Valentino Tinoco
Financial Analysis in Salt Lake City, UT
About
As a motivated and driven individual, I am seeking a full-time position in the finance industry where I can expand and enhance my knowledge and expertise. My objective is to improve the financial performance and results of the company, contributing to its overall growth and success. I am committed to using my skills in financial valuation to minimize risk in investments, utilizing models that accurately factor in both risk and cash-flow growth.
Work Experience
In my role at MD Horizon, I took an active part in conducting financial modeling and valuations for SME Medical Practices, contributing to analyses of businesses boasting up to $25M in revenue.
My responsibilities extended to lead generation initiatives, involving targeted outreach to potential sellers through cold calling, emails, LinkedIn, and negotiating with business brokers.
I also participated directly in negotiation calls, where I provided insights drawn from financial analysis, including Quality of Earnings assessments, Risk Management, and crafting well-considered offers. This involved employing complex financial modeling to inform our negotiation strategies and proposals.
On the creative side of things, I was tasked with the design of presentations, templates, and various other necessary business documents.
Furthermore, I undertook comprehensive market research, using the insights gathered to craft a solid investment thesis for presentation to prospective investors.
In terms of team building, I was actively involved in the recruitment process, bringing on board talented interns and professionals.
I also maintained effective communication with accounting and law firms to ensure we were all working towards the same business goals.
I successfully grew two private Facebook groups, attracting a total of 2 thousand members, mainly consisting of business buyers and brokers. On our podcast, we hosted prominent individuals from the M&A industry to share their experiences with SME acquisitions. Our members received assistance with SME valuations, negotiations, deal structuring, crafting offers, and pitching to sellers. Additionally, we helped them develop relationships with financial institutions to secure funding.
I advocated that actual business valuations should be based on Free Cash Flow rather than EBITDA, which is primarily a seller metric and can lead to overvaluations of SME enterprises. To this end, I developed financial models to value SME companies, including P&L, Balance Sheet & Cash-Flow Statements, 10-year Forecasting, Enterprise & Equity Value, and Cash-Flow Metrics such as NOPAT, FCF, and FCFF. I also employed DCF Modeling and Term-Based Offer Crafting to further refine our approach.
Through market research, we developed an investment thesis that reduced risk and improved returns by using multiple growth models. Additionally, we performed a SWOT Analysis to identify market weaknesses, which we then used as our value proposition to business owners to negotiate their sale. These experiences provided me with a wealth of knowledge in the areas of market research, valuation, deal structuring, and risk management.
During the Covid-19 pandemic, I recognized a unique opportunity to invest in healthcare companies, particularly those specializing in senior care homes. My goal was to enhance and expand these facilities by implementing home health services. However, I soon discovered that the senior care industry was considered high-risk and securing financing was exceedingly difficult due to market uncertainty. Additionally, my lack of expertise, being fresh out of high school at the time, presented further obstacles. Nonetheless, this experience taught me valuable lessons and allowed me to gain a deeper understanding of the intricacies of the healthcare industry.
I successfully sold my idea and assembled a team of professionals including a Chairman, CFO, CPA, and a Transactional Attorney to aid in our acquisition efforts. Our market research focused on identifying potential acquisition targets that met our investment criteria, with a particular emphasis on business owners seeking to retire. To build a list of potential sellers, I established a sales team to engage with business owners.
To expedite the acquisition process, I created a 5-system rapport model that maximized the likelihood of win-win scenarios with business owners. I, along with my team, conducted business valuations and crafted offers for sellers. We encountered challenges with small business owners who typically lack knowledge on how to sell a business, leading to delays as we had to educate them, and there was often pushback on price negotiations.
To address this issue, we developed a term-based negotiation strategy that prioritized business continuity over seller/buyer winning bias. This approach made sellers more open to alternative structures, such as seller financing, equity hold, and earnouts. We also prepared legal documents, including NDAs and letters of intent, with the assistance of our transaction attorney to minimize our risk.
Although we were able to secure a 5M commitment letter from a top 10 SBA bank, we were unable to proceed due to the SBA's restrictions on our development and the unstable financials of the target businesses. Nonetheless, this experience allowed me to develop invaluable skills in negotiation, deal structuring, and risk management.
Side Projects
One of the biggest challenges in acquiring SMEs, particularly small businesses, is that many owners lack experience selling their business. To make the process more seamless, we aim to streamline the process of receiving financials from business owners, reducing the timeframe from three months to just one week.
Here's how our system works:
We reach out to business owners via email, phone, or mail, expressing our interest in purchasing their business. Instead of using the word "selling," which can have negative connotations, we use a more positive approach by asking if they have thought about retiring or expanding their business in the near future. This reframes the conversation, opening the discussion for succession planning. We then explore the possibility of purchasing their business, tailoring our approach to their specific motivations for selling. By taking this approach, business owners are more open to discussing the sale of their business.
Typically, we would schedule a discovery call to assess the quality of the business and determine if it meets our initial criteria. After this call, we would request financials, which can often take several months to receive. However, with our new system, we ask for the business owner's email and direct them to a website where they can answer a few questions about themselves and their business. The website also includes a section for them to upload their financials. This approach not only speeds up the process but also creates trust as business owners are more comfortable uploading their confidential financial data to a secure website rather than emailing it to a stranger.
Based on the financials and the business owner's responses to our questions, we tailor an offer and assess a risk score. We then get on a call with the business owner, walk them through the offer, and explain how we arrived at the valuation. This is not our final offer but rather a starting point for negotiations to determine what the business owner is comfortable with.
Valuations are inherently biased, which is why we take a business-first approach. We focus on ensuring that there are enough cash flows for the business operations, employees, CAPEX, investments, R&D, and maintenance. After deducting these expenses, we then work on the seller's requests, the buyer's requests, and negotiate to find a middle ground. This approach ensures continuity of the business after the sale and helps prevent one-sided, greedy decisions.
It should be noted that this approach is not revolutionary in and of itself, but by innovating in every aspect, one can stack these systems like building blocks to create a larger and more efficient framework.
As an independent sponsor in M&A, I observed a lack of available excel-based valuation and pricing models for public use. In response, I developed six models that build upon each other, streamlining the valuation process and focusing on what truly matters.
I noticed that many in the industry, including business brokers and other independent sponsors and search funders, relied on rule of thumb valuation models such as EBITDA, industry multiples, DSCR, and other metrics that lead to overvaluations.
Instead, I developed a model that accounts for the risk of cash flows, as the value of a business is ultimately determined by the value of its cash flows divided by the associated risk. Recognizing that many people lack the knowledge to properly price businesses, I took a term-based approach to negotiations that considers the seller's motive for selling and structures pricing based on various factors. These factors may include tax structures, equity holds, and earnouts, which can help reduce capital gain taxes for the seller by structuring the deal with a payment over time to shift it to income tax and equity holds to capitalize on future growth in the company's value.
My dynamic model allows me to structure deals based on various parameters, and it provides a more accurate and reliable way to determine the true value of a business.