Exit Rich by Michelle Seiler Tucker

Author:Michelle Seiler Tucker
Language: eng
Format: epub
ISBN: 9781732510296
Publisher: An Inc. Original
Published: 2021-09-15T00:00:00+00:00

ENVIRONMENTAL ISSUES

If there are environmental issues that affect your business, you must let the buyer know. These could be health issues that affect employees, such as contaminated drinking water, or there could be waste disposal issues that involve necessary permits and inspections.

As you can see, this comprehensive list of needed information will uncover every detail that’s relevant to your business and determining its value. Obviously, you want to have all this information in hand well before you offer your business for sale, because it all contributes to pricing your company for maximum value at sale. Don’t worry if you can’t figure out how it all comes together to establish that figure: That’s what your M&A advisor or business broker is for.

There is no one size that fits all when determining what a business is worth. We certainly do not want to point fingers at any one profession. However, my sellers have told me horrific stories about what “outside professionals” claimed their business was worth. We have heard different formulas that make absolutely no sense, such as five times gross income. No one is going to pay you five times gross for your business. It does not make sense and will never meet the Buyer’s Sanity Check. We have also had sellers who were very upset because these same professionals charged them $15,000 to $20,000 to evaluate their business.

When sellers engage our firm to sell their business for the amount that these professionals have valued their business for, we must start from scratch and revalue the seller’s business to make sure the seller is getting the highest selling price possible. Our experience has shown that, in most cases, the valuation of the business provided to us was way too much—or, even worse, way too low.

We once worked with a physical therapy company that wanted to sell their business. The partners had paid their CPA $17,000 to value their business. He valued their business for approximately $600,000. Even though he was a CPA, he did not pull industry standards or business comps or back into the cash flow to ensure the business cash flows were enough to support a $600,000 asking price. In addition, he did not valuate the company operations.

When we take engagements, we don’t price businesses based on the valuation of third parties, nor do we base our valuation on what the seller wants for their business. We run the numbers, do projections via the discounted cash flow method, value intangible assets, pull industry standards, and pull business comps. We also look at all the other characteristics (the ST 6 P’s) of the business before pricing it.

Unfortunately, we did not come up with a price tag of $600,000. That number did not compute. They had only been in business for three years and were making a little over $100,000 a year, including add-backs. They were operating on three of the ST 6 P’s, not six. Upon completing our valuation, we told them that their business was worth $430,000. Needless to

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.