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

Can I Determine the Market Value of my Business Before Going to Market?

January 16, 2018

The decision to sell your business should not be taken lightly. Before you respond to the next inquiry from an unknown buyer and potentially turn your business upside down, make sure you have a thorough understanding of your company's value.....

» see this post    » all posts


Another Successful Semester: Kaulkin Ginsbergs Fall 2017 Internship Highlights

January 11, 2018

Every spring, summer, and fall, the Kaulkin Ginsberg team selects highly qualified students in the Greater DC Metro Area to join our team as an intern for the duration of the semester. We strive to create a program that not only benefits our firm, but also provides unique opportunities for students, and this fall was no exception.....

» see this post    » all posts


ARM Industry Benchmark: Five Key Ratios Explained

January 4, 2018

Far too often, owners struggle to assess opportunities for growth or investment because they lack the information needed to make informed, strategic decisions on how best to position their business for long-term success. As you develop 2018 goals, Kaulkin Ginsberg has identified, and defined, five key benchmark ratios to assess your company's 2017 performance.....

» see this post    » all posts


RECENT ANNOUNCEMENTS

Mike Ginsberg to speak at RMA's 2018 Annual Conference

January 9, 2018

Mike Ginsberg, president and CEO of Kaulkin Ginsberg, will be joining a panel of industry experts at RMA's 2018 Annual conference to discuss M&A and financing in the ARM industry.....

» see more




Kaulkin Ginsberg Company announces the addition of the U.S. federal government market segment on KG Prime.

December 5, 2017

As part of Kaulkin Ginsberg expanding market intelligence series on KG Prime, their market research team recently retrieved and examined data regarding the US federal government market segment.....

» see more




Kaulkin Ginsberg Company Teams up with Topline Valuation Group to Offer a New Valuation Service

November 21, 2017

Kaulkin Ginsberg, in conjunction with its sister company Topline Valuation Group, announces the release of a product that provides ARM company owners with an in-depth assessment of their company's strategic opportunities.....

» see more