I read an interesting article about one of the challenging aspects of being a business broker.  While successful business are often experts, or at least very knowledgeable about their business and the industry in which they operate, this knowledge often gives them a false sense of their expertise in other areas as well. This leads them, after a few conversations with their peers, and the reading of a few articles or books, to reach a hard-coated conclusion about the price and terms they expect to receive for the sale of their business.

And many successful business owners become emotionally attached to their business, and feel its value is the sum of the time they’ve invested in their business and the potential of the business.  They really don’t know how the market determines business valuation, but they know what they need to retire – and that’s the number they fix in their mind as what they expect to receive for the sale their business.

The top challenge of a business broker is to help the business owner realize that the value the market places on their business is based upon many factors, and they must not become fixated on a valuation they determined based upon emotions.  The following article discusses this situation, as well as seller expectations regarding fees.

The Importance of Reasonableness When Selling Your Business

by Dave Kauppi

“Sometimes business owners are their own worst enemies in the sale of their business. This post explores the importance of reasonableness for a business seller.

We recently completed a survey of a broad cross section of business brokers and merger and acquisition professionals. One of the questions we posed was, “What is the biggest challenge you face in your practice?” We gave them eight choices including lack of financing, sell side deal flow, not enough buyers, etc. We asked our professionals to pick their top three. The top answer was Seller Value Expectations with a 68.9% response rate. The next closest answer was sell side deal flow at 55.3%. Why is this the biggest challenge that our industry faces? To me this translates into a great deal of wasted effort on the part of our buyers, our seller clients, and our profession.

...The business owner's first reasonableness hurdle is whether he/she recognizes that to reach these corporate buyers is a very difficult and labor intensive process and a firm that specializes in reaching these targeted buyers is the right choice to hire...The seller's reasonableness will be put to the test as he tries to balance his emotions with the ultimate arbiter of value, the marketplace...”

To read the entire article, click The Importance of Reasonableness When Selling Your Business.

Contact us today, at our Charlotte or Atlanta office, if you're considering the valuation or sale of your company. 

Summit Acquisitions Group specializes in the sale, appraisal, and financing of privately owned companies ranging from $750,000 to $25,000,000.  Contact their offices in Atlanta, GA and Charlotte, NC for a free consultation.
 

I was the broker for the owner of a company in a declining industry. Like many other businesses in this industry, this company was experiencing declining revenues – caused by the decline in the overall economy and the long-term trend of this industry.

The owner had been looking for an opportunity to merge with another company and save both companies by eliminating duplicated costs. The problem with this strategy is that long-term debt is used by most companies in this industry to acquire heavy equipment used in their production – and the equipment has declined in value – so most companies have no way to shed their debt by selling off under-utilized equipment.

In in the meantime, while his search for a merger partner was going nowhere, his personal cash reserves were being depleted to keep the business afloat.

In this particular case, the owner recognized the downward spiral that his company would inevitably succumb to, so he was prepared to sell his company under a total...

Out of fifteen buyers we identified, three expressed real interest, and we settled on one that closed the deal within three months of our first discussion.

Click here to access a PDF that tells the entire story.  

Contact our Charlotte or Atlanta office if you're considering the sale or valuation of your company.


Summit Acquisitions Group specializes in the sale, appraisal, and financing of privately owned companies ranging from $750,000 to $25,000,000.  Contact their offices in Atlanta, GA or Charlotte, NC for a free consultation.

Preparation to sell (or exit) your company should be considered as an integral part of your business plan.  Exit planners often advise business owners to consider a strategic plan for exiting before starting or even acquiring a business.  This may seem premature, but proper transaction execution for the sale of a company takes strategic orchestration.  Your financial advisory team should include a merger and acquisition advisor, an estate attorney, transaction attorney, and a tax accountant.  As you prepare to sell your company, you should consider the many challenges involved.

Confidentially positioning and marketing your business to private equity groups, industry buyers, investor groups, foreign buyers, strategic buyers, and/or hedge fund can be done effectively through the expertise and knowledge provided by the professionals at a mergers & acquisitions or business brokerage firm that focuses on businesses of your size.  There are numerous components that are crucial to a successful outcome.  And, there are many pitfalls that could negatively impact the net proceeds resulting from a divestiture transaction or even derail the entire transaction. A transactional advisory team, led by a successful merger and acquisition advisor, is crucial for a successful closing.

Protecting the years of hard work, dedication, and sacrifice that you have invested in your company is best achieved when you utilize the intermediary strengths provided by the professionals at a successful mergers & acquisitions or business broker firm. A comprehensive marketing plan and marketing materials are usually created right after the engagement starts.  These marketing materials serve as a template for the continuous improvement of the company’s market value.  If the sale of the company is projected for the future, an update of the plan should be completed every three to six months, along with an update of the documents.  As you prepare to sell a company, consider utilizing the valuation, marketing plan, and marketing documents provided by the professionals at a successful mergers & acquisitions or business broker firm.
 
Contact our Charlotte or Atlanta office if you're considering the sale or valuation of your company.
 

Summit Acquisitions Group specializes in the sale, appraisal, and financing of privately owned companies ranging from $750,000 to $25,000,000.  Contact their offices in Atlanta, GA and Charlotte, NC for a free consultation.
 

I talk to business owners all the time who ask me: “What’s the best method for valuing my company?” Valuing your business is one of the most critical components of businesses success – for two reasons:  (1) you should always operate your business with an eye toward your exit strategy.  This focus helps you filter all important decisions through the ultimate purpose of your business – to provide you with funds needed for retirement! Each decision should increase the likelihood that your retirement goals will be met on schedule; and (2) you need to know, at all times, what the market will pay for your business. If you don’t know that answer, then how can you possibly plan for your family’s financial future?

Determining the value of a business utilizes a systematic process. Warren Buffett was quoted as saying: “…business schools should be encouraging students to learn the boring, critically important, discipline of business valuation.”  It is important to understand the components involved in this process.  This can be compared to a lawyer drafting your will or an accountant preparing your financial records.  Even though professionals are handling these important tasks for your business, you should still have an understanding of the foundational principles involved in these tasks. This same concept applies to valuing your company. Business valuation is a process that you, as a business owner, should understand. The process can seem complex, but the two baselines of the valuation are easy to grasp: (1) What is a reasonable forecast of cash flow of the business for the next 3 years; and (2) What is the risk that this forecast significantly overstates or understates future cash flows?  

Assets are nice, but they only provide the lowest value of a profitable business.  Revenues are close to meaningless when determining business valuation - unless the buyers are using the same valuation metrics used to value tech companies in the late 90's.  What you need is a high likelihood of large amounts of future cash flow!   And, the best predictors of future cash flows are prior year cash flows.

The professionals at the Summit Acquisitions Group begin each of their engagements with a business valuation. We can either prepare our own business valuation (quite often at little to no cost) or help coordinate the valuation by an independent business appraiser (usually between $6M and $10M).  The professional appraisal valuation is usually within 5 to10% of our valuation.

Contact our Charlotte or Atlanta office if you're considering the sale or valuation of your company. 

Summit Acquisitions Group specializes in the sale, appraisal, and financing of privately owned companies ranging from $750,000 to $25,000,000.  Contact their offices in Atlanta, GA and Charlotte, NC for a free consultation.
 

The first step a business owner needs to consider when planning the sale of his or her company is to determine the market value.  A business valuation provides an excellent indicator of your company’s market value, and it offers guidance for pricing the business for a successful sale in a reasonable period of time.  A proper valuation also reduces the likelihood of receiving offers significantly lower than the actual market value, thus shrinking the gap between the expected purchase price and actual offers.

The professionals at Summit Acquisitions Group, with offices in Charlotte, NC and Atlanta, GA) can explain the differences between a business valuation opinion – which is prepared by an experienced M&A firm or business broker, and an actual business appraisal – which is prepared by an independent professional appraiser.  Briefly: a business valuation opinion provides the Seller with an informed understanding of the market value of his company – prepared by professionals actively engaged in the market; and a business appraisal provides the Buyer with some level of confidence that the business his been priced per a valuation prepared by an independent professional business appraiser.

Besides providing our in-house business valuation opinions, the Summit Acquisitions Group also coordinates (with a professional independent business appraiser) the preparation of three types of business appraisals for our clients: (1) the Full Business Valuation, (2) the Limited Scope Business Valuation, and (3) the Value Report Business Valuation.

The Full Business Valuation provides the business owner with a comprehensive overview of the company’s worth. It includes a 70 -100 page report, which includes graphic displays, a statistical summary, critical factors, a premium analysis, value formulas, a correlation of methods, comments on the fair market value, a discretionary net profit analysis, a historical and projected overview, a list of all researched comparable sales, a write up on the industry, a description of where the industry is headed, industry ratios, area maps, and more.

The Limited Scope Business Valuation (approximately 50 pages) is also offered in our Charlotte, NC and Atlanta, GA offices.  While not designed for the sophisticated buyer, it does provide valuable information for companies that cannot afford the Full Business Valuation report.

The Value Report Business Valuation (approximately 30 pages) is designed for smaller companies that cannot afford the more comprehensive business valuations. It is not designed for companies with over $5 million in revenues and is not designed for companies who could end up in litigation, for estate planning, or need a stock sale appraisal.

Most of our clients choose our internally prepared business valuation opinion as the first step in the process of selling their business.  Many of our clients also chose to have us coordinate the preparation of an independent appraisal to verify our market analysis. Any valuation discrepancy is researched and resolved in order to provide our clients with an accurate picture of their company’s value to provide to buyers.

Along with a preparation of an appraisal of our client’s company, after we have been engaged, Summit Acquisitions Group will also prepare comprehensive marketing documents.  These documents are indispensable during the selling process, and they also serve as a template for the continuous improvement of the company’s value. These documents are updated every six months to provide Buyers with fresh financials and new employee & operational information.  These updates also assist our clients in running their company with an eye on maximizing the value of their business.  The professionals at Summit Acquisitions Group, with offices in Charlotte, NC and Atlanta, GA, provide our clients with all the services necessary to determine the market value of their company and to prepare and implement a successful marketing strategy to sell, or obtain growth financing for, their company.

Contact our Charlotte or Atlanta office if you're considering the sale or valuation of your company.

Summit Acquisitions Group specializes in the sale, appraisal, and financing of privately owned companies ranging from $750,000 to $25,000,000.  Contact their offices in Atlanta, GA and Charlotte, NC for a free consultation.
 

Appraising your business can be a very valuable process.  Do you know what your company is worth right now?  Do you know what buyers are looking for in a business?  Do you know what needs to be done to increase the value of your business?  An appraisal will answer these questions for you – and much more.  It’s a good idea to have your company appraised every three to five years. Having your company routinely appraised will give you its current value, a realistic perspective of the future direction of the business, and it will provide you with the tools to increase its value.

Knowing the value-drivers for your company will help you focus on those activities that really matter. If you’re thinking of retiring anytime soon, you absolutely need to know the value of your business.  It’s probably the most valuable asset you own.  And, while you don’t check the value of your stock portfolio every day (that’s not good for your blood pressure), you certainly check periodically and you have a pretty good idea of your total portfolio balance between checks.  The same holds true for the value of your business – and much more.  In addition to needing to know the actual current market value of your business for retirement planning, you also need to know and understand the drivers that determine the market value of your company.  After all, you don’t have much control of the market value of your stock portfolio, but you sure do have control of the market value of your company!

Whether you’re planning to sell your business in six months or five years, acquiring the knowledge of what’s required to increase that value will allow you to make informed decisions regarding plans for sales, business acquisitions, estate planning, exit planning, and more.

The professionals at Summit Acquisitions Group, with offices in Charlotte, NC and Atlanta, GA, specialize in business valuations and appraisals.  They offer you three choices to fit your particular needs and your budget: the Full Business Valuation, the Limited Scope Business Valuation, and the Value Report Business Valuation. The information included in these three options will provide you, depending upon the amount of details you with to obtain, with an accurate determination of the current market value of your company and the factors that will increase future value.

As part of our unique selling process, a comprehensive marketing strategy is designed and developed by the professionals at the Summit Acquisitions Group - with offices in Charlotte, NC and Atlanta, GA.  An update of these documents is conducted every six months to provide Buyers with fresh financials, plus new and updated information – including 12 month forecasts.  These marketing documents provide our M&A professionals with the ability to begin marketing your company at the time of your choosing and maximize your business’ operating effectiveness – as you run your business with an eye towards its future sale.  Appraising your company is a very important part of achieving business success, and it is a very important part of preparing for a future sale or merger.  Appraising a company is a practical investment that could profoundly affect you and your company’s future.

Contact our Charlotte or Atlanta office if you're considering the sale or valuation of your company.
 

Summit Acquisitions Group specializes in the sale, appraisal, and financing of privately owned companies ranging from $750,000 to $25,000,000.  Contact their offices in Atlanta, GA and Charlotte, NC for a free consultation.