At one time or other, almost every business owner wonders what his/her business is really worth. While ultimately, it can be said that a business is worth what someone is willing to sell it for and what the buyer is willing to pay, there is considerable science and knowledge to the art of valuing a business.
That was the topic of a recent seminar, hosted by The Family Business Association and Cape & Plymouth Business, on the topic of business valuation. The seminar was aimed at family business owners and small business owners, sole proprietors and entrepreneurs looking to understand how to estimate their business.
The afternoon began with people having a number of questions about how to put a dollar value on a business, but by the end of the presentation the audience left with some very valuable information.
Companies presenting at the seminar included ROCG Consulting, Murphy Business, Blackstone Management, Delphi Valuation Advisors, Dunn Rush & Co. LLC, and Partridge Snow & Hahn LLP. The event’s Master of Ceremonies was Warren Rutherford, Executive Suite.
A number of attendees had never gone through a formal process of having a business valued, but Bob Viamari, Publisher of Cape & Plymouth Business, got the discussion rolling with the news that he had done precisely that.
Throughout the event, there was a lively discussion around valuation. One surprising revelation from a broker was the story of a manufacturing facility with annual sales of nearly $4 million which was valued at only $400,000. In this particular case, the seemingly low value was based on what profits were left over after the cost of doing business.
The panelists said that it is critical for a business owner to analyze strengths and weaknesses in a business. For example, does a business depend too much on one key person? Is there a disproportionate “client dependency,” meaning that too much revenue comes from one source? Those could be considered as weaknesses, whereas certain strengths position a business more favorably for succession. These could include a strong management team, low employee turnover, audited financial statements, a repeat client base and a strong positive cash flow.
Advice that came from the panel to business owners also included: be prepared to disclose a great deal of information. Also, plan for it taking anywhere from 2 to 5 years for a company seeking to increase its value for a better sale, and know that a sale process can take more than a year. The seminar comes at a time when statistics show that 8.4 million baby boomers are ready to transfer ownership of their businesses.
“We are very pleased to have partnered with Cape & Plymouth Business on this forum,” said Ed Tarlow, President of the Family Business Association of MA. “We look forward to future collaboration.” To learn more about Cape & Plymouth Business, please visit www.capeplymouthbusiness.com. TO learn more about The Family Business Association of MA, go to www.fbaedu.com.
- April 9, 2015
- no comments.