Recently, you made the biggest and most difficult decision in your career; you decided to exit your business. More than that, you decided to sell to a professional business buyer.
We understand this probably wasn’t an easy choice. You might have entertained the idea of passing your company to your children or trusted employees. But, as our team at Generational Equity makes clear at our executive conferences, the best way to secure the long-term legacy of your business (and your financial future) is selling to a committed buyer who can take your company to the next level.
But, now you’ve made that tough decision, it’s time to establish your true business valuation and growth potential. Of course, you want to attract the maximum bid for the hard work, time and money you put into your company. But, achieving that optimal return doesn’t happen overnight.
That’s why we recommend your first step is to recast your company’s financials. Like most business owners, you may have under-reported earnings to reduce taxes over the years. This is perfectly legal and par for the course. But when the time comes to exit, this means you might misjudge the true value of your company. By recasting financial statements, you show buyers the true profitability of your business.
In practice, this is where an expert will cast a keen eye over your company’s financials in recent years to reinsert any earnings or expenses along the way. This will help establish your true business value. Don’t confuse this for manipulating your finances to mislead potential buyers – their detailed due diligence process will uncover any attempts at this.
Instead, recasting will reexamine your finances to provide an accurate and promising picture to buyers. Don’t forget – they are interested in your business’s potential growth under their direction. So, it is important to ensure you aren’t selling this short by recasting (normalizing) your financial statements.
Let’s apply this approach to a company’s EBITDA (earnings before interest, taxes, depreciation and amortization). As we have highlighted in past pieces, EBITDA is used by buyers as a gauge of business worth. Using this number allows them to compare several investment opportunities and determine which is the most promising.
Many aspects included in EBITDA can be recast for a more accurate picture of your company’s value. These include:
This is just a small sample of the financials you should analyze and recast to establish the true value of your business. Without this, you risk undervaluing or overvaluing your business when heading into market – either way, you won’t get the price you deserve for your dedication to your enterprise. Recasting your statements will take some time and effort (especially if you don’t use the guidance of a professional M&A advisor), but this is time well spent to ensure a precise valuation.
It is important to seek the support of a professional M&A firm to get an accurate company valuation. This is where our skilled advisors at Generational Equity can help. Not only will we provide a comprehensive account of what price your business would command in market, but we’ll also discuss techniques to increase that value over time AND place your company in front of the right buyers.
If you’d like to learn more about the importance of recasting and how our team values a company, you should attend one of our executive conferences. These are completely complimentary (apart from a few short hours of your time) and provide a detailed analysis of the M&A process, giving you the perfect launching pad to confidently exit your business.
Find out when we’re in your area and together we’ll create a legacy that will last for generations.
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
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 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 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
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 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
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
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.
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
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
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
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
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 would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
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
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
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
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
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
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
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.
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
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.
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.
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