Establishing Value Before Going to Market

February 1st, 2017

All too often an owner decides he or she is ready to sell the business, but doesn’t know how much it’s truly worth. Failing to establish value from the start may result in the disappointing and uncomfortable situation of terminating your advisor because he or she couldn’t get you the value you wanted (or he or she promised) for the business.

The process of selling your business can be very stressful, and may even become a huge distraction for you and your management team. We don’t recommend going through this process unless you’re relatively comfortable with the value you can receive from the sale of your business. As such, it’s important that you and your advisor are on the same page when it comes to the value. Your advisor should recommend one of two approaches to you in order to provide guidance on value before moving forward with selling your business: formal business valuation and market value advisory assessment. If he or she doesn’t, then you may want to reconsider your selection of an advisor.

Valuation Discussion Approaches:

  1. Formal business valuations are in-depth analyses of a company that are usually performed by a certified public accountant, certified valuation analyst, or some other valuation-accredited individual, and must follow strict fair market valuation guidelines in accordance with the IRS.
  2. Market value advisory assessments can be similar to a formal business valuations in the way that they provide a valuation range, but they aren’t usually as in-depth as formal business valuations, the information is meant for internal discussion purposes only, and isn’t an official document.

While formal business valuations are the more costly of the two options, they also tend to be more revealing since they’re official documents. If you have a more complex business structure with multiple segments under the umbrella of a holding company, then it may be best to go with a formal business valuation. Alternatively, if you have a fairly straight forward business structure and only want to understand value, then a market value advisory assessment may be sufficient, but, once again, this is not an official document.

Before anyone starts thinking that this is just an added fee for an advisor, we recommend you consider the fact that the information gained from this process will likely be used in the development of your company’s transaction materials. In fact, your advisor may even offer to offset some of the initial costs associated with starting the transaction process since they have already started analyzing your business through one of the two aforementioned valuation discussion approaches. Therefore, a smaller upfront investment to determine an official and thorough value could actually save you a lot of time, money, and overall anxiety.

If you’re interested in speaking confidentially with a member of our team about valuing and/or selling your business, just send us an email at hq@kaulkin.com.

Comments are closed.

LATEST BLOGS

Options Abound for Sellers of Lower Middle Market Businesses

July 18, 2017

There is no shortage of buyers for a selling company in the lower end of the middle market. Sorting through all prospective buyer candidates to find the very best for your business is a challenge that any owner shouldnt take lightly.....

» see this post    » all posts


Changing with the Times: Cybersecurity in Collection

July 13, 2017

Collection agencies have a lot of valuable information that hackers are looking to get their hands on. Are you protected?....

» see this post    » all posts


Is Your Business Prepared for a Sale?

July 11, 2017

Preparing a business for a potential sale is not only a defensive move that an owner can take, but it is also prudent to business. Here are a few ways to make sure you're prepared.....

» see this post    » all posts


RECENT ANNOUNCEMENTS

Kaulkin Ginsberg Moves Its Market Intelligence Online

June 8, 2017

Kaulkin Ginsberg is changing the way busy owners, executives, and senior leaders access strategic market intelligence with the launch of KG Prime. KG Prime is a comprehensive and easy to use web-based service that provides users with economic, market segment, and other forms of strategic research.....

» see more




AXIAL FORUM - Publishes "Succession Planning - A Critical Missing Element in Many Family-Owned Businesses"

June 7, 2017

AXIAL FORUM, a web-based strategic mediator for the M&A industry, recently published an article succession planning by Topline Valuation Group. This article was co-authored by members of the Topline Valuation Group and Kaulkin Ginsberg team....

» see more




ACA of Texas Publishes "Three Critical Healthcare Industry Trends for Outsourced Business Services" in its Winter 2017 Magazine

March 16, 2017

The ACA of Texas Publishes "Three Critical Healthcare Industry Trends for Outsourced Business Services" by Kaulkin Ginsberg in its Winter 2017 Magazine. Kaulkin Ginsberg details its belief that the growth in patient lending and financing programs, clinical integration networks, and physician quality reporting systems for the Centers for Medicare and Medicaid Services (CMS) could have profound effects on companies focused on servicing healthcare providers in 2017 and beyond.....

» see more