Business owners and shareholders cannot adequately plan for a sale or merger unless they understand the price that the business will bring in a fair transaction.  In order to know this price, an appropriate valuation is required.

The right valuation will:

  1. Clearly indicate the value and value drivers of the business, arming sellers with the tools necessary to negotiate the best possible price.
  2. Identify how to support a higher value prior to the sale by adjusting for related-party transactions and/or expenses (e.g., owners’ compensation, related-party leases, and other perks).
  3. Help determine the optimal time for a sale by gaining an understanding of general M&A trends and specific trends in your industry.
  4. Show expected future wealth and returns under multiple scenarios: hold for now, sell all or some, recapitalize with debt or new equity partners, bring in a strategic partner, invest new capital for growth, etc.
  5. Help with retirement planning by structuring a transaction to minimize estate taxes.
  6. Help determine optimal transaction terms, lowering risk and improving returns.
  7. Show you how your business compares to your peers. This will help identify areas to increase the value of the business.
  8. Show the “intrinsic value” of the business under current ownership and the “fair market value” of the business to others.
  9. Assess and demonstrate synergies to a specific-buyer, supporting that they could pay a price above the fair market value, and still earn above-market expected returns.
  10. Help identify the segments of your business that are most valuable, allowing management to focus on those areas that will most impact the overall business’ value.

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