Developing Your Three Year Plan Preparing: Margins, Books, Money! Preparing To Sell! Developing Your Three Year Plan Preparing: Margins, Books, Money!

Establish Valuation: Develop a 3 Year Plan: Valuation - Rule of Thumb for Campgrounds: 2.8 to 3.8 times Gross Sales Make sure books accurately present Gross Sales otherwise your sales will just be GROSS! Owners need to set aside personal feelings about companies worth & establish a realistic and competitive price. Need to objectively analyze business records and assets Study the current Marketplace Consider employing the expertise of a professional business appraiser.

Establish Valuation: There are many acceptable methods of valuing a business. One method may be more suitable than another, depending on the type of business being valued, including its industry, size, and circumstances of the sale.

$350,000 Establish Valuation: For the purposes of this session we will use 3.5 Times sales as our accepted “Multiple”. So for example if you make $100,000 in Gross Sales what should your campground Target Market Price be based on our MULTIPLE? EXACTLY: $350,000

Valuation Step 1: Prepare your financial statements: Gather financial records for the past 3 years including: Income Statement Cash flow statement Balance sheet

Income Statement What is an 'Income Statement' An income statement is a financial statement that reports a company's financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities. It also shows the net profit or loss incurred over a specific accounting period. Read more: Income Statement Definition | Investopedia http://www.investopedia.com/terms/i/incomestatement.asp#ixzz4a6Quv7gS

Cash Flow Statement What is in a Cash Flow Statement? Essentially, the cash flow statement is concerned with the flow of cash in and out of the business. The statement captures both the current operating results and the accompanying changes in the balance sheet.

Balance Sheet What is a Balance Sheet? A balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership, a corporation or other business organization, such as an LLC or an LLP. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year.

Income Statement – SDE Statement Seller’s Discretionary Earnings Work with your accountant or business professional to transform your Income Statement into a seller’s discretionary earnings statement. This takes into account non-recurring purchases and discretionary expenses to more accurately reflect the value of your business

SDE Example Let’s say you decided to take $70,000 of earnings and invest in upgrading all of your sites to 50 amp service. The hit to the bottom line is severe! But only for that calendar year. So if you denote it and transform it out as non-recurring expenses, it will accurately show future income on a go forward basis. Plus you can extrapolate the income benefit by having more 50 Amp sites available to rent.

Worksheet Examples Let’s switch to a few examples and watch what happens!

What a Difference an SDE Makes! Now that we’ve seen the impact on your Pro Forma by pulling out the Seller’s Discretionary Earnings and Non-Recurring expenses, we should also account for any future impact to your gross sales the SDE’s will provide.

SDE Examples Let’s switch over to the spreadsheets to view the affect on the bottom line.

E = I = T = D = A = EBITDA Anyone know what this stands for? Earnings (Before): I = Interest T = Taxes D = Depreciation A = Amortization

Financing Costs (Interest) EBITDA Explained: This is just one measure of a company’s operating efficiency. It measures the profits without having to consider other factors such as: Financing Costs (Interest) Accounting Practices (Depreciation & Amortization) Tax Tables

EBITDA Explained: EBITDA Gets the FAT out!

Houston we have a problem! What if my Gross Sales don’t equal what we want as a sales price??? GS X 2.8 to 3.8 = Target Price

Cabins/Park Models/Rentals Increase Gross Sales Using our SDE’s we can target items that will increase our sales! Hottest revenue producers lately????? Cabins/Park Models/Rentals

Revenue Producers: Golf Carts What else can we use Discretionary Earnings on that will be non-recurring Expense with ULTRA Recurring Income??? Golf Carts Attractions (slides, Mini Golf, fun land items, etc) Larger PULL THRU sites with full hookup 50 Amp with Water/SEWER/INTERNET/CABLE

Conclusion: When you want to sell – we need a 3 year exit strategy that includes: Establishing a realistic and competitive selling price by developing a credible VALUATION. Gather all financial tools for that journey: Income Statement Cash Flow Analysis Balance Sheet Transform your income statement into an SDE Statement so you can effectively prove the parks worth! If you don’t like the number – use SDE to improve it!

email – john@propertiespluswinona.com Course Speaker John Jaszewski Owner/Broker – WI & MN 724 East Broadway Winona, MN 55987 Office – (507) 452-5700 Cell – (507) 450-5626 email – john@propertiespluswinona.com