The Vant Group represented a project based construction business for sale.   The business, in preparation for sale, created a forecast based on their upcoming projects. The report revealed that three of their largest projects were scheduled to start in the 4th quarter of the current year.   After the LOI was signed, a customer pushed their project to the next year.  The change affected projections and created a shortfall in the forecasted EBITDA.  Although a benefit to the buyer, he was uncertain that the gross profits would reflect the projected revenue.

To address the buyers’ uncertainty, the sales terms were restructured to include a portion of the purchase price as an ‘earn out’, tied to a gross profit percentage.   The owner’s note was converted into an ‘earn-out’ tied to a targeted gross profit.

The seller agreed to the conversion because he was 1) staying on with the company for 12 months to help with the transition and would continue to have an influence on the sales of the company and 2) had the backlog to support the targeted gross profit.  The seller felt confident that if the projects were again pushed back, he would still be able to win projects from other bids he had out.

The purchase price remained the same, and the buyer and seller agreed to the new deal terms.

 

 


The Vant group is excited to announce that Bill Massie has joined the firm.  He brings a wealth of experience in many facets of investment banking.

Bill has worked with entrepreneurs and high-growth companies for over 20 years. His experience ranges from venture capital raises to IPOs. He is highly skilled at sourcing early to intermediate stage equity and debt capital, structuring and placing mezzanine debt and selling privately-held companies.

Bill owned a Broker-Dealer firm for 15 years which specialized in private placements for high-growth entrepreneurs.  His understanding of the needs and opportunities of these businesses will be invaluable to The Vant Group as we expand our investment banking operations.

2018 looks to be a significant year for The Vant Group.  We have several large projects underway which will require significant capital raise expertise with market rollup opportunities for our clients as well as value creation for our investors.  Here are a few examples:

  • The Vant Group (TVG)is partnering with a firm to exploit opportunities in the cannabis business in Colorado and several other states this next year. Our efforts will include providing roll-up capital to consolidate and integrate disparate business operations, expand dispensary and production facilities, and develop new pharmaceutical products.  We believe that there is enormous profit potential as the cannabis industry grows and becomes more sophisticated. The Vant Group intends to play a leading role in providing financing, advisory, and investment banking services to this space;
  • TVG will spearhead a real estate development project in Broken Bow Oklahoma designed to meet the increasing demand of vacationers traveling to the area. Resort cabin rentals, purchases, and a corporate conference center will be among the offerings;
  • TVG, along with one of our partners, has engaged with an exceptional operating group to purchase and grow a well-known local restaurant chain with attending real estate assets in Uptown.

This sampling of 2018 projects is part of the exciting times at The Vant Group.  We are looking forward to working with our investment banking clients and capital sources as we seek to add value and make money for our partners.

 


A verifiable cash flow can determine the price of a business acquisition.

Buyers and business brokers go as far as stating that cash flow is a major deciding factor in a business purchase decision. For buyers, an owner’s discretionary cash flow, secured through a business purchase, is important in determining the value of a company.

Owner’s Discretionary Cash Flow (ODCF) is the amount of money a new owner can take annually from the business.  TVG, as a professional business broker, can assist in analyzing the business’ income statement to determine the ODCF. There are common tax strategies that comprise the ODCF; net income, owner’s equity withdrawal and perks, depreciation and amortization, interest expense, and non-reoccurring expenses.

Your federal tax rate is determined by your net income. A common tax strategy is to offset the business profit with allowable expenses, therefore keeping your taxable income low.  With this tax strategy in mind, a small net income does not necessarily reflect an unprofitable business. 

The owner’s salary is a large component of ODCF. Again, there are tax incentives for paying less employer and employee tax, based on a lower income level.  To decrease tax liabilities, business owners will often pay themselves a small salary and make up the difference with owner perks. 

An owner perk is when the business pays for personal expenses, a benefit of owning a business. Although a good tax strategy, business paid personal expenses, lowers the net profit.  To appropriately value a business for sale, an itemized perk list can be added to the income statement, increasing the value of the business on paper.

Both non-cash expenses, depreciation, and amortization are components of ODCF and used to reduce taxes. Depreciation decreases taxable income but does not reduce cash. It is acceptable to include depreciation and amortization in cash flow calculations.

Interest is a component of ODCF and can be attributable to bank loans, personal loans, equipment leases, and other debt instruments that may go away after the sale. One-time or non-recurring expenses are also considered components of ODCF. Extraordinary litigation expense is a good example unless litigation is an annual occurrence. 

Calculating ODCF is an important component when preparing your business exit strategy.  Contact The Vantage Group today for help with your ODCF and exit strategy plan.


The professionals at TVG have some difficult and disappointing conversations with business owners when valuing their business for a sale.

Business owners spend their entire life building a business with the hopes of selling and realizing that big payday. Most sales are the result of health, fatigue or customer issues and when business owners decide to sell, they likely don’t have a proper plan in place to execute a successful sale.

Lacking an exit plan, the financials usually don’t support the sales value that the business owners have in mind. In the words of Stephen Convey, sellers should “Begin with the End in Mind”. The day a business is opened, an exit plan should be created as a roadmap toward that big payday.

Here’s an article that emphasizes the importance of creating an exit strategy: The Vant Group is here to help guide you through the steps of buying or selling a business.