When considering the value of hiring an M&A advisor to support the sale of your business, there are two ways of looking at this question and both are equally important:
These two interrelated questions need to be weighed closely by any business owner who is even considering finding a buyer without professional advice and guidance.
Let’s look at the first question: How much is your time worth? Right now, you are most likely spending 100% of your working hours managing and leading your company. Most of your time is focused on making major decisions that affect your company’s growth and future. You obviously pay yourself a salary and maybe even a bonus now and then.
But that is not the real value of your time.
Consider this: It will take up to 1,000 hours of your time over a 9- to 15-month period to close a deal with a buyer. That is 1,000 hours taken away from running your company.
In far too many cases, we see business owners neglect operations to negotiate with buyers only for the transaction to fall apart at the 11th hour because the company didn’t reach its projected numbers. Even a 10% deviation from what you tell buyers your numbers will be at close will probably cause them to shave off at least that much from their offer (usually more). It also will most likely open a Pandora’s Box of questions about owner dependence and scuttle the deal.
This reality makes your time worth far more than the hourly wage you would pay yourself in those 1,000 hours of negotiating your transaction with buyers.
Then there’s the question of making sure you get a premium for your business. How do you maximize your business’ value?
Ask yourself: How many companies have you successfully sold in your career? If you are like most business owners, you will only sell a company once in your life, and most buyers are experienced. Do you want to learn on the job about how to close a deal with a savvy buyer?
More importantly, do you know how to successfully negotiate a premium above book value for your company? Most buyers will simply look at the value of the assets on your balance sheet and use that as the starting point of negotiations. If you fall for that trap, you are already in danger.
In most cases, the true value of your company is in its future earnings, not its fully depreciated assets on the balance sheet. But do you know how to calculate that, much less negotiate that with an experienced buyer? Probably not.
This is not to say that hundreds of businesses are sold every year without M&A advisors. However, statistics show that if you want a premium, hiring a professional firm is key.
The good news is that Generational Equity, the leading M&A advisory firm for companies in the lower middle market (companies valued below $100 million) is here to provide you with our M&A services. Our deal teams have extensive experience in working with businesses across all industries and are here to guide you through the most significant event in your professional life – exiting your business.
And no matter what, don’t undervalue the value of having a professional M&A firm by your side!
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2021 Generational Equity, LLC. All Rights Reserved.
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.Andy Graham, Vice President, Modern Heating & Plumbing
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.Pete L.
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”Karen S. Williams, CFO, BW Manufacturing
Dear Chris and Andre, I just wanted to say thanks for all your help. Even though this process was not an easy one, it was comforting to know that I had a capable team standing beside me. You made me feel like we were almost your only client or at least the most important one. Thanks again, and I will recommend your service in the future.Shenille Engelhart, Owner – CLS Technology
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.Jay Dinnison, Owner of Sharpe Mixers
T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.Bryan D. Horn, Owner, Over Under Clothing
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.Larry Moore, Owner, A Company Portable Restrooms
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.Michael J Polarek, President, Paragon Packaging
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!Eric Erlandson, Owner, Action Fastenings, Inc.
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!Andy Graham, Vice President, Modern Heating & Plumbing
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.Michael J Polarek, President, Paragon Packaging
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.Robert Evans, President and CEO of Mealtracker Dietary Software
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.Karen S. Williams, CFO, BW Manufacturing
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.Jay Dinnison, Owner of Sharpe Mixers
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.Robert Evans, President and CEO of Mealtracker Dietary Software
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Terry D. Wickman, President, Keytroller
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