Value is one of the most critical metrics of business ownership, but valuation is not a priority for most business owners until a sale is contemplated. Many owners are surprised and disappointed to find that their life’s work will not bring the value they expected and face a shortfall in debt payoff or in funding their retirement. This creates concern and fear at a time that owners are looking forward to benefitting from many years of hard work and risk.
We often have business owners initiate discussions with us presenting a price they need to obtain for their business in order to achieve their financial goals. Frequently, there is little or no relation between their “needed” number and the market’s valuation of their business; the market, not surprisingly, values a business largely based on forward risk of future profitability and growth prospects. Less risk equals higher value! Hard assets (machinery, inventory, and the like) can in most cases be easily replaced with like kind- a business’s standing (in terms of unique products, services, reputation, customers served and the like) in its market cannot. THAT is what an owner is selling, and where the value of an individual business is found and realized in a sale.
Occasionally, a business owner will discuss with us a value reached using a valuation methodology they believe to be applicable to them. While often a good starting point, one must realize that there are 3 widely recognized methodologies each with several approaches to valuation, which sometimes reach differing results. Our expertise is in recognizing and explaining which valuation method is appropriate for a given situation and addressing how the business would be best presented to assure maximum value to the owner. Frequently, owners express concern about the cost of preparing a valuation but are unaware that we offer alternatives to a certified Business Valuation Report that nonetheless provide important tools in the sale process and at a lower cost. Our initial consultation is complimentary and will present those alternatives for the owner’s consideration and action if desired, as well as our initial thoughts on enhancing sale value. Our goal is to maximize sale potential while minimizing upfront investment.
