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• Value Definitions

Businesses with Significant Realty Assets

When valuing businesses with significant real estate assets it is critical to break out all of the assets when providing the different values of the equipment, business and real estate. The real estate needs to be valued completely separately from the business and equipment components. Most appraisers use similar rates of return for all of the components, or simply lump all of the values together, similar to combining apples and oranges. We provide separate appraisals for each of the components of the real estate, equipment and the business so that the risk can be easily segregated among the various components. This is absolutely critical since each business has various working capital requirements, future capital expenditures, differing customer bases and locations of the facilities, among other factors.

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Solid Waste/Landfills/Recycling

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of solid waste businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments primarily engaged in the collection and disposal of waste by processing, destruction, or incineration. Establishments also operate waste treatment plants, landfills, or other sites for disposal of such materials.

General Industry Information
Waste Management is a complex industry, one which has had to adopt many environmental regulations since the 1970s. At one point, the United States did not differentiate between discarded materials, allowing all varieties of waste to be transported to local dumps. Environmental concerns specifically air and water contamination concerns prompted significant industry regulation by the EPA. The most significant differentiation was between municipal solid waste and hazardous waste. Distinct management requirements exist for different types of waste.

Due to the various waste disposal methods, specialized waste management firms profited from engaging in these niche trades. Revenues are largely driven by periodic contracts with municipalities, commercial clients, and other types of clients. Collectively, all segments of waste management and remediation services billed approximately $40 Billion during 2008.

Recently many municipalities have opted to privatize their waste management efforts. Businesses engaged in municipal refuse administration gather the waste from curbside locations or collect already filled dumpsters and transport the material to landfills. Technological advances, such as computerized routing equipment and improved sorting machines used by recyclers have positively affected this industry.

A lingering concern over available landfill space has arisen from public unwillingness to permit new landfills. In turn, many municipalities, as well as the federal government, encourage recycling efforts. The role of long-haul transfer stations is expected to increase into the future, as trash will likely be exported to remote locations.

Acquisition activity is expected to continue in the waste management business, however the scope of future mergers is likely to diminish as companies focus on integrating acquired businesses, generating internal growth and reducing various costs.

The landfill and private waste management industry in the United States is comprised of over 10,000 companies with a combined $50 billion in annual revenue. The industry is highly fragmented aside from the largest three companies which account for over half of the industry revenue. Those three companies are Waste Management, Allied Waste Industries and Republic Services.

The major services in the industry are collection, waste treatment and disposal, remediation and recycling. Waste collection accounts for well over half of the industry operations. Smaller companies within the industry will generally specialize in only one of the operations while larger companies are vertically integrated and able to cover all functions.

While most companies in the industry deal only with non-hazardous and solid waste, some will handle liquid and hazardous, low-level radioactive material as well.

Trash and other waste is usually collected from commercial sites using small steel containers that are dumped into collection trucks. Back-end loaded trucks are generally used for waste collection from residential sites.

Red Flags and Risks
In order for there to be any business for landfills there has to be waste. The abundance in waste generated is based on consumer spending and economic activity. If consumers are not spending as much, then less waste is generate as well. Companies will also have to run efficient operations in order to stay profitable. This is much easier for larger companies who can achieve economies of scale as opposed to small companies in the industry.

The industry is also subject to a growing public concern with the environment. Companies as well as individuals could be making a conscious effort to produce less waste and use more recyclable products instead. This goes in hand with any potential environmental regulations or standards put in place by the federal government. The federal government and smaller specialized companies with sophisticated technologies are also handling hazardous and low-level radioactive materials. Other work such as cleaning up oil spills, ground contaminations, asbestos and lead paint removal is also done by smaller specialized companies.

Another risk for landfills is the restriction in amount of available locations. Due to zoning restrictions , there are certain areas where landfills can not be located

Any existing contracts, especially those with municipalities, should be reviewed for terms and expiration. The loss of a contract could be detrimental to revenues. High-priced municipal arrangements frequently account for the majority of revenues in this industry. Waste management firms can suffer serious consequences related to liability for spilled materials, worker injury, worker dehydration, and other serious mishaps. This industry is at risk of fluctuating operational costs, namely gasoline for transit vehicles. The majority of vehicles used in this industry are very large and have poor fuel economy. A rise in fuel prices can eat away at margins. Additionally, waste management plants are energy intensive and rising energy costs also can eat away at margins. Permitting is a significant concern for many waste management facilities. Municipalities often impose restrictions on facilities limiting the amount of waste volume processed. Buyers should investigate the tonnage permits in place, and consider the feasibility of applying for a volume expansion permit. Lastly, buyers will want to examine the on-site equipment for feasibility and reliability. Old equipment is likely to be either obsolete or require considerable amounts of repairs.

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Scrap/Salvage Yards

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of scrap/salvage yard businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments primarily engaged in assembling, breaking up, sorting, and wholesale distribution of scrap and waste materials. This industry includes auto wreckers engaged in dismantling automobiles for scrap.

General Industry Information
According to the recent US Census, there were 11,731 establishments that sold recyclable wholesale materials in the United States. Combined, these businesses accounted for annual sales of $28.9 Billion, an average of $2,463,558/ firm. Many businesses in this industry usually focus their operations on recovering one type of material. The most common are metals (iron, steel, aluminum), attained from the dismantling of vehicles and building demolition. Frequently, scrap and recycling yards will process several types of materials, assuming that the facility size and equipment mix are sufficient.

Scrap yards sell processed, compressed, and bundled recycled material to manufacturers for use as raw material. The majority of the client base includes steel mills and car manufacturers. This industry has undergone vertical integration initiated by large manufacturing firms, who opted to expand their operations to include a recycling branch.

A significant amount of the work involved relates to the sorting process. Extraction of hazardous materials (most commonly oil, PCBs and lead) is required prior to shredding or shearing. Environmental and safety regulations are inherent in these types of businesses, given the chemicals, hazardous waste, and oily parts involved (such as car batteries and gasoline tanks). Permitting is usually required for processing, storage, and collection of these materials. OSHA is active in maintaining worker safety standards, given the potential hazards of large crushing, shearing, and storage equipment.

There are many independent operators in this business, although their market share has been threatened by vertical integration pressures from large firms. Acquisition of independent operators is particularly attractive to commercial companies reliant upon steel inputs (such as American car companies).

Scrap yards are affected by the ups and downs of wholesale steel prices. Generally, scrap steel prices are indicative of an economy’s condition, where high scrap prices are associated with a healthy economy demanding the purchase or construction of equipment/buildings. The scrap metal business has benefited from China’s current infrastructure development projects. With most of the world’s steel being transferred to the region, the market has experienced worldwide price increases.

The industry is affected by organized labor, most notably the American Steelworker’s Union.

Red Flags and Risks
Scrap metal businesses tend to suffer during low points of the economic cycle. Potential buyers of a scrap yard should gage the company’s performance during both high and low points for financial feasibility. Owners of scrap yards and recycling centers are well acquainted with local distaste for such businesses. Unsightliness, coupled with noise pollution and high traffic, account for the general unpopularity of recycling businesses in neighborhoods. Typically, city permits are required for operation, and can be difficult to come by. Inspections and forms of regulation may be necessary for operation. Buyers would be wise to spend a great deal of time focusing on equipment quality during the due diligence period. On-site equipment for shearing, lifting, transporting, and weighing should be evaluated for utility, condition, and safety. Vehicles involved in transit need to be well maintained, and licensed to transport waste materials. Lastly, these types of businesses face issues of ground and water contamination due to hazardous deposits. Auto junkyards house heaps of parts, which may be dripping with oils and other auto fluids which can seep into the earth. Other hazardous types of materials, containing stored energy (pressurized containers) or flammable substances are hazardous to nearby workers and businesses. Care needs to be taken when handling piles of refuse.

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Lumber Yards

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of lumber yard businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments engaged primarily in selling lumber to the general public. These establishments may also provide a line of general building materials.

General Industry Information
Businesses categorized as lumberyards typically include operations which specialize in wood sales, however larger warehouse hardware stores which retail other goods can also be included in this category. The bulk of revenues are obtained from customers engaged as professionals in home construction, contract work or other areas of building. Occasionally, lumber sales are made to individuals engaged in “do it yourself” projects.

Lumber dealers typically purchase their inventory from lumber wholesalers in the Pacific Northwest or Southeast regions of the United States. This business can be very cyclical, for many reasons. Access to materials from logging companies can be halted due to environmental reasons. Futures contracts for lumber can be purchased to hedge the risk of rising costs. Demand for lumber products is affected by construction cycles.

Wood-specific retailers numbered approximately 9,200 as of the recent census. As is the case with many industries, massive consolidation and the dominance of few firms has squeezed out many small operators. Leaders include Home Depot, Lowe’s and Menard Inc, which are credited for expansive franchising and advanced inventory systems. Total industry sales during 2002 were approximately $78 billion, or an average of $8.5 million in sales each.

Red Flags and Risks
As noted earlier, it is important to understand two fundamental concepts about this industry. First and foremost, the lumber business fluctuates dramatically, as it is subject to construction cycles, sudden price increases, and drops in the supply of raw materials. Secondly, it can be very difficult for smaller lumberyards to survive with the rapid expansion of the larger warehouse centers. Survival of the smaller lumberyards is often obtained through mergers and by providing specific value-added services to customers. Worker’s compensation expenses can be high for this business, where workers are dealing with large pieces of wood, heavy pallets, and cutting materials.

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Garden Centers and Nurseries

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of garden centers and nurseries. Below is a brief synopsis of the industry.

Description of Business
Retail nurseries, lawn and garden supply stores are engaged in providing agricultural products to consumers. These products are typically planted for aesthetic purposes on private land or in commercial settings. In addition to selling plants, flowers, trees and the like; stores also sell gardening tools, soils, sods, fertilizers, and other gardening related supplies.

General Industry Information
Operations in this industry generally fall under two categories. Single-unit stores tend to be individual proprietors whose buildings stand alone. These types tend to house harder-to-find seeds and plants for their customers rather than the typical fare. The other type usually is a multi-unit branch. These operations are closely tied to larger retail outlets and provide supplementary gardening supplies and services to their larger partners (i.e. Builder’s Square connected to a Kmart). Rather than carrying specialty products, these stores tend to focus on generic, high-demand goods.

Suburban sprawl following World War II really catapulted this industry into full gear as families began to landscape new homes. However, the industry took a turn in the 1990s and started to move away from providing seeds and began to carry bedding plants that were both easy to cultivate and less time consuming. The industry experienced phenomenal growth during the 1990s as more baby boomers began to fall into the age where people traditionally began to spend more money and time resources on gardening.

During the 1990s, the industry transformed greatly, following one of two trends. The first trend was the domination of larger multi-unit (franchise) operations that created a more corporate atmosphere. The second trend has been the increased segmentation of the market; smaller operations began to specialize and focus their product offerings in order to attract a more “elite” gardener.

Increased competition from large superstore retailers like Home Depot has strained the industry as well. To augment falling sales, smaller operations have begun to offer professional landscaping and consulting services in addition to plants and supplies.

The Midwest remains the largest patron of the industry, thanks to high home ownership rates, larger lot sizes, and a constituency that has been raised on or near farm land. According to a survey through the National Gardening Association, Americans spent $39.6 billion during the recent census on their lawns and gardens, an increase of $30.2 billion over the previous four years. Mail-order and internet purchases have become an increasingly popular option for consumers, having made up 8.4% of total sales. The majority of these operations are extremely small with five or fewer employees.

Red Flags and Risks
Competition has been the largest risk for operators over the past two decades. The industry has been marked by buyouts and the entry of large-scale operations like Home Depot into the market. Buyers looking to purchase smaller operations should be sure to find a niche market to operate within so that they don’t become overwhelmed by competitive pressure. Many successful businesses have achieved positive working relationships with professional landscapers, gardeners, and gardening clubs. Developing these networks can be critical, and knowledgeable employees can be valuable to maintaining such relationships. This industry is susceptible to environmental regulations, given the use of fertilizers and other soil additives that are derived from inorganic chemicals. Sales tend to fluctuate with the seasons. In addition, as well as many gardeners will purchase garden products during the spring and summer months than in winter. It would be wise to review at least one full year of financial records to gain a better understanding of the cyclical nature of the business.

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Gas Stations/Service Stations & C Stores

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of gas station businesses. Below is a brief synopsis of the industry.

Description of Business
Gasoline service stations primarily engaged in selling gasoline and lubricating oils. These establishments frequently sell other merchandise, such as tires, batteries, and other automobile parts, or perform minor repair work, with average annual sales of $1,530,287/firm.

General Industry Information
The retail gasoline business is expansive, with annual revenues over $125 Billion. According to the Bureau of Labor Statistics, there were 81,684 establishments as of the recent census, employing 614,000 workers.

Gas stations were once operated by individual retailers, who purchased gasoline from wholesalers. Increasingly, gas companies are engaging in vertically oriented business plans, purchasing and franchising their operations. In doing this, some gasoline wholesalers are being pushed out of the industry, as retailers are buying directly from oil manufacturers. Exxon Mobil is the top American gas company, as well as service station parent company, whose refined oil was sent to 42,000 retail stations (source: Hoovers).

Many existing stations are looking to expand their convenience store offerings, a move which is often made to increase operating profits. Most newly built service stations are streamlining the layouts of gas stations with convenience stores.

General trends of automation have permeated this industry, including credit/ debit card payments. The automation has enabled service stations to offer payment at the pump for customers. Generally, the automation allows gas stations to operate with fewer employees, a fact reflected in the high sales per employee ratio for this business.

Red Flags and Risks
Competitive pressures have thinned profit margins for many operators. Increases in expenses can quickly hinder an operation, so cost management is crucial. Because it is possible for a single employee to operate a gas station, workers have become particularly vulnerable to theft and other crimes. Buyers should consider the safety of employees, and check the facility’s surveillance and other safety controls. Buyers may be interested in checking with the Congressional Energy and Commerce Committees to review pending legislation pertinent to this business. Environmental legislation affects this industry significantly, especially with regards to the underground storage tanks. Fiberglass tanks are preferred, and tank condition needs to be inspected by a third party professional during the due diligence period. This inspection should report on any leaks or rust in the tanks. Retroactive liability for environmental damage caused by faulty storage tanks can put an operation out of business. A very important item to review is the gas station rental lease and any franchise agreements. Frequently, franchise transfer fees apply. Location is vital, with freeway access and visibility fueling sales from regular commuters.

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Grocery Stores

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of grocery store businesses. Below is a brief synopsis of the industry.

Description of Business
This category, commonly known as supermarkets, food stores, and grocery stores, are primarily engaged in the retail sale of canned foods and dry goods, such as tea, coffee, spices, sugar, and flour; fresh fruits and vegetables; and fresh and prepared meats, fish, and poultry.

General Industry Information
The grocer’s industry is associated with flat sales margins due to increased competition. Higher expenses have effectively minimized profit margins to razor-thin levels, particularly amongst smaller independent stores. The minimal profitability amongst smaller and medium-sized stores spurred a recent wave of merger and acquisition activity. Openings of store chains and discount food retailers, including the Wal-Mart super centers and Target’s food products expansions, have applied further pricing pressure.

According to the Encyclopedia of American Industries, approximately 15% of market share is attributed to independent stores. Markets that cater to ethnic food customers are gaining in terms of market share, as are warehouse-style stores that carry food items (namely Costco, Price Club). Gourmet shops are often able to justify higher prices for high quality merchandise, although sales for these shops tend to be more cyclical.

Large stores are better able to negotiate pricing terms from wholesalers, and may require exclusive distribution contracts with food manufacturers. Firms that are not vertically integrated may face challenges from supply interruptions. Generally speaking, steady patronage coupled with a favorable lease and in-place liquor licenses make for a marketable grocery business.

Red Flags and Risks
Above all else, it is important for a grocery store to have a solid long-term lease. Considering the slim profitability in this business, it is conceivable that an unfavorable lease could single handedly deteriorate an operation. Operating expenses that tend to slim margins for this business include worker’s compensation, fluctuating wholesale prices for goods, and salary increases for employees. Union activity is present in this industry, primarily by the United Food and Commercial Workers International. Utilities expenses are considerable, given the large quantity of refrigeration equipment. By virtue of the fact that grocers retail food products, there are many different regulatory agencies that certify and permit grocery stores. In addition to the FDA, grocery stores need to be in compliance with the Department of Agriculture, Department of Commerce’s National Oceanic & Atmospheric Administration (seafood retail), and the Bureau of Alcohol, Tobacco, and Firearms (alcohol permitting). Depending on the products sold, it is likely that additional permits are necessary.

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Bowling Alleys

We have experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of bowling alley businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments known to the public as bowling centers. Such establishments frequently sell meals and refreshments.

General Industry Information
There were approximately 4,900 bowling establishments in the United States, as of the recent census. Combined, they account for over $3 Billion in annual revenues. Within the last five years, the bowling business has undergone some consolidation, resulting in increased revenues for the remaining operations. The average bowling center generates approximately $612,000 in annual revenues.

Much of the income generated from this industry comes from regular (repeat) bowlers. Aficionados of this activity often enroll in bowling leagues, which have regular seasons and are very dependable clients. The count of league players should be included during due diligence.

As is the case for most recreational businesses, advertising and marketing are very important. Efforts to revamp the bowling business have resulted in innovations, particularly the successful cosmic bowling. Often times, additional equipment expense is incurred to include these options for customers. Many have found success marketing themselves as family-oriented recreation centers.

Generally, buyers purchasing a bowling center will purchase the land, building and equipment combined with the business. Value drivers for the sale of these businesses are often based on the value of real estate and other equipment (automatic pin setters, audio/visual scoreboards, etc) involved in the sale.

Red Flags and Risks
Check for appropriate signage, and expenses that will be incurred to achieve a modern image. Technological improvements are often necessary and the expense for this should be considered. If any foodservice or concession stand is involved in a business transfer, all licenses should be checked for validity. Liquor licenses are particularly sensitive, so reasonable buyers should look into these items. Lastly, financials should be reflective of a full year of revenues. This business can be cyclical, peaking during the height of bowling league activity.

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Auto Lube & Tune Up Shops

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of auto lube and tune up shop businesses. Below is a brief synopsis of the industry.

Description of Business
This U.S. industry comprises establishments primarily engaged in changing motor oil and lubricating the chassis of automotive vehicles, such as passenger cars, trucks, and vans.

General Industry Information
According to the recent US Census, there were 8,223 Auto Lube and Tune-Up operations in the industry. This represents an overall increase in businesses from 1997, which recorded 7,431 operators. This 11% increase is unique, due in large part to the increased specialization in fast oil changing services.

The auto lube business has become focused on quick, in and out service. Franchises have standardized much of the operations in this industry, where customers expect rapid service and low prices. The top franchise operators include Jiffy Lube, Valvoline Instant Oil Change, Express Oil Change and Grease Monkey International.

Smaller oil change shops often augment sales from lube services by providing other light maintenance services, namely smog diagnosis and brake repair. Often, the number of vehicle bays and general equipment mix determines the shop’s productivity.

The oil change industry is considerably less cyclical in nature than other businesses. Routine repair and maintenance servicing is considerably less expensive than other types of automotive care. During economic downturns, customers are more aware of maintenance issues, preferring to pay for upkeep than risk major vehicular problems from vehicle negligence.

During routine service inspections, technicians test and lubricate engines and other major components. In some cases, the technician may repair or replace worn parts before they cause breakdowns that could damage critical components of the vehicle. Technicians usually follow a checklist to ensure that they examine every critical part. (Source: Occupational Outlook Handbook, Bureau of Labor Statistics). The industry does not require intensive training, and as a result, turnover of technicians is often an issue for service shops.

Red Flags and Risks
As this industry is becoming dominated by franchise operators, the effects of franchise payments and agreements should be a major component during a business due diligence period. Potential buyers should realistically consider potential revenue as a function of total vehicle bays. Productivity is often a function of a leased space’s capacity. However, operators must concern themselves with the effects of competition. An emerging neighbor with more bays and customer volume can easily put an independent operator out of business. It would be wise for a buyer to survey local competition.

Another point that must be considered by anyone interested in buying an auto lube and tune-up shop is the management of waste material. Many communities progressively restrict automotive shops in an effort to curb contamination. Soil and air pollution can result in hefty cleanup costs, and even cause unforeseen legal liabilities.

Amongst the largest risks for these businesses is the potential for on-site injury. Auto mechanics deal with heavy, elevated cars and hot liquids. The likelihood of burns, slips, and falls mandates proper implementation of safety procedures. Accidents can be costly for both workers and owners. Finally, it is important to consider the effect of a sale on any existing leases. Specific items within the lease that should be of interest to a buyer include rent amount, the length of the lease, utility payment agreements, and maintenance agreements.

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We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of mortuaries, and cemetery businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments primarily engaged in preparing the dead for burial, conducting funerals, and cremating the dead.

General Industry Information
The funeral home industry is an exceptionally stable business. Characterized by predominantly private, localized operators, many families have profited from running this type of business. The 1990s saw takeovers of many small funeral homes. However, many regionally specialized operators maintained their close-knit businesses. Specialization in terms of services available distinguishes operators from their competitors, and attracts reliable customer bases.

The industry was plagued with bad publicity during the early 1990s, when the Federal Trade Commission investigated the practices of some funeral homes. Regulation has since forced these businesses to charge for each service on an individual and itemized basis, rather than billing premium rates for bundled packages. The industry standard today mandates full, up-front disclosure to potential customers in the form of price lists.

Basic operations include preparing the deceased for embalming, coordinating funerals, remembrance ceremonies, and burial. As the prices of preparing funerals have increased, a sub-industry specific to funeral planning has emerged. Industry certification for Certified Preplanning Consultants is now available through the National Funeral Directors Association.

It is important to review any lease encumbrances. Special permits are often required by local zoning departments to operate crematoriums; however, many homes opt to not include cremation services, given the lower market price for conducting cremations instead of embalming.

Red Flags and Risks
The reputation of the funeral home is one of the most important items to consider. This can be quantified by assessing customer evaluations and the level of repeat business. Competition from existing funeral homes is the greatest risk for any given funeral home owner. Issues such as licensing and city permits may depress the supply of new funeral homes, positively affecting the sale of an existing or grandfathered business. Buyers should consider what role they will assume after an acquisition, and determine if additional employees will need to be hired. If the seller was a licensed mortician, it will be necessary for either the buyer or another individual to become certified. Potential buyers should also gauge the business’ relationship with life insurance providers.

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We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of motels/hotels and bed and breakfast businesses. Below is a brief synopsis of the industry.

Description of Business
Commercial establishments, known to the public as hotels, motor hotels, motels, or tourist courts, primarily engaged in providing lodging, or lodging and meals, for the general public.

General Industry Information
This industry accounts for approximately $90 billion in annual revenues, and is closely associated with the general travel industry. Business travel and leisure travel customers are roughly even in terms of consumption. Hotels are distinguished by the amenities they provide, and are generally classified as either full service or limited service (motels).

There are more than 47,500 hotel/motel properties in the US, according to the American Hotel and Lodging Association. The 1980s brought a huge construction boom to this industry, which eventually oversaturated the hotel market and depressed the per-room revenues.

Franchise operators account for a large amount of the industry’s revenues, and have emerged as powerhouses due to their strong marketing, standardized employee training, and brand loyalty programs. Industry leaders include Inter-Continental, Cendant Corporation and Marriott. Each of these hotel giants operate as parent companies for several hotel chains, which are varied in terms of price and amenities offered.

Lower-end, limited service operations have become quite popular in recent years, with cost-conscious travelers looking for no-hassle deals. Increased automation from the larger chain operators assists in keeping prices low, while maintaining reasonable profit margins. Many buyers seek a well established, low hassle reservation system in place. Limited service hotels are associated with comparably low staffing needs.

High-end resort hotels have experienced three consecutive years of double digit declines in profitability before a major rebound in 2004. Revenue from sources other than room rentals account for approximately 48% of the total revenue at these types of establishments. Resort hotels require significantly more staff than other types of hotels, which explains their higher payroll expense ratios. Generally speaking, resorts with an excess of 250 rooms enjoyed greater gains in revenue and profitability in recent years (source: Trends in the Hotel Industry, USA Ed. 2007 y PKF Consulting).

There are several attributes that are associated with a hotel’s success. The occupancy rate is a good measure of room rental activity, and is particularly useful for setting prices that optimize profits. Ancillary services, such as dining and convenience stores add value to a hotel, along with intangibles (such as retention rate and positive referral sources from travel agents).

Red Flags and Risks
The hotel and motel industry can be cyclical, as it is closely related to the travel industry. Businesses that cater primarily to business travelers typically go for higher multiples than businesses that cater primarily to leisure travelers. Financials should be requested that reflect an entire cycle of operation, to calculate a normal occupancy and rack rate. Having competitors within a close proximity can be a challenge, so buyers should consider local market conditions for feasible room rental rates. Owners run the risk of thinning profit margins caused by increases in operating expenses, namely utilities, minimum wages, and worker’s compensation. Assuming that the sale of a hotel/motel includes the real estate, buyers need to conduct a thorough investigation of the building. Inspection services should be employed to check for building damage and assess repairs. Order a star report. Seasonality in occupancy and rack rates should be tracked over the prior 3 years.

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Coin Operated Laundry

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of coin operated laundry businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments primarily engaged in the operation of coin-operated or similar self-service laundry and dry cleaning equipment for use on the premises, or in apartments, dormitories, and similar locations.

General Industry Information
According to the recent US Census, there were 12,185 coin-operated laundries and dry cleaners. These businesses accounted for a total of $3.48 Billion in industry revenues, and employed approximately 46,000 people.

Traits that are often associated with successful coin-operated laundry business include favorable long term lease arrangements, good rental locations, and an appropriate mix of equipment. Due to the importance of water as an input for these businesses, it may be difficult to obtain a suitable location that also has ample interior space and parking. Equipment mix refers to the ratio of washers to dryers. Typically, more washers are preferred, as dryers can service more than one load of laundry.

Demographics can affect a coin-operated laundry business dramatically. There is a positive correlation between a community’s renter population and customer volume for laundry mats, as many apartment properties are not equipped with washer and dryer hookups. Similarly, many operators have found success working in areas with college dormitories and other high-density locations.

The industry is highly fragmented, although there are clear industry leaders. Coinmach Service Corp. and Mac-Gray Corp. boasted combined sales of $700 million during 2004. Both lease out laundry room space in residential complexes.

Red Flags and Risks
Buyers need to consider leased space carefully when buying a business. Acceptable term lengths often last between 10 to 20 years, with water utilities billed separately. A signed lease providing adequate surveillance and security is a strong positive for this business, which usually operates at extended hours without employees present. Equipment should be in proper working order, including water heaters, extractors, washers and dryers. The building’s plumbing should be in good condition to safeguard against leaks and water damage. Due diligence on equipment should consider the water efficiency of machines and age.

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Dry Cleaners

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of dry cleaner businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments primarily engaged in dry cleaning or dyeing apparel and household fabrics other than rugs.

General Industry Information
A vast majority of this industry is comprised of smaller businesses, with annual revenues less than $300,000. The presence of individually owned operations translates into little union activity and an abundance of competition at local levels. According to the recent US Census, there were approximately 28,000 dry cleaning operations.

The dry cleaning business is associated with long hours, arduous working conditions, and slim profit margins. Many operators offer alterations and tailoring in addition to dry cleaning services to supplement revenues. Increasingly, franchise operations are beginning to emerge in significant numbers, where machinery is uniform and advertising is emphasized.

This industry has been subject to heavy environmental regulation. Concern over toxic chemical emissions from several types of cleaning solvents has led to formalized efforts to minimize hazardous waste. Newer carbon dioxide machines are available, although the price for such equipment is significantly higher than the price of conventional machines.

Red Flags and Risks
If owners wish to be “passive owners” they will need to spend time finding an employee, given the high turnover in this business. The work is arduous, with warm rooms from the steam machinery and equipment. The most significant and damaging risk to this industry is the threat of competition. Many smaller dry cleaning plants experience the negative effects of heavy competition when faced with the emergence of new plants and chain-operated franchises within proximity to the business.

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Restaurants (Limited Service)

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of limited service restaurant businesses. Below is a brief synopsis of the industry.

Description of Business
This U.S. industry comprises establishments primarily engaged in providing food services (except snack and nonalcoholic beverage bars) where patrons generally order or select items and pay before eating. Food and drink may be consumed on the premises, taken out, or delivered to a customers' location. Some establishments in this industry may provide these food services in combination with selling alcoholic beverages.

General Industry Information
The food preparation and service industry is the largest employer amongst retail businesses in the United States. As of the recent US census, limited service restaurants numbered 228,848 establishments nationwide. Approximately $136 Billion in annual revenue is generated by these businesses, or $594,280/business/year.

This industry can be quite competitive, given the rise of franchise operations. Chain-owned establishments have come into dominance in terms of total units. This phenomenon can be attributed to the notable stability and lower failure rates that are typically associated with franchise businesses. Franchises also tend to spend more time on strategic planning & marketing, and will go to greater efforts to obtain rental space at prime locations.

Factors that are attributed to profitable limited service restaurants include the population density of the location, as well as restaurant visibility and parking. Proximity to office spaces and/or mall locations are frequently preferred.

Job opportunities should be better for salaried managers than for self-employed managers. More new restaurants are affiliated with national or regional chains than are independently owned and operated. As this trend continues, fewer owners will manage restaurants themselves, and more restaurant managers will be employed by larger companies to run individual establishments (Source: Bureau of Labor Statistics’ Occupational Outlook Handbook).

Red Flags and Risks
Restaurants and food service businesses face risks that are common in many industries, such as expiration or change of lease terms, interest rate hikes on financed equipment, minimum wage increases, worker’s compensation, etc. Buyers should be especially concerned about maintaining the existing lease agreements. Mall and other specialty locations are often critical to the success of these establishments. Franchise operators need to carefully review the franchise rights and terms. Often, a franchise transfer fee will apply, or lease terms can change if the corporation owns the real estate and leases to the franchisee. Restaurants are subject to regulation for maintaining sanitation, health, and safety standards. It is important for a restaurant owner to be mindful of local alcohol restrictions and license requirements, as well as zoning. Invalidation of permits can hinder operations, and result in sizeable penalties for the owner. For several reasons, the emergence of new competition can be particularly devastating. As consumer tastes change and franchise operations are rapidly absorbed into the industry, business owners may not be able to keep pace with the evolving market. Customers frequently alter their food consumption habits.

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Restaurants (Full Service)

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of full service restaurant businesses. Below is a brief synopsis of the industry.

Description of Business
This industry group is comprised of businesses whose primary objective is the preparation and service of food and drink for immediate (on-site) consumption. A wide range of companies are included in this category. These businesses may or may not offer alcoholic beverages.

General Industry Information
The food preparation and service industry is the largest employer amongst retail businesses in the United States. As of the recent census, full service restaurants alone provided jobs for 3.9 million workers, and obtained revenues of approximately $145 Billion.

This industry can be quite competitive, given the rise of franchise operators. Chain-owned establishments have come into dominance in terms of number of units. This phenomenon can be attributed to their notable stability and lower failure rates. Another aspect of this business that contributes to competitive pressure is the constant emergence of new eateries. While a majority of new restaurants fail during the first year of operation, the market share of an existing business can still be challenged with a single new competitor.

Nevertheless, more than 70% of restaurant businesses in the country remain independently operated, reflecting an industrial stronghold of small business. (source: National Restaurant Association) Aside from a good reputation, factors that are associated with profitable restaurants include a locally dense population, along with good visibility and ample parking.

Eating-and-drinking places are extremely labor-intensive. According to restaurant.org, sales per full-time employee were $57,567 in 2003. The sale per employee ratio is significantly lower than for other industries, making management of employee compensation and other costs critical to the long-term profitability of an eatery. Typical expenses can be found at www.restaurant.org, which breaks out typical expenses as a percent of total sales:

Red Flags and Risks
Restaurants and food service businesses face risks that are common to other industries, such as expiration or change of lease terms, interest hikes on financed equipment, minimum wage increases, worker’s compensation, etc. In addition to these potential issues are variables unique to food service companies. Restaurants are subject to strict regulation for maintaining sanitation, health, and safety standards. It is important for a restaurant owner to be mindful of local alcohol restrictions and license requirements, as well as zoning restrictions. Revoking of permits can hinder operations, and result in sizeable penalties for owners. For several reasons, the emergence of new competition can be particularly devastating. As consumer tastes change and franchise restaurants are rapidly absorbed into the industry, business owners may have difficulty keeping up with evolving markets. Aside from the risks of external competition and regulation, business owners face fluctuations of input prices. Increases for fresh ingredients (dairy, produce, etc.) pose a greater threat to companies engaged in price competition, where profit margins are more likely to be thin. Employee management is a key issue for many operators. High turnover rates can mean costly training, so potential buyers should consider worker retention before finalizing an acquisition. Skilled employees, namely managers and food handlers, are often the most difficult to replace in a timely manner. Trustworthy employees are often critical to the success of these businesses, which are susceptible to cash theft or inventory abuse by workers.

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Meat and Fish Markets

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of meat and fish market businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments primarily engaged in the retail sale of fresh, frozen, or cured meats, fish, shellfish, and other seafood.

General Industry Information
Meat and fish markets with paid employees numbered 7,214 per the 1997 U.S. Census count. In contrast, the most recent census reported 5,848 employer meat markets, reflecting a decline in these businesses. The trend can be attributed in part to increased competition from giant grocery stores and warehouse stores that sell similar products. Approximately $4.35 Billion in meat products were sold as of the recent census, or $743,844/firm.

Butchers and meat cutters are employed at the retail level. Fish cutters and trimmers, also called fish cleaners, are likely to be employed in both manufacturing and retail establishments. These workers primarily scale, cut, and dress fish by removing the head, scales, and other inedible portions and cutting the fish into steaks or fillets. In retail markets, they may also wait on customers and clean fish to order. Butchers frequently receive pre-cut parts of meat and will often customize an order to fill a customer’s request.

Meat and fish markets are well equipped with refrigeration equipment to prevent viral and bacterial infections that can occur in environments with flesh matter. In most states, a health certificate is required. Automation techniques and the consolidation of the animal slaughtering/processing industries are enabling owners of meat markets to minimize the amount of meat cutting and packing that takes place in retail shops.

The outlook for this industry appears to be changing. More jobs involving cutting and processing meat are moving away from retail stores and into food-processing plants, reducing the need for butchers at the retail level. However, as the U.S. population grows, the demand for meat, poultry, and seafood should continue to increase, sustaining a base market for professional butchers. In addition, the significant increase in asian immigrants over the past 15 years has lead to an increase in demand in major metropolitan areas.

Red Flags and Risks
There is a large risk of worker injury in this business. Injury risk is a direct function of meat cutting and the level of cleanliness of the facility. The inherent risks are associated with slippery materials that fall on the floor, and bacteria/ viral infections that can occur from unsanitary work spaces. Unclean or damp floors increase the likelihood of slips and falls. Common injuries include cuts and occasional amputations, which occur when knives, cleavers, or power tools are used improperly. Both risk factors can be minimized by retailers if they purchase pre-cut meat from wholesalers. Cleanliness of the facility can be maintained by hiring additional help and training workers to maintain clean working environments (Source: Occupational Outlook Handbook, 2004 by Bureau of Labor Statistics). Seasonality of the financial statements should be considered by a potential buyer. Summertime sales are particularly higher than at other points during the year. Lastly, buyers should consider the product turnover when purchasing a business. When working in a perishable foods business, it is important to gage the inventory turnover to reduce waste and get a sense of the business flow.

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Bakeries (Retail)

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of retail bakery businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments primarily engaged in the retail sale of bakery products. The products may be purchased from others or made on site.

General Industry Information
According to the recent US Census, there were 7,485 retail bakery establishments in operation. The total industry receipts for the year amounted to $2.8 Billion, making the average sales per bakery $374,000 annually.

High levels of sales are often attributed to either a solid retail customer base or successful negotiation of contracts with markets, hotels, caterers, or other high-volume bakery products customers. Often, bakeries will try to maximize profits by selling gourmet coffee or ancillary products.

Although the forms of indirect competition have increased in recent years, the trends remain positive for this industry. Since 1997, the number of retail establishments has increased, along with the aggregate revenues. Nonetheless, additional competition could prove costly for some retailers, which are up against supermarkets and warehouse stores.

Red Flags and Risks
During any due diligence period, a buyer should check for existing lease agreements. Baking and storage equipment should also be inspected to ensure proper condition. The expenses of possible employee injury should concern any reasonable buyer. Potential on-the job injury can include burns or other body harm caused by baking and kneading equipment. Safety precautions should be employed and enforced. Lastly, this business can have significant financial difficulties if the price of key inputs rises. Recently, bakers have struggled to pay for the rising costs of wheat flour, after a drought cut supplies. Rising materials costs are particularly harmful to this business which already has slim profit mar-gins.

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Bakeries (Commercial)

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of commercial bakery businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments primarily engaged in manufacturing fresh or frozen bread and bread-type rolls and fresh cakes, pies, pastries and other similar "perishable" bakery products.

General Industry Information
The commercial bakery industry is quite sizeable, accounting for nearly $24 Billion in production as of the recent US Census. There were approximately 2,500 commercial bakeries in operation that same year, which is an 8% decline from the total operators in commercial baking during 1997, with average annual sales being $9,600,000 per business. Generally, commercial bakeries are located close to their clients (often in large municipalities), in an effort to maintain freshness of the product.

Commercial bakers sell their products to restaurants, hotels, other food manufacturers, along with food markets. Often, a contract is negotiated specifying term and fixed price of the product. Existing contracts are a strong positive for firms looking to sell their business. Indirect competition has been eating away at this industry for the last few years. Rather than engaging the services of commercial bakeries, some retailers have opted to bake their own bread utilizing dry mixes, or to purchase large quantities of bakery products from warehouse stores.

This business is associated with thinning profit margins. Companies in a good financial position are opting to buy poorer performing operations, and expanding the parent unit’s distribution base. The acquisition and subsequent industry consolidation trend is especially apparent during recessionary periods.

Licenses to produce bakery goods are necessary, and any industrial space occupied by bakers must be zoned appropriately. It is important to comply with Clean Air and Water regulations, which affect this industry in several respects. Oven emissions and wastewater are the primary materials of concern to regulators.

Red Flags and Risks
Operators of this type should be very concerned about competition from similar commercial bakers. The loss of a large client can be devastating, so buyers should carefully examine existing contracts. Similarly, a buyer should check on any lease agreements. Leases are particularly important in this business, as it may be difficult to secure a rental location that permits a commercial bakery. Potential on-the job injury can include burns or other body harm caused by baking and large kneading equipment. Safety precautions should be employed and enforced to minimize worker injury. Lastly, this business can face trouble if the product’s input costs rise. Recently, bakers have struggled to pay the higher prices of wheat flour, after a drought cut raw supplies. Some larger companies purchase futures contracts with the hope of stabilizing volatility in the prices for commodities. This option is not likely to be feasible for smaller operators. As such, upswings in prices generally affect the smaller businesses to a larger extent than their large diversified counterparts.

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Wineries

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of winery businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments primarily engaged in manufacturing wines. This industry also includes bonded wine cellars engaged in blending wines.

General Industry Information
There are approximately 20 million acres of vineyards around the world, producing an annual supply of more than 25,000 million bottles of wine. However, commercial wine production is concentrated in relatively few areas in the world. Today, Europe still accounts for the majority of global wine production and consumption. California, Argentina, South Africa, Australia and Chile are becoming increasingly important. (Source: California trade and commerce agency)

The California wine industry now ranks sixth in the world in terms of production, and accounts for more than 90% of total U.S. wine production. Three out of every four bottles of wine sold in the U.S. come from California, and International Sales of wine are strong. California has more than 400,000 acres devoted to wine grape production. Increasingly, wineries in California are applying advanced science and technology to growing and production. Water tracking satellites and soil mapping tool are more commonplace, along with cloning high demand varieties of grapes. Anti-contamination technology is also utilized to detect presence of growing contaminants.

Distribution of wine products is a significant residual industry which is closely related to wine manufacturing. Currently, there are only 12 states in the U.S. that allow free trade of wine across state borders. Wine shipment regulations prohibit the shipment of wines to personal addresses, intended to protect in-state wholesalers and retailers.

US leaders in the wine making business include Ernst & Julio Gallo, Robert Mondavi, Beringer Wine Estates, and Sebastiani Vineyards, Inc. Wineries are capital intensive businesses, and seasonality in weather impacts this industry heavily. A prerequisite for production is obtaining a winery use permit. Obtaining such a permit is a lengthy process, and these permits dictate the allowed uses of a facility (commercial versus direct retail). Permits for on-site tasting have added value than permits exclusively for commercial winemaking.

Red Flags and Risks
Buyers should consult with agricultural specialists in reviewing soil reports and water sources to ensure future success in vine cultivating. Issues including potential plant disease and weather history should be considered in reviewing a possible site. Some wine producers operate without a vineyard, opting to purchase cultivated grapes from an outside grower. The loss of a relationship with the key input supplier can be devastating, and working agreements should be settled prior to a business acquisition. Equipment sold with the business should be valued independently. Functionality and condition should be evaluated prior to acquisition. Finally, buyers need to review current permitted volume at the facility. Common problems include low volume permits and structural violations. Expiration and renewal issues should be fully disclosed during the due diligence period.

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Tire Stores

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of tire store businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments primarily engaged in the retail sale of new automobile tires, batteries, and other automobile parts and accessories.

General Industry Information
The majority of sales and installation in this industry is performed by franchise operations. There is a high population of competitors in this aftermarket of the automobile industry. Product lines typically include a variety of tires designated for specific vehicles.

Some operators offer customized wheels and related services. Often, equipment and equipment capabilities dictate the services which can be provided at a tire shop location. Equipment commonly found at business locations includes wheel alignment machinery, ground lifts, updated tools, and diagnostic equipment.

Occasionally, tire shops will furnish commercial customers with contract services. Such commercial accounts are a positive attribute for tire shops. Other positive attributes include a good location with plenty of parking, and several experience tire technicians.

There is also a relatively new regulation affecting this industry. The National Highway Traffic Safety Administration (NHTSA) requires retailers to register every tire that is sold. The law requires tire retailers to provide tire registration forms to purchasers and, in turn, the customers can voluntarily mail in the completed forms to the tire manufacturers so they can be easily contacted if their tires are recalled for defects or other safety issues.

Leaders in terms of market share are companies engaged in franchise activity Tire Kingdom, a subsidiary of TBC (tire wholesale business leader) earned approximately $5.5 billion during its 2004 fiscal year. Discount Tire Co, a large independent dealer, earned approximately $1.4 billion in revenues for the same accounting period. A large presence from Sears, Roebuck & Co exists, although tire retail is not their primary business.

Red Flags and Risks
Businesses involved in selling and installing tires face heavy competition, especially in areas close to tire manufacturing plants and in proximity to higher retailers with auto repair businesses. Such competition is credited with thinning profit margins, so buyers should consider the risk of emerging or existing competition. A factor which may affect the competition in this business is location. Visibility and adequate signage is important to this business, and the location should be large enough to sustain garage traffic. As always, it is important to review lease agreements and terms. The risk of worker injury and safety is prominent with tire shops, since they work on cars that have heavy parts and can spew hot liquids. Worker’s Compensation can be costly, and price increases can eat away at profit margins. Ensuring a threshold of safety will hedge this risk.

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Motorcycle Shops

We have experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of motorcycle shop businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments primarily engaged in the retail sale of new and used motorcycles, including motor scooters and mopeds, and all-terrain vehicles in addition to motorcycle gear and accessories.

General Industry Information
Typically, motorcycle shops can be broken down into two distinct classifications: dealerships that sell new bikes from one single manufacturer, and retail stores that sell both new and used bikes, along with accessories and motorcycle-related clothing. Both types of operations generally provide service departments that account for a portion of revenues.

As of the recent US Census, the United States Census Bureau reported that there were roughly 7,800 establishments engaged in selling new or used motorcycles and equipment. By 2003, the amount of establishments operating in the United States increased to 9,603 with total sales equaling about $9.9 billion. The average operation reported sales of approximately $1 million annually. The majority of motorcycle dealerships are found in warm-weather states like California, Florida, and Texas.

Franchised dealerships tend to fare better in this industry than the independent retailers. While franchised dealerships make up only one third of the motorcycle dealerships, they still control 80% of the market in terms of revenue. For non-franchised operations, the majority of sales came not from motorcycles, but from apparel, parts, accessories, and servicing.

As is the case with most of the markets for durable goods, motorcycle sales are somewhat vulnerable to changes in general economic conditions. Recessionary and expansionary periods tend to affect the levels of consumption for these products.

The two largest manufacturers in this business are Honda and Harley-Davidson. Exports have become an essential function of this industry; accounting for over $500 million in annual sales during 2001.

Red Flags and Risks
Since many buyers finance their bikes, the industry is at risk of interest rate fluctuations and swings in overall economic conditions. Buyers should be mindful of this and ask owners for financials that reflect several years to get a better indication of sales for an entire economic cycle. Although businesses located in warmer states are more likely to thrive, there are examples of successful high-volume dealerships in cold-weather states.

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Automotive and RV Dealerships

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of automotive and RV dealership businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments primarily engaged in the retail sale of new automobiles or new and used automobiles. These establishments frequently maintain repair departments and carry stocks of replacement parts, tires, batteries, and automotive accessories.

General Industry Information
Operations of auto dealerships vary, depending on whether the vehicles for sale are new or used. Large mega-dealers and auto malls are the most common format for sales of new vehicles. At one point, retail establishments that focused on new cars carried an individual line of cars. Recent consolidation at the manufacturing level has resulted in shared marketing efforts, where larger lots are selling several lines of vehicles. Large, well financed dealerships are accounting for a larger share of the new vehicle retail market.

Used-car dealerships do not typically have the relationship with manufacturers that the new car dealerships have. Instead, their inventories are largely obtained from commercial businesses that trade vehicles as a part of operations. Retired fleets of rental cars, trade-ins from customers, and auction purchases of repossessed vehicles are the most common methods of obtaining inventory.

A large segment of the auto dealership industry is dedicated to vehicle financing. Larger dealerships may have in-house financing departments, while others refer clients to loan brokers who specialize in vehicle lending. Low borrowing (interest) rates are a strong positive for this industry.

At the same time, manufacturer’s rates on wholesale vehicles impact the retail auto businesses. Examples of this cause and effect are the employee discounts offered to customers during 2005. As a result of this massive discount program by manufacturers, new vehicle purchases increased, causing a sharp increase in used vehicle inventories, since many customers sold their former cars or engaged in trade-ins.

There are several key leaders in the auto dealership business. AutoNation is the largest in the U.S. Formerly known as Republic Industries, the firm owns about 350 new vehicle sales franchises in more than 15 states and offers no-haggle sales policies and online sales. United Auto Group Inc. and Sonic Automotive Inc. are also large dealership franchises.

Location is important to auto dealership businesses. Good visibility, site capacity (in terms of vehicle parking spaces), and local demographics are items to consider. Many dealerships have become burdened with competition retailing the same manufacturing line in the immediate region. Proximity to direct product competitors is a problem for many businesses. However, being close to auto dealerships selling other vehicle lines can be a definite positive, as the wide variety tends to attract more auto customers in an area.

Red Flags and Risks
Firstly, diligent buyers should consider franchise agreements. Problems of economic cannibalization can occur if similar dealerships are located too close to each other. Buyers should review their franchise agreements to see if their sales area is protected. Franchise terms should be reviewed for expiration and any fees. Buyers can gage the reputation of an auto dealership using several methods. The level of repeat or referral business is arguably the best indicator of customer service and reputation. Historical sales made by sales personnel can be tracked to identify high productivity employees, taking into account complaints and problems tied to their sales. Sale of inventory can be a complicated issue during acquisitions. Buyers should be cautious of the inventory valuation methods utilized by auto dealerships. Rather than relying on the FIFO, LIFO, or weighted average cost of goods sold methods for determining value, buyers should consider the fair market value of the inventory as a whole. Dealerships that offer in-house financing may understate the likelihood of payment defaults. “Bad Debt” from customers is not an issue for companies who outsource vehicle loans to a separate financing entity.

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Beer and Wine Bars

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of beer and wine bar and brew house businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments primarily engaged in the retail sale of alcoholic drinks, such as beer, ale, wine, and liquor, for consumption on the premises.

General Industry Information
According to the recent US Census, there were 48,855 Drinking Bar businesses in operation. Product sales came to approximately $15 Billion, and this industry provided work for over 335,000 employees.

This industry is associated with high levels of competition, including direct competitors (beer taverns), restaurants serving alcoholic beverages, and at-home consumption of alcohol. Ownership of these businesses is most often private, enabling owners to offer a wide array of operation styles. Businesses typically carve out a niche market, and cater their bar to a particular patronage (sports, singles, pool table bar, etc.). Attributes such as a good location (high foot traffic, ample parking) and loyal customers often drive up the sales price of a given business.

A very important aspect of operating a beer or wine bar is the inventory control mechanism. This industry is particularly vulnerable to undetected losses brought about by employee “skimming” and other abuses. In addition to the raw value of inventory, inventory information is useful to track the consumption patterns of patrons. Effective owners can utilize this information to ensure optimal product offerings and appropriate menu prices.

An operator’s foundation for success lies in the infrastructure of the bar’s control systems used to track all liquor, food and cash transactions. Today’s bar rely on technology, computer systems used to analyze, report and store vital sales and internal cash flow information.

Theft is the primary source of loss in most bars. Unfortunately, an operators inability to control theft will determine the degree of profitability. On a daily basis, operators must prevent theft from customers and from employees. Customers leaving without paying their check, passing counterfeit money or even stealing empty beer mugs are all potential problems an operator will face on a daily basis. These customer oriented thefts pale in comparison to the damage employees can do by stealing from you. Repeatedly, bartenders if unsupervised are inclined 8 times of 10 to steal, according to the book, “The 49 Ways Bartenders Steal.”

Many operator actively participate in the use of “spotters”. Bar managers who suspect employees of stealing, will hire experienced spotters, often ex-bartenders themselves, who pose as customers to come and catch the thief red handed. Table below lists some of the 49ways bartenders steal

Red Flags and Risks
As noted above, it is important to understand the inventory controls, and improve them as necessary. Training workers to carry out these measures may be a substantial expense, depending on the required training and automation. The business’ status with regulatory agencies should be a topic of consideration for a buyer. Validity of the liquor license and its transferability to new ownership should be a key aspect of the acquisition’s due diligence, along with a comprehensive history of any past violations. Lastly, potential owners should consider the quality of staff. Bartenders and servers should be comfortable with basic math and be competent to handle an operation’s cash income. They should be attentive to customers and be mindful of customers’ safety, particularly if security staff is not employed on the premises.

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Liquor Stores

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of liquor store businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments primarily engaged in the retail sale of packaged alcoholic beverages, such as ale, beer, wine, and liquor, for consumption off the premises.

General Industry Information
The liquor store business is a relatively competitive industry, dominated by individually owned “mom and pop” shops. In addition to the retail of liquor bottles and non-alcoholic drinks, these operations typically carry pre-packaged snack foods along with ancillary items, including lottery tickets and cigarettes. There were approximately 28,000 establishments operating in the United States, credited for $28 Billion as of the recent census.

Larger retail operators are generally associated with higher levels of efficiency. The economies of scale of large business is often credited with pushing out independent shops. This trend is illustrated by the continued decrease in total liquor store operators, and the proliferation of larger format stores. Chain store operators have been quicker to adopt point of sale inventory systems, which ensures higher levels of efficiency. Other significant sources of competition for liquor stores include supermarkets which sell liquor, and specialty online retailers (e.g. wine.com, Planet Wine).

Due to the evolving social attitudes about liquor and alcohol consumption, this industry is highly regulated. New mandates are frequently issued by state and local governments with regards to alcohol products sales, so it is beneficial for business owners to stay abreast of emerging regulation.

Additional sales are obtained from tastings in wine bars where additional income can be as high as 20%, and is typically not reported.

Red Flags and Risks
Liquor stores are subject to the negative publicity brought about by alcohol awareness campaigns, and are vulnerable to new restrictions on the sale of alcohol items. Methods of regulation include taxation of product sales, revoking the owner’s liquor license (typically for stores which sell to minors), and adoption of local rules that limit the sale of liquor during certain periods or days of the week. Safety is a huge concern for liquor store workers. OSHA has determined that liquor store operations are the second deadliest industry for employees, behind taxi services. The reasons cited include transactions in cash coupled with late hours of operation, which make employees vulnerable to armed robbery. Buyers may want to look into historical crimes against the property or business.

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Veterinary Clinics

We have experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of veterinary clinic businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments of licensed practitioners primarily engaged in the practice of veterinary medicine, dentistry, or surgery, for animal specialties

General Industry Information
The services provided by veterinarians affect several different areas. Public health, agriculture, and human companionship are served by this highly specialized industry. In order to open a practicing veterinary clinic or hospital, a licensed Doctor of Veterinary Medicine must be employed.

In the United States, approximately 67% of veterinarians are engaged in private or corporate clinical practice. Other veterinarians limit their practice to the care of farm/ranch animals and advise owners on the best approaches to production medicine. Some veterinarians treat horses exclusively, and others treat combinations of species. Although a majority of veterinary professionals focus on basic services for companion animals, a large variety exists in terms of specialization by procedures. This includes treatments for cancer, dental care, and animal transplants.

Clinics servicing smaller companion animals have begun to sell over the counter drugs and other animal care products in addition to offering traditional veterinary services. The pet population has increased significantly, maintaining steady demand for veterinary services. Although the market largely consists of smaller independent operations, a clear industry leader exists. VCA Antech, Inc. boasts of a network of over 300 animal hospitals throughout the United States.

Red Flags and Risks
The largest risk for a veterinary clinic or hospital is the threat of competition. Chain pet shops, such as Petsmart, and Petco increasingly provide free advice and often sell over-the counter medications for animals. This threat can be hedged to a certain extent through advertisement and marketing. Buyers should beware of any licensed veterinarians who intend on parting from the clinic after acquisition. It may prove difficult and costly to replace these highly skilled and licensed employees, should they choose to leave.

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Kennels

We have experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of kennel businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments primarily engaged in providing overnight boarding services for pets, equines, and other animal specialties. These establishments typically do not include veterinarian care.

General Industry Information
According to the American Boarding Kennels Association, approximately $2.4 billion is spent annually on animal boarding and grooming. Kennels operate as temporary homes for pets when owners are away on vacation, or otherwise unable to care for the animal. Pets (usually dogs) are fed, often cleaned, and supervised for short periods of time.

Operation of a successful Kennel necessitates a good operational space layout. Large, secure pens are important to maintain an orderly business.

Red Flags and Risks
There are several industry-specific risks that a potential owner should investigate. Firstly, the work environment may be hazardous to employees, should any malicious animals, especially dogs, turn on their handlers. Well trained and experienced staff can typically gage animals for violent and aggressive behavior. Keeping pets in such close proximity for boarding purposes may result in an infection of animals. Although proper hygiene may reduce the risk factor, illnesses comparable to the human cold have been known to spread amongst kennels. It would be wise to avoid caring for animals which may contaminate the others, and to ensure that all animals have been vaccinated prior to admission. Finally, it would be wise to consider the layout of the kennel, as the design can greatly affect the noise factor. Most employees will be adverse to the volume of barking. An owner should thoroughly examine fencing within the kennel to avoid runaway pets. Most recently, with fewer people traveling, there has been a significant reduction in revenue for these businesses.

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Nursing Homes

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of nursing home businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments primarily engaged in providing in-patient nursing and rehabilitative services to patients who require continuous health care, but not hospital services. Care must be ordered by and remain under the direction of a physician. Included in this category are establishments certified to deliver skilled nursing care under the Medicare and Medicaid programs. This industry also includes mental retardation facilities and nursing care facilities.

General Industry Information
Due to several factors, the in-patient nursing industry is projected to continue its strong growth in coming years. Firstly, life expectancy is on the rise, increasing the expected share of elders in the population. Additional care services will be needed to treat the myriad of health care concerns that develop as a function of age. Secondly, advances in medical technology have brought about tremendous growth in rehabilitation services, which treat patients of all ages. Enhancements and new developments are anticipated to greatly expand this field in years to come.

The funding for in-patient nursing facilities is provided in large part through Medicaid. Other important sources of revenue for these care facilities are: Medicare, private Health Insurance plans, and private funds. Frequently, care centers will not accept patients with Medicare, as the program is associated with complex paperwork and reimbursement protocol.

In 2003, the number of patients enrolled in the Medicaid program numbered approximately 7.5 million (source: Centers for Medicare and Medicaid Services). Medicaid is administered by individual states, which establish guidelines of amounts and items reimbursable. Medicaid operates as a vendor payment program, with payments made directly to the providers. Not all treatments are prioritized equally by the state due to resource limitations, and certain types of fragile procedures (such as respiratory therapy) are not covered.

Approximately one-third of the nation’s skilled nursing facilities are operated by the government or non-profit agencies. Within the private nursing care industry, there are distinct business leaders. Beverly Healthcare is the largest, operating 354 nursing homes and 18 assisted living centers across the United States.

These facilities and businesses are generally broken down into the following categories (Source: New Lifestyles):

Red Flags and Risks
During the acquisition phase, it would be wise to review all of the necessary licensing and certifications to operate a nursing care facility. In particular, a buyer should review the status of the business with Medicaid, and determine if the business is in compliance with program requirements. Delinquencies or noncompliance can affect reimbursement collection. The employees should be given a thorough review, to avert any potential damage to patients. Allegations of corruption and abuse by employees plagued the industry during the 1990s. Furthermore, the turnover of non-nursing positions is high, increasing the risk of a bad employee. Double check to see if permits are up to date on the facility.

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Theaters

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of movie theater businesses. Below is a brief synopsis of the industry.

Description of Business
This category includes commercially operated theatres primarily engaged in the indoor exhibition of motion pictures. Drive-in theaters are not included in this classification.

General Industry Information
Initially, the majority of movie theaters were owned by the dominant movie producers. Government intervention ended this practice in 1949, in an effort to curb monopolistic activity. Until the 1970s, the majority of movie theaters featured one screen. The emergence of multiplexing assisted the industry in achieving sustainable cash flows. A trend of over-construction began to plague the industry, causing a flood of screens during the 1980s. As a result of this activity, owners were forced to cut prices to remain competitive.

The revenue sources for movie theaters include ticket sales, concession sales, and advertisements. Typically, production companies receive a fraction of ticket sales. Concession sales and advertisement revenue belongs exclusively to the movie theater.

Current leaders in the industry include Regal Entertainment Group, AMC Entertainment Inc, and Cinemark USA. Combined, these top three companies controlled approximately 33% of the industry’s 36,000 movie screens in 2004 (source: NATO). The industry is notably sensitive to changes households’ disposable income, which is affected during periods of high unemployment and interest rates.

Red Flags and Risks
Threat of competition has become more pronounced, causing problems for many in this business. The movie theater industry has had to contend with increased competition from the cable networks, particularly with their roll out of digital optical fiber networks and the availability of better quality and more channels. Additionally, owners of theaters have had to face ever increased piracy problems. The equipment used by movie theater operators needs to be maintained and repaired just like any other equipment. A buyer should look for any equipment that may not be functioning properly and discount for obsolete machinery. Similarly, buyers should consider the benefits associated from purchasing a theater with advanced technology.

Publications
Please see the Valuation of Movie Theaters for the most comprehensive booking on the subject in the industry.

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Day Care Facilities

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of day care facility businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments primarily engaged in the care of infants or children, or in providing pre-kindergarten education, where medical care or delinquency correction is not a major element. These establishments may or may not have substantial educational programs. These establishments generally care for pre-kindergarten or preschool children, but may care for older children when they are not in school.

General Industry Information
The child care industry is relatively new, a residual effect of women taking up work outside of the home. As this industry has matured into a large employer and an irreplaceable provider of child care services, oversight and government regulation have followed.

Although the US Census reported more than 68,000 operators in this business, levels of competition do not challenge this industry as severely as other fields. This can be attributed to consistently high demand for child care providers. Trends of dual incomes and rising birthrates are strong indicators of a positive future outlook for child care services. According to the US Bureau of labor statistics, the industry’s outlook is most promising for individuals licensed as child care providers.

Several aspects of the physical day care are inspected for licensing by state regulators. The building’s sanitation and safety features are assessed periodically. Arguably the most vital aspect of the licensing process is the certification of caretakers. Individuals are screened by way of criminal background checks, abuse history reports, and adequate first aid education. Day care facilities are required to abide by mandatory employee to child ratios. States may impose penalties on operations that are caught without a license or in violation of such requirements.

This industry is largely fragmented, and includes diverse operators. There is a large presence from non-profit day care centers, the most noteworthy being the Head Start program. Top industry leaders gave grown quickly in the last decade through acquisition activity. KinderCare Learning Centers Inc., Tutor Time, Childtime Learning Centers Inc., and La Petite Academy Inc., are amongst the largest Child Care businesses.

Red Flags and Risks
Rising costs of high quality labor is probably the largest risk factor for these businesses. Turnover is high, and retaining good long-term workers can be costly, especially in areas facing increasing wages. This risk can be managed if parents are able and willing to absorb additional labor expenses, but without such clientele, day care centers may not be economically feasible. Childcare facilities face relatively high levels of regulation and licensing requirements by governing entities. Code revisions and additional mandates can be costly, especially for small operations. Potential buyers should review the licensing status of the center and all employees. A wise investor will request a detailed report of any prior code violations associated with the center. This is important for many reasons, primarily because insurance providers refuse liability coverage for unlicensed day care centers. Positive relationships with local employers can add value to a business, given that many subsidize employees’ child care expenses.

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Eldercare/Adult Day Care

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of eldercare/adult day care businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments primarily engaged in the provision of residential, social and personal care for the aged, where medical care is not a major element.

General Industry Information
These facilities are commonly referred to as continuing-care retirement communities (CCRCs). This industry has a positive outlook, given that America’s fastest growing population segment is the elderly community. As of the recent census, there were nearly 14,000 elder care facilities that were distinguished from nursing facilities. The primary distinction between the two types of residential facilities is the lack of constant medical supervision for the former. Hence, there is little to no medical insurance revenue associated with these retirement centers.

Significant functions of this industry include facilities management, employee management, and service management. As residential facilities, elder care centers must be specially suited towards senior living. Employees may check patients’ pulse rates, temperatures, and respiration rates; help with simple prescribed exercises; keep patients’ rooms neat; and help patients move to bed, bath, dress, and groom. Maintaining a qualified and reputable staff is central to this personal services business. Other significant operation within the business is managing the facility’s enrollment. Deposits are often required of residents, along with the established monthly fees.

These centers may assist seniors by providing meal preparation, offering assistance with physical care and house keeping. There are many operators in this industry that are non-profit, which are nevertheless a direct form of competition.

Dominant leaders in the CCRC business include Sunrise Assisted living, Inc. and American Retirement Corp. As of December 31, 2004, Sunrise Senior Living operated 380 communities, of which 367 communities were in the United States. American Retirement Corp was a distant second, operating 67 senior living communities in 14 states as of March 2005.

Red Flags and Risks
During the acquisition phase, it would be wise to review all of the necessary licensing and certifications for the facility. It is common to sell the underlying real property in combination with the business. Deferred maintenance should be considered carefully. The employees should be given a thorough review, to avert any potential damage to patients. Allegations of corruption and abuse by employees plagued the industry during the 1990s. Furthermore, the turnover of non-nursing positions is high in this business, increasing the risk of encountering a bad employee. Buyers would be wise to review all employee files and evaluations. A good indicator of future revenues is the current list of tenants with their term expiration information and monthly rent payments. This list, combined with the facility’s typical retention rate and a list of future residents (i.e. those who have paid a deposit) should adequately reflect revenues for the immediate future.

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Agriculture

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of agriculture related businesses. We have valued row crop businesses, timber concerns, vineyards, wineries, packing house operations, and many other areas of this industry. Below is a brief synopsis of the industry.

Description of Business
Companies and organizations that produce, grow, raise, harvest, process, store, market, and/or sell food and other crops and livestock.

General Industry Information
This industry is so large that the following overview barely scratches the surface of this industry.

The agriculture industry's broad scope includes everyone from farmers and ranchers to scientists who devise new and better foods and the businesspeople who keep it all running. The various disciplines within the industry seek ways to more efficiently feed Earth's ever-growing population while improving profit margins for food-related businesses. Allied industries provide the infrastructure that makes this possible, including rail and road transportation, pesticides and fertilizers, and processors that transform raw products into comestibles.

The United States is the worlds largest producer of food and agricultural products, and US agriprocessors export their products around the globe. Total domestic farm sector receipts from the sale of agricultural commodities were projected to total $242.7 billion in 2006, according to the US Department of Agriculture (USDA). This sum, up from $238.9 billion in 2005, consisted of $121.2 billion in livestock receipts and $121.6 billion for crops. The agency forecasts cash receipts of $258.7 billion for 2007, based on projected sales of $125.2 billion in livestock and $133.5 billion in crops.

The leading commodities, based on cash receipts, were poultry, cattle, dairy products, and corn. Net farm income in 2007 was estimated at $66.6 billion, up from $60.6 billion in 2006 but below the $72.6 billion farmers earned in 2005. Nonetheless, it is $9 billion (16.2%) above the sector’s 10-year average of $57.4 billion. The USDA predicted government payments to farmers dropping dramatically in 2007, to $12.4 billion for the year, down from $16.3 billion in 2006 and from the record $24.3 billion received in 2005. The 10-year historical average (1996-2005) is $16.1 billion.

Farmers' cooperatives took root in the early part of the 19th century and remain significant in the industry. Cooperatives such as CHS(grain) and Sunkist Growers(fruit) often formed so members could capitalize on their strength in numbers in order to buy supplies at lower cost, build facilities, and negotiate better prices for their crops. Many co-ops have merged or formed joint ventures to further increase their buying power or product offerings. Dairy Farmers of America and New Zealand's Fonterra are two prime examples.

A number of food cooperatives have been expanding their capabilities, often becoming a part of the processing stage of food production. Ocean Spray Cranberries has a processing unit that was formed by the co-op to turn its raw ingredients into consumer-ready foods. Conversely, grain cooperatives have stuck to their traditional storage and marketing services. Many live in the shadows of the larger companies that offer similar services, such as Archer Daniels Midland and Bunge Limited.

At the root of all growth in the agriculture industry is an increasing world population. Agri-biotech companies are looking for ways to help feed the growing number of global inhabitants through genetic modification (GM). GM aims to create sturdier plants and animals, disease resistance, and higher crop yields. Consolidation, vertical integration, and genetic modification are all part of the agricultural industry's push to produce more food, cheaply, while making steady profits. As opportunities arise in emerging markets around the globe, many agribusinesses will utilize these options to stake their claim.

Red Flags and Risks
Rising costs of high quality labor is probably the largest risk factor for these businesses. Turnover can be a problem, and retaining good long-term workers can be costly, especially in areas facing increasing wages. The industry is also subject to external risk. Examples of External risks are Exchange Rates, Interest Rates, Commodity Prices and Government Regulations, and most importantly, weather and other ergonomic conditions. Water is always a huge risk and the wells or water sources need to be assessed. More recently, agriculture land has increased in value over and above the economic value of land of between $1,000-4,000/acre.

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Auto and Truck Dealership Facilities

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of auto and truck dealership businesses. Below is a brief synopsis of the industry.

Description of Business
Businesses include large facilities that sell new and used car and trucks.

General Industry Information
With revenues of approximately $1 trillion per year, the automotive retail industry is the largest retail trade sector in the United States. The majority of automotive retail sales in 2005 were generated by the approximately 21,500 U.S. franchised dealerships, producing revenues of approximately $700 billion. The industry is highly fragmented and largely privately held, with the publicly held automotive retail groups accounting for less than 10% of the total industry revenue.

Of the close to $700 billion in U.S. franchised dealer aggregate annual sales in 2005, new vehicle sales represent approximately 60% and used vehicle sales represent approximately 28%. In addition to new and used vehicles, dealerships offer a wide range of higher-margin products and services, including service and repair work, replacement parts, extended service contracts, and financing and credit insurance, which collectively represent the remaining 12% of total industry revenues.

According to industry data, the number of U.S. franchised dealerships has declined from approximately 24,000 in 1990 to approximately 21,500 today. Although significant consolidation has already taken place, the industry today remains highly fragmented, with more than 90% of the U.S. industry’s market share remaining in the hands of smaller regional and independent players. It is very probable that further consolidation in the industry is likely due to the increased capital requirements of dealerships, the limited number of acceptable alternative exit strategies for dealership owners, and the desire of several manufacturers to strengthen their brand identity by consolidating their franchised dealerships.

Red Flags and Risks
There are several risks inherent in the business of automotive retail. The first is the reliance on manufacturers to provide valuable inventory and advertisement to attract customers. Also, because it is a labor intensive industry, the threat of labor strikes could directly affect business. Weather and natural hazards also pose as a threat to the success of the industry.

The biggest risk to the car dealership industry comes from competition from other dealerships, and heavy regulations. Because many US manufactured automobiles are sold internationally, US dealerships are constantly subject to foreign trade risks. One of the more important risks is changes in international tax laws and treaties, including increases of withholding and other taxes on remittances and other payments by subsidiaries. Companies are also affected by exchange rates, currency valuation and changes in international government regulations. More recently, the economy has had a profound influence upon property and business values.

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Night Clubs

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of night club businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments for evening entertainment, generally staying open until the early morning, that serves alcoholic beverages and usually food and offers patrons music, comedy acts, a floor show, or dancing.

General Industry Information
The bar and nightclub industry includes about 50,000 locations with combined annual revenue of about $15 billion. No major companies dominate; varying state liquor laws complicate the ability to form large chains. The industry is highly fragmented: the 50 largest companies hold just over 5 percent of sales.

Personal income and entertainment needs drive demand. The profitability of individual companies depends on the ability to drive traffic and develop a loyal clientele. Large companies can offer a wide variety of food, drinks, and entertainment, and have scale advantages in purchasing, financing, and marketing. Small companies can compete effectively by serving a local market, offering unique products or entertainment, or providing superior customer service. The industry is extremely labor-intensive: average annual revenue per worker is $45,000.

Bars and nightclubs compete with other venues that offer alcoholic drinks or entertainment, including restaurants, hotels, casinos, and consumer homes.

Beer is about 40 percent of sales, distilled spirits or hard liquor 30 percent, food and non-alcoholic beverages 10 percent, and wine 7 percent. Customers consume the majority of bar drinks on-premise, and companies may specialize in certain beverages, like craft beers or martinis. Entertainment includes live music; disc jockeys (DJs); dancing; and adult entertainment.

While most customers go to bars and nightclubs to socialize, bar activities tend to focus more on drinking, while nightclubs focus on entertainment and dancing.

Red Flags and Risks
The failure rate for nightclubs is extremely high. According to Nightclub and Bar Magazine, eight out of every ten will fail during the first year of operation. Another obstacle for opening a nightclub is zoning restrictions. Oftentimes local governments will see community resistance to opening another nightclub due to expected noise and drunken patrons. Additionally, the club will have to purchase a liquor license to sell alcohol and a pouring license to serve it and allow it to be consumed in the building. Both could be in limited supply in the community and/or expensive to obtain from local governments. Some local municipalities might also require an entertainment license allowing the establishment to provide live music, television, and dancing.

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Radio Stations

We have experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of radio station businesses. Below is a brief synopsis of the industry.

Description of Business

Companies that own and operate radio broadcast stations and radio programming services serves alcoholic beverages and usually food and offers patrons music, comedy acts, a floor show, or dancing.

General Industry Information
The radio broadcasting industry includes about 6,800 companies with combined annual revenue of about $18 billion. Major companies include Clear Channel Communications, Cumulus Media, Citadel Broadcasting and CBS Radio. The industry is highly concentrated and top heavy, with the top 50 companies accounting for 75 percent of the market share. The top four companies earn around 45 percent of the industry revenue. Companies that broadcast exclusively over the internet are not included.

Demand is driven by consumer demographics and business advertising. Individual station profitability is dependent on advertising volume and mix as well as efficient operations. Naturally, larger companies will have a competitive advantage in market dominance for advertising.

The major product lines in the industry are programming, air time broadcasts, production and post-production services. Program rights, merchandise sales, equipment rentals and the sale of website advertising space are other products offered by radio stations. Broadcasted air time accounts for 90 percent of revenues. Air time includes network compensation and advertising.

Radio companies produce or acquire radio programs as well as operate broadcasting studios and transmission facilities. Large corporations will own multiple radio stations in order to achieve economies of scale in negotiating advertisement and programming contracts. Independent, or non-network companies will have much smaller revenues.

Red Flags and Risks
The main risk for a radio station is threat from competitors in attracting listeners. Part of this is determined by the strength and quality of the signal that the station transmits. The transmission signals and broadcasting licenses are both regulated by the FCC. Because most of the revenue for radio stations comes from selling air time to companies for advertisements, successful radio stations need to establish a listener base in order to convince the buyers of airtime that there is a large audience to relay their message to.

Because the industry is regulated by the FCC, it is highly sensitive to any sort of regulatory changes that may come into place.

Technology is also rapidly changing the industry. Stations are converting to digital broadcasting. Digital signals are higher quality and easier to edit than analog signals, while using less broadcast spectrum. The signal transmission is also digital as opposed to using radio frequencies. Further changes, like this one, could change the industry dramatically. Internet radio and satellite radio has also had an impact upon profits.

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Car Washes

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of car wash businesses. Below is a brief synopsis of the industry.

Description of Business
Companies that own and operate carwash facilities.

General Industry Information
According to an industry profile by Businesswire, the carwash industry in the United States is highly fragmented, with the 50 largest chains holding just 15 percent of the market. The carwash industry in the United States includes 14,000 full-service carwashes with combined annual revenue of about $5 billion.

Large chains include Wash Depot (70 locations), Oasis Car Wash, Car Wash Partners and Auto Bell Car Wash. The industry is highly fragmented: the 50 largest chains hold just 15 percent of the market. Chains are local or regional. A typical firm has one location. A large location has 35 employees and $1.5 million of annual revenue.

Demand is driven by favorable weather, new car sales and growth in consumer income. The profitability of individual firms depends on favorable location and efficient operations. There are few economies of scale. Chains have advantages in advertising and customer recognition. Small firms can compete successfully by good location. The industry is highly labor-intensive; annual revenue per employee is just $40,000.

Major services are exterior wash, exterior and interior cleaning, waxing, underside cleaning, vacuuming and premium detailing. Ancillary products and services such as pick-up/drop-off services, fast food, greeting cards and automotive products are also offered at some locations. Detailing services consist of intensive interior and exterior cleaning, and waxing and polishing by hand.

Full-service car washes require the most extensive and expensive facilities of all types of car washes, with a need for at least 20-30,000 sq ft (land) and the largest number of employees. The majority of the lot is used for the tunnel.

Exterior car washes combine some of the features of the rollover and the full-service car wash. Like the rollover, the customer stays in the vehicle. He drives the car onto a conveyor that takes the car through a tunnel similar to that in a full-service car wash. As the car travels through the tunnel, it goes through a rinse, suds, another rinse and a wax cycle. Some exterior car washes also offer a drying cycle. Many gas stations have exterior car washes as well as conveyor automatics (or rollovers). The exterior facility takes up more space than a rollover facility - conveyors average about 100 feet in length - but it also offers higher profit potential than rollovers.

The rollover car wash is housed in a single bay. Customers can accomplish two tasks in one trip by filling up their tanks and having their cars washed.

The self-service car wash is slightly different from the other three types of car washes. This car wash has a trigger gun and a foaming brush for customers to use to clean their cars themselves. Customers insert coins into a time-regulated machine and then rinse their cars, apply soap and rinse again. The wash-cycle times are 4 minutes, 4 minutes and 5 minutes. The longer the wash lasts, the more it costs. (Source: Entrepreneur Magazine's "How to start a Carwash)"

Red Flags and Risks
Labor is a large portion of overall costs. Buyers should beware of employee payments made “under the table.” Multiples have risen to unbelievable heights as many operators think that they can skim money from the facility. The IRS typically audits these businesses based upon an audit of the utility bills. Fraud is rampant in this industry, so make sure that you double check the financial numbers which are represented.

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Ice Skating Rinks

We have experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of ice skating rinks. Below is a brief synopsis of the industry.

Description of Business
Establishments primarily engaged in operating ice skating rinks open to the general public.

Industry Overview
It is estimated that over 35 million Americans ice skate. Whether it is ice hockey, competitive figure skating or recreational skating, interest in the sport of ice skating is at an all time high. As a form of recreation and family entertainment, ice skating is becoming even more popular in spite of being held back by a shortage of ice skating facilities offering quality ice on a year long basis. The problems associated the shortage of adequate ice rinks is further compounded by the lack of such off-ice amenities and profit centers as retail pro-shops, food and beverage services, arcade games, and other ancillary amenities.

The number of skating rinks that are in place come in a number of different sizes. The average sized rink would be about 18,000 sq ft with a skating surface of roughly 9,500-11,500 sq ft (or approximately 70’ x 150’). These are only rough numbers.

Red Flags and Risks
The equipment breakout is critical and needs to be evaluated pertaining to batterboards, chillers, etc, and a depreciation schedule with equipment type, model number, and date of purchase. In many cases the efficiency of the chillers are not enough to keep the ice solid enough for long hours of skating and slush is the more common problem.

Look over the existing operations and financial projections, as well as construction costs, and any long term lease with a municipality or other lessor (landlord). Make sure that the percentage breakout of revenue for figure skating, hockey, public access, and skate rentals can be broken out over a multiple year period.

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Mines and Rock Quarries

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of mines and rock quarry businesses. Below is a brief synopsis of the industry.

Description of Business
Open pit mines where rocks or other minerals are extracted.

General Industry Information
The nonmetallic mineral mining and quarrying industry in the US includes about 4,000 companies with annual revenues of about $20 billion. Major companies include Vulcan Materials, Martin Marietta Materials, and subsidiaries of foreign firms such as Hanson Building Materials (UK); Oldcastle Materials (Ireland); and Rinker Materials (Australia). The industry is highly fragmented, with many small firms serving local geographic markets; about 75 percent of operations have fewer than 20 employees.

Major products include crushed and broken limestone (30 percent of revenue); construction sand and gravel (25 percent); crushed and broken granite (10 percent); and phosphate rock and potassium salts (10 percent). Other products include soda ash, bentonite, clay, and other broken stone. Phosphates and potassium salts are used to make fertilizers. Crushed stone, sand, and gravel are also referred to as aggregates.

Most rock quarries are open-pit mines where the surface is blasted to reach mineral and stone deposits. In order to access deeper deposits, walls are cut in the sides of the mines. The rock is blasted from the mine face, loaded into trucks to be carried into a crusher that will break it down into smaller pieces.

Technology in the industry has become increasingly advanced over the years, leading to heightened efficiency. This is turn has reduced the need for labor.

Red Flags and Risks
The biggest risk for the industry is it’s reliance on consumer demand. The mines and quarries are very abundant and large, and several are shut down or idled due to lack of consumer demand. Strict environmental regulations will also often force mines and quarries to be changed back to their original look and use. Because the mines are very large and the goods are being constantly moved, the industry is very sensitive to increased transportation costs. Often times the cost to move the product exceeds the values of the products themselves. Because of this, pits and quarries are careful to make sure there is a market or their goods nearby.

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Marinas

We have over 20 years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of marina businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments offering dockage for boats and ships as well as harbor for companies to load and unload cargo. Also includes facilities for storage of cargo.

General Industry Information
There are almost 13 million families which owned boats in the United States. There are over 10,000 marina facilities which provide storage space and sell marine-related services and products to recreational power and sail and commercial water craft owners. There is no standardized format for determining marina industry assets since a marina may refer to a facility with only four docks or one with thousands of slips as part of a larger facility. The 1980s saw significant expansion and slowed in the early 1990s when vacancy rates ranged from 20-30%.

A marina rents, leases or sells slips, usually in a boat basin with piers and stationary or floating docks. More than 8,000 marinas, with about 400,000 slips, sell marine services. There are moorings and anchorages for about 33,000 boats. More than 200 dry slip or land based, often stacked, boat facilities store up to 150,000 boats on racks in buildings or on open land. Finally, there are approximately 1,100 boat yards provide wet slips.

Rents are generally based upon dry dock, open water slips, slips which range in length from 20 feet to 80 feet, end tie slips, and bulkhead slips.

Red Flags and Risks
When doing an inspection, review the following areas:
The mooring cleats should be cast ductile iron – hot dip galvanized, great for salt water. The cleats are the key to safely mooring a vessel to a dock. Check to see that all bolts and fasteners are hot dipped galvanized, and the power boxes are UL listed. The bumper strips should be of heavy duty marine grade vinyl, which protects the boats from hitting the whalers. Make sure that the pile caps are constructed of high gloss, long lasting fiberglass, with a layer of gel coat protection. The floatation system should be constructed of polyethylene pontoons and polystyrene foam core.

The marinas should be constructed of all #1 or better, ACZA pressure treated lumber, with .60 penetration, and pressure treated marine plywood. The decking should be made of “Trimax lumber” which is a high performance construction material produced from recycled plastic through a new patented process. “Trimax” resists attacks by termites, insects and marine borers. It outlasts all treated wood and does not erode in salt water. It is weather resistant, and most importantly is maintenance free.

Check for any amenities, such as fresh water and, dock-box storage for each slip, On-Site Pump-A-Head, Dock Carts, Clean Restrooms, any Shower Facilities, Handicap Access, On-Site Restaurant, On-Site Boat Yard, On-Site Marine Product Store, any Storage Garages, Convenient Parking, or Security Cameras.

The biggest risk for the industry is it’s reliance on healthy economic conditions since boating is a discretionary expense. As a result, vacancy rates increase significantly in recessionary times.

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Golf Courses

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of golf related businesses. We have valued golf course businesses for private individuals and the Internal Revenue Service. Below is a brief synopsis of the industry.

Description of Business
Large areas of land landscaped for playing golf. Golf course facilities may also include pro shops, cafés, bars and equipment centers.

General Industry Information
The 12,000 golf courses in the US generate combined annual revenue of about $18 billion. Large companies include ClubCorp and American Golf Corp. About 3,000 courses, with $7 billion of revenue, are owned by non-profit entities such as municipalities and private clubs. The industry is highly fragmented: within the commercial segment, the 50 largest companies account for only about 25 percent of the market. Most companies operate just one or two courses. The average commercial course has annual revenue of about $1 million.

Golf courses receive revenue from membership dues, activity fees, sales of food and drinks, and sales of merchandise. Membership dues account for a third of industry revenue; activity fees ('greens fees') for 25 percent; food and drinks for 25 percent.

Golf courses can be classified as private or open to the public. Private courses may be associated with country clubs, golf clubs, or real estate developments. Courses open to the public may be associated with resorts or operated as local 'daily fee' courses, including commercial and municipal courses

Red Flags and Risks
Demand is driven by demographics and population growth. The profitability of individual companies depends on efficient operations and good marketing, because many costs are fixed. Large companies can have advantages in management experience. Small companies can compete successfully by operating in favorable locations or through superior marketing. The industry is very labor-intensive: annual revenue per employee is just $55,000. When looking at financials, check to see if grounds maintenance is sufficient. Many courses have fungus and problems with grass which may need to be replaced. Water is always an issue and should be looked at closely.

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Country Clubs

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of country club businesses. We have valued these businesses and facilities for private institutions as well as the Internal Revenue Service. Below is a brief synopsis of the industry.

Description of Business
Establishments, usually in a suburban district, with a clubhouse and grounds, offering various social activities and generally having facilities for tennis, golf, swimming, etc.

General Industry Information
An estimated 25,000 membership sports and recreation clubs were in operation in 2002, generating revenues of more than $22 billion. Employment in this sector declined by 4 percent from more than 400,000 employees in 2000 to 385,200 in 2002. Personal consumption expenditures, however, rose more than 15 percent from $75.8 billion in 2000 to $89.2 billion in 2003.

American country clubs were born in the late 1880s--a creation of the wealthy upper class as an exclusive social setting in which to enjoy various athletic and recreational endeavors. The clubs flourished until the late 1920s, when the Depression forced many of them to close. A renaissance took place in the late 1940s and 1950s, spawned by post-war affluence and the increased interest in golf (a sport that has enjoyed a tremendous amount of growth across the nation for the past several decades). As a direct result of this heightened popularity, many country clubs were built during this period. The trend of the mid-1990s continued into the 2000s, as private country clubs have become a major pastime for many Americans, with more than 12,000 such facilities in operation.

Red Flags and Risks
Demand is driven by demographics and population growth. The profitability of individual companies depends on efficient operations and good marketing, because many costs are fixed. Large companies can have advantages in management experience. Small companies can compete successfully by operating in favorable locations or through superior marketing.

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Health & Fitness Clubs

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of health and fitness businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments that house exercise equipment, swimming pools, spas, saunas and other services for members.

General Industry Information
According to the International Health, Racquet & Sportsclub Association, the number of health clubs in the United States grew by 5.1 percent during 2001, reaching 17,807 facilities at the beginning of 2002. This was an increase from 16,938 in January 2001. Despite the slow economy that characterized the first years of the 2000s, health club expansion continued at a quick pace. In 2001 fitness and health centers in the United States generated combined revenues of more than $12.2 billion.

Health clubs emphasize three aspects of physical fitness: cardiovascular conditioning, strength, and flexibility. Some even add nonprofessional mental health services like stress reduction and counseling programs. Full-service health clubs featured aerobic conditioning equipment, resistance equipment, dance and exercise classes, swimming pools and spa areas, and sometimes even tanning and massage. As the U.S. population ages, the over-50 population is becoming increasing important to the health club industry, and some clubs are responding by adding health maintenance and monitoring programs to their offerings, including checks for bone density, blood sugar, and blood pressure.

In 2002 membership and enrollment (or initiation) fees from the industry's 33.8 million members constituted the vast majority of club revenues. Although these fees have long been the mainstay of industry income, other revenue sources like children's programs, personal training, exercise classes, physical therapy, and aquatic programs started contributing a growing proportion of health club revenues.

According to industry statistics, there were an estimated 32,040 physical fitness facilities in 2005. The industry employed 254,345 people, with the average fitness facility employing nine people. Combined, physical fitness facilities reported estimated revenues of nearly $10 billion for 2005.

Red Flags and Risks
IHRSA members claim that the following issues are the five most pressing external challenges to the industry: local economy, price sensitivity of the market, competition from clubs, taxes, and unfair competition from non-profit establishments like YMCAs. The same survey respondents specified member retention, personnel management, advertising and marketing, cost control, and sales management as their top five internal priorities. Although home exercise was farther down the list of external threats, some industry analysts have noted that "the boom in home fitness is cutting into the health club business."

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Acute General Hospitals

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of acute general hospital businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments that specialize in short-term medical treatment, for patients having an acute illness or injury or recovering from surgery.

General Industry Information
According to the 2002 Statistical Abstract of the United States, the United States had 5,810 general and surgical hospitals in 2000, down from 6,965 in 1980. Of the total facilities in 2000, approximately 3,000 hospitals had more than 100 beds. Made up of both non-profit and profit-making establishments, they employed slightly more than 5 million workers and took in about $412 billion in annual gross revenues. This amount accounted for nearly one-half of the nation's total annual health care employment and health care expenditures, placing hospitals at the center of the health care industry. Although hospital revenues have increased substantially every year, from $102 billion in 1980 to $412 billion in 2000, or 404 percent, costs incurred by hospitals have also increased, from nearly $92 billion in 1980 to more than $395 billion in 2000, or 429 percent.

In recent years U.S. hospitals have been increasingly under pressure by government and businesses to provide higher quality service at lower costs while increasing access and preserving patient choice. A move to emphasize outpatient over inpatient care and efforts to use health maintenance organizations (HMOs) and other cost-cutting measures implemented by employers dramatically altered the business in the 1980s and 1990s. One result was a trend toward more academic medical centers, more ambulatory surgery, and fewer community hospitals, which declined in total number by 17 percent after 1981. As pressure to enact such changes continued, general medical and surgical hospitals approached the end of the twentieth century with persistent uncertainty about the direction and shape of their industry's future.

Hospitals receive their revenues from different sources for the services they provide to patients. In the early 2000s the largest source of income to community hospitals came from Medicare and Medicaid programs. Of the $1.4 trillion spent on health care in 2001, governmental funds provided 46 percent, or $648 billion. Private insurance paid 35 percent, or nearly $487 billion, and out-of-pocket expenses accounted for 15 percent, or $210 billion. The remaining 4 percent came from other sources of revenue.

Red Flags and Risks
Hospital expenses are strongly affected by legislation, costs of medical technology, and trends in medical practice. As these expenses rose throughout the 1990s and into the 2000s, on-site administrative, food service, maintenance, and laundry support often were streamlined or contracted out in response. To counteract rising costs, many hospitals also attempted to expand their revenues by increasing their role in community health maintenance efforts beyond traditional emergency, obstetrics, and inpatient care to include disease prevention and patient education programs such as weight reduction, drug rehabilitation, prenatal care, and pediatric wellness.

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Psychiatric Hospitals

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of psychiatric hospital businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments that specialize in the care and treatment of patients affected with acute or chronic mental illness.

General Industry Information
According to the 2002 Statistical Abstract of the United States, the United States had 5,810 general and surgical hospitals in 2000, down from 6,965 in 1980. Of the total facilities in 2000, approximately 3,000 hospitals had more than 100 beds. Made up of both non-profit and profit-making establishments, they employed slightly more than 5 million workers and took in about $412 billion in annual gross revenues. This amount accounted for nearly one-half of the nation's total annual health care employment and health care expenditures, placing hospitals at the center of the health care industry. Although hospital revenues have increased substantially every year, from $102 billion in 1980 to $412 billion in 2000, or 404 percent, costs incurred by hospitals have also increased, from nearly $92 billion in 1980 to more than $395 billion in 2000, or 429 percent.

Hospitals receive their revenues from different sources for the services they provide to patients. In the early 2000s the largest source of income to community hospitals came from Medicare and Medicaid programs. Of the $1.4 trillion spent on health care in 2001, governmental funds provided 46 percent, or $648 billion. Private insurance paid 35 percent, or nearly $487 billion, and out-of-pocket expenses accounted for 15 percent, or $210 billion. The remaining 4 percent came from other sources of revenue.

Psychiatric hospitals fall into one of two categories: nonprofit or for-profit. Nonprofit entities include government-administered facilities and charitable institutions. In the mid-1990s, nearly one-half of the nation's psychiatric hospitals were either nonprofit or government entities. In keeping with this configuration, the standards and revenues of the industry are largely shaped by government legislation.

Red Flags and Risks
In recent years U.S. hospitals have been increasingly under pressure by government and businesses to provide higher quality service at lower costs. A move to emphasize outpatient over inpatient care and efforts to use health maintenance organizations (HMOs) and other cost-cutting measures implemented by employers dramatically altered the business in the 1980s and 1990s. One result was a trend toward more academic medical centers, more ambulatory surgery, and fewer community hospitals, which declined in total number by 17 percent after 1981. As pressure to enact such changes continued, general medical and surgical hospitals approached the end of the twentieth century with persistent uncertainty about the direction and shape of their industry's future.

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Convalescent Hospital

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of convalescent hospital businesses. Below is a brief synopsis of the industry.

Description of Business
Establishments that specialize in the continuous care and treatment of elderly patients who have difficulties taking care of themselves.

General Industry Information
In the mid-2000s, $100 billion was spent on nursing home care annually. Skilled nursing care facilities, which were for-profit, non-profit, or government owned, serve the nation's fastest growing population segment, which are those 65 years and older. In the 2000s, 36 million people over the age of 65 resided in the United States, which represented a little over 12 percent of the total U.S. population, a number that was expected to increase to 20 percent of the population by 2020, with 6.6 million people residing in nursing homes by 2050. The American Health Care Association reported in 2006 that 15,800 facilities had 1.5 million residents, with another 240,000 beds available.

Men who were 65 were expected to live an additional 16.3 years and women were expected to live an additional 19.2 years. Life expectancy was projected to continue to rise, with life expectancy at age 65 reaching an additional 17 and 20 years for men and women, respectively, by 2020. In other words by 2020, a 65-year-old man could be expected to live to the age of 82 and a woman could be expected to live to the age of 85. For those over the age of 65, there is a 41 percent chance of spending an average of 2.5 years in a skilled nursing facility. A one-year stay in a nursing home can cost between $30,000 and $80,000.

Essentially, these figures reveal the scope and populations served by the skilled care nursing industry. Years of innovative reallocation of resources expanded options for long-term care. However, few match the optimum level of skilled nursing care provided for populations with chronic and multiple disabilities. Skilled nursing care, similar to the concept of custodial or convalescent care, represents a long-term vehicle for meeting the comprehensive medical, personal, and social service needs of chronically disabled persons. A Center for Medicare and Medicaid Services (CMS) report stated that, at 22 percent, the most common reason the elderly enter a residential facility is circulatory problems. Injuries and respiratory diseases account for 14 percent and 11 percent of admissions, respectively.

Skilled nursing care services differ in terms of the levels of services provided, patient admission criteria, staffing, and reimbursement mechanisms. Each aspect of the skilled nursing care environment reflects the high level of intensive care. Overall, non-profit, independent facilities consistently gave the best care. All skilled care facilities provide continuous 24-hour care that is prescribed, directed, and executed under the supervision of a medical doctor. Professional performance and supervision by licensed personnel also apply to the provision of ancillary services such as physical therapy and other such prescribed services.

One of the trends affecting health care is integration, or integrated delivery systems, whereby patients are tracked over time, spanning all levels of care and fostering alliances among the various care givers.

Red Flags and Risks
Nursing home regulations, the need for new managers, higher care standards, managed care contracts, and rising insurance costs are some of the challenges facing the industry. Longer life spans, coupled with the trend toward smaller families with fewer children to share responsibilities for the aged, will mean a greater need for medical health companies. As a result, the nursing home and long-term care industry will continue to grow, but it is unlikely that it will be able to keep pace with the growing demand for quality skilled nursing care. Funding will also be a dilemma as reduced or stagnated government spending is a widespread concern. In 2007, Medicare payments for nursing homes were set to rise over 3 percent.

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Assisted Living Facilities/ Retirement Projects/CCRCs

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of assisted living facility/retirement communities and continuing care retirement center (CCRC) businesses. Below is a brief synopsis of the industry.

Description of Business
An institution for the care of patients that require assisted living.

General Industry Overview
The nursing care industry in the US includes about 30,000 companies with combined annual revenue of $100 billion that operate 60,000 nursing facilities. About 10,000 companies are nonprofit, generally affiliated with churches, charities, and local governments. Large for-profit companies include Beverly Enterprises and Sun Healthcare Group. Nursing homes are a cheaper alternative to long-term hospital care. The profitability of nursing facilities depends greatly on efficient operations, because revenue per patient is largely controlled by the large government insurance programs, Medicare and Medicaid. The majority of companies operate a single facility, with average annual revenue of $1 million, but about 600 operate ten or more facilities. Large companies tend to run larger facilities that have economies of scale in purchasing and staffing, with average annual revenue of $3 million.

The industry includes skilled nursing facilities for recovery from acute or chronic medical conditions, mental health and substance abuse facilities, and various types of community care and assisted living (AL) arrangements. A wide array of healthcare and dependent-care services are provided, ranging from expensive 24-hour nursing care to help with daily living tasks such as bathing, eating, and dressing.

Red Flags and Risks
The profitability of the industry is determinate on the elderly population. Without a large elderly population, there is not much business for assisted living centers. Another problem for the industry is being able to afford the increasing costs of technology. Because many firms within the industry are non-profit or state-run, expenses are paid by various sources such as Medicaid, the participants, donations, grants, and private long-term care. This means that the success of the industry in dependent on continued funding from outside sources. Because there are constant advances in the medical field, adequate funding is required to afford the equipment, personnel and other expenses in order to keep the facilities in operation.

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Alzheimer’s Units/Non-Medical Senior Care/ Subacute Care Facilities

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of Alzheimer units/non-medical senior care and subacute care facility businesses. Below is a brief synopsis of the industry.

Description of Business
Non-medical senior care includes an enormous range of services including consulting, day-to-day assistance with routine chores and personal care (such as eating and bathing), and more general welfare and social services.

General Industry Overview
One of the most widespread sectors in this industry is the adult day care center, which follows the child day care model to provide social and medical attention to the elderly. In 2008 there were 3,400 adult day care centers serving 150,000 seniors. Another strong sector is geriatric care management, in which consultants meet with families to design a care strategy for loved ones tailored to particular needs and financial capabilities.

For seniors not yet at the stage of needing long-term care but in need of some daily attention, day-to-day care has been increasingly viewed as an intermediary step in a smooth transition to old age. Moreover, as baby boomers move into retirement years and begin to require non-medical care, a smaller percentage of those requiring such services will have family members capable of providing for them. Thus, the "professionalization" of non-medical senior care is likely to continue its strong upward trend.

Adult day care programs are offered in senior centers, community centers, and churches. These programs are sometimes attached to hospitals, nursing homes, or other health care institutions. In addition, residential care facilities might provide these services should the client's care needs extend to mental and other chronic care concerns. For the most part, they are nonprofit organizations. The centers provide opportunities for social interaction and exercise along with hot meals. Adult day care operations can also offer a range of services--including transportation to and from home; counseling and social services; grooming, hygiene, and laundry services; social activities; physical, occupational, and speech therapy; and others--to those seniors with cognitive or functional impairments.

The increasing need for adult day care centers was widely recognized in the late twentieth and early twenty-first centuries. According to Partners in Caregiving, 26 percent of existing day care centers opened in the late 1990s and the early years of the first decade of the 2000s. Still, the need is hardly met. According to the 2000 census, there were 3,407 adult day centers operating in the United States. The centers mostly served people with dementia, including Alzheimer's disease, or those in poor health.

Red Flags and Risks
Because many firms within the industry are non-profit or state-run, expenses are paid by various sources such as Medicaid, the participants, donations, grants, and private long-term care. This means that the success of the industry in dependent on continued funding from outside sources. Because there are constant advances in the medical field, adequate funding is required to afford the equipment, personnel and other expenses in order to keep the facilities in operation.

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