Value Enhancement Analysis

The three most important value elements of a business are 1) the earnings generated by the enterprise, 2) the likelihood the current cash flow will continue into the future, and 3) will the proceeds from the sale of the business provide for the income stream required by the buyer after the sale.

The earnings element speaks for itself. Superior returns, those above industry averages, will attract the most interest from highly qualified buyers.

The risk of the cash flow continuing after the sale will determine the premium or discount a buyer will place on those earnings.

If there is a value gap between what the business is worth to a serious and qualified buyer, and the cash required by the owner to meet his financial goals upon the sale of the business; we identify the weaknesses, make recommendations, then advise on an implementation strategy designed to fill the gap.

Our strategy for enhancing enterprise value is to reduce the perceived risk to a potential buyer, thus enhancing the return to the seller. We look at your business through the critical eyes of a strategic buyer to identify strengths, weaknesses, and synergistic opportunities; then we assist you in implementing your customized plan.

Although each business and industry has specific value drivers, which we identify and build upon, there are some generic value drivers that are characteristic of businesses that sell for a premium price:

A stable and motivated management team
Operating systems that improve and sustain cash flow
Effective financial controls
Operating profits at or above industry averages
Good and improving margins, profits and cash flow
A solid, diversified customer base
A facility appearance consistent with a successful enterprise
A realistic growth strategy

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How does your company measure up?

Over 70% of pending sale transactions either fail to materialize or result in downward price adjustments. In addition to such a high mortality rate, failing to properly prepare a company for sale often results in: a limited number of potential and qualified buyers which reduces the seller's leverage; winding up with an unattractive deal structure, poor integration, and the departure of key employees. Attracting a premium price from serious and qualified buyers depends on how well prepared your business is in meeting the buyer's criteria, and the quality of your M&A team.

Solid, profitable businesses attract more buyers and command premium prices. Marginal businesses do not. Unprofitable businesses often do not sell.

Position your business for a premium price by preparing ahead. As baby boomers begin selling their businesses over the next few years, the competition for buyers will dramatically increase. Your business CAN stand out if you start planning now.

Each day of planning and implementing can bring you one step closer to your dream. Contact us today for a complimentary discussion.