Return On Investment Analysis For An Absentee Owner

Actual Case Studies of Recent Acquisitions of Businesses That Buyers Will Operate Absentee/Part Time

Item	Business Example (A)	Business Example (B)	Business Example (C)	Business Example (D)
Purchase Price	200,000	325,000	500,000	1,000,000
Buyer's Down Payment	(50,000)	(65,000)	(125,000)	(250,000)
Buyer's Acquisition Loan	150,000	260,000	325,000	750,000
Business Cash Flow*	70,000	145,000	160,000	315,000
Less Buyer's Annual Loan Payments**	(27,000)	(46,800)	(67,500)	(135,000)
Buyer's Annual Cash Flow After Loan Pmts	43,000	98,200	92,500	180,000
Less Manager's Salary	(30,000)	(20,000)	(30,000)	(50,000)
Buyer's Absentee Cash Flow	13,000	78,200	62,500	130,000
Absentee Cash Flow For 7 Years***	91,000	547,400	437,500	910,000
Plus Value Of Business After 7 years****	200,000	325,000	500,000	1,000,000
Total Financial Benefits To Buyer*****	291,000	872,400	937,500	1,910,000
Less Buyer's Original Down Payment Investment	(50,000)	(65,000)	(125,000)	(250,000)
Net Financial Gain To Buyer, 7 years	241,000	807,400	812,000	1,660,000
Return On Investment (ROI) During 7 Years******	482%	1,242%	650%	664%
Annual Average Return On Investment (ROI) Counting Cash Flow Benefits and Equity Return	68%	177%	93%	95%

Notes:

* Annual Business Cash Flow using EBITDA Analysis
** Buyer's annual Principal & Interest Payments, 7 Year Loan, Assumes About 7% Interest
*** Cash Flow After Paying Manager To Operate Business, So Buyer/Owner Can Be Absentee/Part Time
**** Assumes Business Will Be Worth No Less In 7 Years Than the Price Buyer Originally Paid. Assumes the PriceBuyer Might Sell the Business For After 7 Year's Ownership, and/or Value Of Debt Free Business After 7 Year's Ownership
***** Adds (a) Absentee Cash Flow For 7 years and (b) Value Of Debt Free Business After 7 Years
****** Return On Buyer's Original Down Payment Investment Over 7 Year's Ownership

This analysis is based on the current owner's results. A different owner may experience different results due to different management practices.

This analysis is for absentee owners who hire a manager to operate the business. An owner-operator who serves as his/her own manager would not have the manager expense.

Information and data about the businesses, including financial records, are the representations of the buyer and seller. Broker disclaims any responsibility for its accuracy.

This analysis assumes that the buyer/acquirer will achieve sales and profits that are no less than the previous owner's sales and profits. If the buyer/acquirer of the business has less sales and profits, and/or if the buyer/acquirer increases the cost of the goods and services, and/or if the buyer/acquirer spends more on overhead operating costs, and/or if the buyer/acquirer does not maintain a mark-up on goods/services equal to the former owner, the above ROI conclusions would not be accurate.

If the buyer/acquirer achieves sales and profits that are more than the previous owner's sales and profits, and/or if the buyer/acquirer decreases the cost of goods, and/or if the buyer/acquirer spends less on overhead costs, and/or if the buyer increases the mark-up on goods/services, it's possible the buyer/acquirer could realize an ROI that is more than the conclusions shown above.

If the buyer/acquirer operates the business as an owner-operator, instead of paying a manager to manage the business, this "hands on" buyer/acquirer would likely have higher SDCF (Seller's Deiscretionary Cash Flow), higher total (ROI) Return On Investment, annually, and over the life of ownership.

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