What is my business worth?
Business are usually valued as a going concern where under this premise it is assumed that all the business assets are considered as a mass assemblage and as part of an income producing business enterprise; contemplating the mutually synergistic relationships of the business’ tangible assets to the intangible assets. Tangible assets are physical assets of the business enterprise whose intrinsic values are readily definable and quantifiable such as real estate, vehicles, inventory, furniture and equipment. Intangible assets are non-physical assets where intrinsic value may not be readily definable. Goodwill is defined as an intangible asset arising as a result of name, reputation, customer loyalty, location, products, and similar factors not separately identified. While the valuation of tangible assets can be a fairly straightforward matter, the valuation of the intangibles or goodwill of the business, or “going concern value” can be more complicated and largely depends on the income producing capacity of the assets (earnings). Before entering any sale process, using some basic information such financial statements, we consult with you as to the likely valuation of the business so that you can make informed decisions regarding a potential sale or planning for the future of the business.
What are the advantages of your services?
The issue of whether a business owner will have professional representation is faced by all owners considering a sale of their business as they weigh the value of professional representation versus the “cost”. In transactions that are self-represented, the owner will typically retain their attorney or accountant to structure the transaction and negotiate on their behalf. Some of these transactions are concluded successfully for reasonable value, but many do not receive fair value and they sometimes don’t even realize it. The difficulty encountered in these transactions is often the result of it being the owner’s first attempt at the sale of a business, and the fact that their attorney or accountant may have limited experience in business sales. We certainly don’t want to imply that your advisers are not necessary to a transaction as you would need their counsel and their particular expertise. Yet most major companies and individuals buying businesses today have bought businesses before and in the case of the larger acquisition companies, employ whole departments of specialists that transact businesses every day. This places you and your advisers at a great disadvantage when trying to negotiate a successful sale with them. Countering such buying sophistication requires not only an in-depth knowledge as to where the value of a business comes from, but also how to negotiate with buyers to translate this into a mutually agreeable purchase price. We see many instances where an inexperienced seller will try to “hammer out” an agreeable purchase price by pushing the buyer to raise their price without regard to their expected cash flow. The buyer would almost never produce an offer that was agreeable in these instances, because the sellers and their advisers simply did not know how to address the business plan, cash flow, or continuing relationships to the buyer’s satisfaction. We believe the best way to ensure that you consummate a successful transaction is to “level the playing field” so to speak by hiring someone experienced in the structure and negotiation of business sales. Professional representation will ensure that your interests are served and that you receive a fair price for the business you’ve worked so hard to build. When considering the value of this service versus the cost, we have found it to be a rare occurrence when professional representation results in a net decrease in proceeds versus a seller represented sale.
What do you charge for your services?
Very similar to real estate professionals, we receive a professional fee in the form of a percentage of the total sale price negotiated on your behalf, which would typically include any amounts received in the form of cash, notes, stock and so on. Our percentage is also very similar to real estate transactions, which is much less than many investment banking fees that can be as high as 10%. It is strictly a contingency fee so we earn it only if we find an acceptable buyer, procure an agreeable offer, and the transaction is concluded successfully. The fee is paid at the closing as part of the settlement of the transaction.
How long does the whole process take?
We believe the sale of a business is a process that is best done carefully and with proper planning and preparation, but we can move very quickly through the process if necessary. An aggressive time frame would be one where we would formulate a valuation and marketing package within a months time, market the business and negotiate with buyers over the next couple months, and after a letter of intent is accepted, another 2-3 months for due diligence and closing documents.