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The Importance of Realistic Valuation Expectations When Selling a Company

By Generational Equity

Accurate Valuation

One of the toughest challenges you will face if you market your company without professional guidance is that, most likely, you will have no idea what your company is worth. This issue becomes very complicated at two ends of the spectrum:

  • You may have valuation expectations that are far too low
  • You may have valuation expectations that are far too high

In the first scenario, you undervalue your business and take the first offer that comes your way. Then, to compound matters, since you have no experience structuring deals, you will probably accept a deal structure that favors the buyer over your needs. You get hit with a double whammy!

With the second situation, since your value expectations are far above what the market will pay, you walk away from what may be some really good deals. To make matters worse, your pride and ego may get wounded by what you consider “low ball” offers and you simply stop negotiating with someone who might be a prime buyer for your business.

Under either scenario you lose!

The Solution to Unrealistic Valuation Expectations? Hire an Experienced M&A Advisor

Now, many of you reading this subtitle are now muttering, “Why should I hire someone to help me sell my business? I am an experienced, skilled business owner with lots of years negotiating contracts with vendors and clients. Why do I need any help with my business sale?”

The reality is that even though you are highly skilled in running and successfully operating a business, you most likely have no experience in selling a company. Most business owners only do it once in their lifetime. That is not how you want to learn how to close a deal for your company, given that you’ll most likely fall into one of the two situations outlined above.

That is part of the reason that Generational Equity’s exit planning process works so effectively.  The first step we undertake is a full and thorough valuation of our client’s business. From this comes our initial estimate of value (the business enterprise value - BEV). This forms the baseline of what you can expect the market will bear for your business.  

However, keep in mind that our BEV is really an economic value based purely on financial modeling. Offers may come in above or below based on a variety of factors including your company’s hidden, non-balance sheet, intangible assets (those enhance the BEV).

Conversely, risks that buyers see in your business model (owner dependence, customer concentration, weak financial reporting, etc.) are items which can negatively impact your BEV.

Ultimately, the market will tell you what your company is worth; but having our baseline value is a real plus because you have a range that you can expect the buyers to be in when they make offers.

Growing The Value of Your Company

One of the real benefits of the Generational Equity business valuation process is that we also provide you with specific ideas on how you can enhance your company’s value and salability. Our relationship with our clients is long-term. In fact, we provide two updates of value over a 5-year period at no additional cost.  

Our goal is to help every client maximize his/her exit point in terms of value obtained from the buyer. Since few companies are “buyer ready” from the moment we start our process, our strategies are designed to help our clients get on the path to improving their valuation. 

These are ideas that you won’t come up with if you try to market your company on your own (or even if you hire your cousin Larry who has a real estate license and recently retired). 

Buyers hate risk, and the steps you can take prior to going to market (or even while actively in the market) to reduce perceived risk in your offer will only help you obtain an optimal deal.

But don’t just take my word for it, listen to what a few of our clients say about the benefits of hiring Generational Equity:

The common thread you see in these unique stories is that the Generational Equity exit journey worked and having our experience on their side was a real benefit. Ultimately, we helped each owner achieve an optimal deal.

Certainly you can do it without us. Companies sell all the time. But do you really want to risk your financial legacy while learning how to sell a company on your own? I know I wouldn’t.

To learn more about our company valuation and deal-making services and how they can benefit you and your family, use the following links:

By Carl Doerksen, Director of Corporate Development at Generational Equity.

© 2021 Generational Equity, LLC. All Rights Reserved.

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We had the pleasure of working with Mr. Ahmad Behjati Managing Director, M&A, for Generational Equity during our acquisition of Papa's Dodge in late 2021. Generational Equity and Mr. Behjati represented and marketed Papa’s Dodge. As our primary contact, Mr. Behjati was professional in every facet of this acquisition process, conveying valuable advice most times and assisting us in every step of the process.
Rick Greene of Dobbs Equity Partners LLC
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 would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.
Bil MacLeslie, CEO, ipHouse
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 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
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
Thanks to you, the entire GE team and especially Michael Goss for driving a great valuation, coaching me and driving the process across the finish line. Please let me know if there is anything I can do to support GE going forward. P.S. Given my experience with GE I felt comfortable enough to sign up with Generation Wealth Advisors!
Tom Currier, Former President & CEO, Rackmount Solutions
I decided to attend the conference and hopefully receive some guidance on how to structure an exit plan of my business. Upon arriving at the conference, I was so impressed with the presentation given by Generational Equity that I set a future appointment that week to discuss the possibility of selling my business with their Senior Managing Director David Robinson.
JoAnn Ellis, Owner of Fondren 5 Star Kennels
The most important contribution I think Ahmad made was with his personality and work ethic. He is sincere, efficient, and very hard working. He was available to me at all times, whether it was for specific detail of the negotiation or just to talk through the bigger picture. He listened, advised, and recommended, but never forced his idea or opinions. In the time we worked together, he became a valued colleague and also a friend.
Salvo Stoch, Founder and CEO of Sleeping Partners
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.
Ralph Noblin, President of Noblin & Associates
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
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.
Generational Equity’s assistance was invaluable in compiling and marketing our business.
Bil MacLeslie, CEO, ipHouse
I wanted to take this opportunity to thank you for all that you have done for us. Not only did you take care of all the aspects of the sale but took extra care to make sure we knew what it looked like every step of the way. I will definitely recommend your company to anyone that is in a position to or looking to exit their business.
Shane and Johanna Kline, Owners of Vision Upfitters
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
Through the sale process, Generational brought in several interested buyers and we closed in about 6 months. I am so glad I accepted that invitation to the conference and could not be happier with the whole process. The team at Generational coupled with their knowledge and guidance was so valuable that in the end, I know I could never have done this on my own!
JoAnn Ellis, Owner of Fondren 5 Star Kennels
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 thank you Eric and Generational Equity making our dream come true.
Larry Moore, Owner, A Company Portable Restrooms
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
We were represented by Michael Goss with Generational. The due diligence was grueling and exhausting, but Michael propped us up and kept us motivated throughout the process. Debi and I continued to ask each other how we could possibly make it through this process without the assistance of Michael. Michael's professionalism and knowledge is absolutely amazing, and we are so blessed to have had him by our side as we made our future dreams come true.
Bob and Debi Lee, Owners of BL Technology, Inc and BL Tl Services, LLC
The professionals at Generational Equity then helped develop a roadmap for enhancing the value of the firm and an evaluation report. This was completed by June 14, 2021. We then developed the Confidential Information Memorandum and put Taylor Studios, Inc. on the market by July.
Generational Equity’s professional staff helped me every step of the way. Their network and professionals are the only reason I sold my company this quickly. For me this is a once in a lifetime sale and I was unfamiliar with the process. I was able to lean on them with questions and concerns.
Betty L. Brennan, President, Taylor Studios
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
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.
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).
Bil MacLeslie, CEO, ipHouse
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
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
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.
After attending a conference with GE, I decided that the value they bring would be worth the expense and as soon as I started working with them, I realized that was the right decision. When we started to get LOIs, Fred Zweifel took the lead on the communication and supported negotiations throughout the process, which got tricky as we moved forward. I learned that it can be common for companies to make a great offer then work to erode that price with their discoveries, but Fred and the GE team kept that from happening.
Caroline Connelly, CEO, OptoTest
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