinary income top bracket may rise to 39.6%).
Selling in a Down Economy - Tight credit markets, no matter what the banks are telling
Availability of Buyer Financing Congress. On the other hand, there’s lots of capital ready to
invest.
Boomers, Boomers, Boomers Stats say that up to 75% of private businesses will be up for sale
within a decade. Will there be more supply on the market?
? ? ?
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34. Recap
• Start Now if You Think you Will Sell in the Next 3 years
• Learn what Drives Value in Your Business
• Get Your (Financial) House in Order
• Re-energize Your Business Plan
• Engage a Professional to Run the Sales Process
• Understand Deal Structures and What’s the Right One for You
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35. To Learn More
• Contact us at:
– troy.centazzo@growthink.com
– per.larson@growthink.com
– 800-506-5728
• We can also conduct a free Company Sale
Audit*
– Guidance on your particular company
sale process
• In the LA area?
• We’re holding a three hour seminar
based on these concepts (February 18)
*Pre-qualification required
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