Naomi - click here and write a clever title
Transcription of interview with Yisrael Factor on September 24, 2012.
Douglas Goldstein, CFP®, Financial Planner & Investment Advisor
Yisrael Factor made Aliyah about three years ago and started a business called Israel Business
Brokers which helps people buy and sell businesses in Israel.
Douglas Goldstein, financial planner & investment advisor, interviewed Factor on Arutz Sheva
Radio.
Douglas Goldstein: How do you help people buy a business?
Yisrael Factor: It’s a pretty standard operation.
First of all, what we want to do is get some clients that are looking to potentially sell
their business.
We will evaluate their business, we will profile them and we will put an angle of phase on
a various valued business so that we can present the profile of this business to the potential
Olim and have those Olim evaluate the business and we will hold their hands and support them
and have them asked those hard questions to the business artist until they feel that they
had that comfort level where they understand the net cash flow of the business and then
go ahead and pull the trigger and actually purchase the business.
Douglas Goldstein: When you said you evaluate the business, what do you really look for?
Yisrael Factor: Typically speaking, there are a lot of different variables that we look
at when evaluating a business: how much money the business is making, how much time the
business stands in the business, how scalable the business might be but the bottom line
is what the buyer is looking for is the return on investment.
Bottom line is if I operated this business the same way that the current business owner
is operating it, how much money would I put in my pocket this time next year and that’s
what I called the annual net cash flow.
What I typically do is I take the annual mid cash flow and then present to the potential
buyer and then go ahead and say on a multiple of net sometimes it will be two times and
sometimes two and a half depending on the industry, that would be a fair price for the
new business owner that the buyer to go ahead and purchase the [prime].
Douglas Goldstein: Let’s say that you found a company that someone wanted to sell, when
you talk about a certain return on equity or cash flow that comes out of it, what sort
of numbers would a buyer be looking for in today’s market?
Yisrael Factor: If I understood your question properly, there’s a few different of numbers
that a buyer is going to look at.
We are not talking about very large major banks or multimillion dollar corporations.
What we’re talking about is a lot of top shops, medium-sized businesses and typical
businesses that you’re going to see on main street USA or main street Israel what people
are going to purchase.
The typical numbers that we look at when we evaluate a business are the gross sales, the
gross profit, the cost of goods, the basic expenses and then the cash flow.
Based on the net cash flow of business, we evaluate the business base and we give the
business an evaluation and then we will present that evaluation complete in a file that we
called business profile that we would use as a tool to help other buyers and the seller
transact the business.
Douglas Goldstein: Do you deal with more specialized companies?
Yisrael Factor: We sell all different types of businesses.
We sell the mom and pop shops, the retail stores, dry cleaners, Mc Cowat and we sell
all different types of small businesses but at the same time, we do all medium-sized businesses
as well.
We have manufacturing companies, large service companies, distribution, wholesale and retail,
you name it.
The criteria that we have to take on a client is that they have a positive net cash flow.
Douglas Goldstein: You mentioned before that you sell businesses to Olim.
Are they the only clients that you work with or do you also work with Israelis?
Yisrael Factor: We deal with all different types of immigrants and all different types
of people from all different backgrounds.
Most people, believe it or not, in Israel are Israelis and because of that we cater
to anybody who lives in Israel and to be honest, most of our businesses actually done with
Israelis.
My comfort level of course obviously since I’m an American is with dealing with the
Anglo population and it’s much easier for me to speak to somebody in my mother tongue
and my [inaudible 0:04:44], but sometimes you have to deal with people who are out of
your comfort level and I’m happy that we work with all different potential clients.
Most of the brokers in my company, one of the requirements for them to be hired in my
company is that they have to speak Hebrew better than myself.
Douglas Goldstein: I think the question that people often want to know is why should they
buy someone else’s business instead of setting up one from scratch?
Yisrael Factor: Let me present this scenario to you.
You may know other statistic that about 80-85 percent of all businesses that start anywhere
in the world are doom for failure before they even start for many reasons but why don’t
you take the scenario where somebody has only taken that risk, had their businesses established
for quite a few years and for whatever reason they’re looking to sell the business, could
be an illness in the family, they’re looking to retire or they just don’t have the fire
in their belly, but the main point is they’ve already gone to that startup phase and have
already gone through those risk and for the same amount of money that you would start
up a business and go through setting up, finding a location, hiring your employees, purchasing
your inventory and opening up your doors and you don’t have any established net cash
flow.
If you purchase the business and you spent the same amount of money or less believe it
or not to purchase an existing business with that ready available net cash flow, don’t
want to go to the closing, you’re hitting the ground running.
Douglas Goldstein: What would be some of the pitfalls that a potential buyer would have
to think about before buying a business?
Yisrael Factor: I’ll tell you the truth is that pitfalls would be the same as they
would be in any other country or any other industry.
You need to have some sort of fame and you need to have some sort of talent in order
to purchase the business on an industry that you’re interested in, something that lights
your fire for example.
More importantly, the setback would be a person needs to fully feel totally comfortable with
the fact that the business is profitable.
You want to evaluate the business and you want to make sure without any doubt that this
business is a good business before you spend the money, you spend the investment of time,
money and energy to take over this business and that’s part of what we do.
We do help potential new business owners in transacting a new business.
Douglas Goldstein: Do you look at the historical tax returns and any legal documents related
to it?
Yisrael Factor: We spend quite a bit of time evaluating the business in order to create
a presentation to the potential business owner and of course, as a broker, I can’t spend
all the time that it takes for a buyer to do due diligence but once we have a buyer
who has a real interest in a potential business, we would then spend a time with that buyer
coordinating the deal, helping the buyer ask the right questions and make sure the buyer
looks at the right paperwork.
If there’s any cultural issues, let’s say for example someone moving from England,
South Africa or the United States to Israel and they wanted to purchase a business, we’ll
help them with all those different technical issues that they may not think about until
they have a full picture of what the business is and what the business isn’t.
When the person has the hand on the back, they have us supporting them and holding their
hands every step of the way and make the transition much easier.
I can tell you that we found that a lot of people move from outside of Israel, coming
to Israel and make Aliyah because they now have the opportunity to make the [inaudible
0:09:01].
Douglas Goldstein: Would you recommend that people should only buy a company in an industry
in which they have experience?
Yisrael Factor: I would tell you that 60 percent of our clients come and looking at one business
and then in the end, they usually find a totally different business that they weren’t even
familiar with that they end up purchasing.
Douglas Goldstein: Is there a way that people can follow you or follow your work?
Yisrael Factor: You can visit my website at www.ESEK4U.com.
Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host
of the Goldstein on Gelt radio show (Monday nights at 7:00 PM on www.israelnationalradio.com.
He is a licensed financial professional both in the U.S. and Israel.
Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, NFA,
SIFMA.
Accounts carried by National Financial Services LLC.
Member NYSE/SIPC, a Fidelity Investments company.
His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered
at: www.profile-financial.com (02) 624-2788 or (03) 524-0942.
Disclaimer: This document is a transcription and/or an educational article.
While it is believed to be current and accurate, divergence from the original is to be expected.
The original podcast can be heard at https://sites.google.com/site/goldsteinradioshows/.
All information on this website is purely information and should not be used as the
sole basis for making financial decisions.
The opinions rendered herein are those of the guests, and not necessarily those of Douglas
Goldstein, Profile Investment Services, Ltd., or Israel National News.
Readers should consult with a professional financial advisor before making any financial
decisions.
Please see the complete disclaimer at https://sites.google.com/site/goldsteinradioshows/.