SHG: Selling Your Business, Part 2
Click here to load reader
-
Upload
schwartz-heslin-group-inc -
Category
Business
-
view
247 -
download
0
description
Transcript of SHG: Selling Your Business, Part 2
SELLING YOUR BUSINESS:
Part 2: What is your business worth?
Presentation Series by Schwartz Heslin Group, INC. (SHG)
The SYB Series
Part 1: Introduction and First Steps Part 2: What is Your Company
Worth Part 3: Preparing for a Sale Part 4: Your Role in the Transaction
You have established your goal to sell your business. Now what?
What Buyers Look For First
Sustainable growth Strong and predictable cash flow Opportunities for growth Stable sales EBITDA NOT Asset Value
What Buyers Look For (2)
Strong revenue growth Proprietary Product/Service Long-term customer relationships Succinct customer database
A CRM is a highly recommended Low customer concentration Low vendor concentration
What Buyers Look For (3)
Barriers to entry The higher the barriers, the more value add
Established sales channels Established and efficient procedures
The business should be able to operate perfectly normally in your absence
Well-maintained capital equipment Up-to-date technology
Buyers Don’t Want to See…
Unreliable financial information This includes inaccurate and/or poorly
prepared records and financial statements Having audited financial statements is
recommended Business dependence on owner
An owner-dependent business may fall apart if sold
High vendor concentration High customer concentration
Buyers Don’t Want to See (2) Short-term ownership
Your long-term commitment in the past signals that the enterprise is a worthwhile investment
Lack of financing Tax rate uncertainty
Something to keep in mind as the United States moves toward increasing the capital gains tax
Acute vulnerability to economic cycles
Valuation Methods
Market Approach Prospective deal directly compared to similar
done deals Income Approach
Either DCF or capitalization of earnings method Asset Approach
Adjusts book value of assets and liabilities to reflect true economic value
Establishes baseline value excluding considerations of future profitability
Market Approach: Benchmarks Comparison of your company to peers
Key revenue drivers Primary expenses Key operating metrics Risks Etc.
Implications to Think About
Market Approach Why does your company deserve to be
valued at higher multiples compared to peers?
Income Approach Maximize value by maximizing cash flow,
income, and revenues in the years prior to sale
Asset Approach Maximize value with a strong, up-to-date
asset pool
Common Challenges to Valuation Unreported or underreported income Owners stubbornly focused on an
arbitrary specific price Unavailable or poorly compiled financial
statements When available, they are rarely audited
Try to Maximize Value
Report ALL revenue Focus on increasing sales Keep thorough and accurate financial
records Raise the public profile of your business Implement an aggressive marketing
strategy Streamline operations
Jettison unproductive assets, workers, and procedures
The Essential Best Practices
Be friendly and easy to work with Make it EASY for a potential buyer Provide requested information about your
business DO NOT be stubbornly focused on an
arbitrarily set price Streamline your operations Maximize sales and profitability
Next in the SYB Series:
Part 3: Preparing for a Sale