Once you become a Generational Equity client, the first phase of our proven M&A process is one of the most important: Our professional evaluation of your business. From our perspective, this is vital for a number of reasons:
Many business brokers skip this first step because it can be tedious, time-consuming and requires a team of valuation professionals who are skilled at their jobs. It is far easier to simply take a company to market directly and take the first offer that comes along.
Not at all. Let’s take this one bullet point at a time.
Firstly, recasting is vital. Most business owners legally suppress profits in order to pay as little income tax as possible at the end of the year. Many of you have hired gifted and talented accountants to help you do this, and it is perfectly legal and acceptable to do so. However, because you have been doing this for years, your company’s profitability is, in many cases, radically understated.
Recasting, which is an acceptable GAAP process, allows us to remove expenses not related to the ongoing operation of the company, such as owner perks, salaries of relatives who are not vital, bonuses, travel, excessive rents, etc. By doing so, we establish the TRUE profitability of the company historically and this forms the baseline we use for our five-year pro forma. Many business owners interested in selling their business are completely surprised at the difference recasting can make to the profit picture of their firm. If you skip this step, your financials could be very far off in the offering memorandum you create for buyers.
Secondly, we also use the evaluation to form the basis of the recommendations we eventually make to the business owner regarding how to enhance the value of the business going forward in the M&A process.
Let’s face it, there is no such thing as a “perfect” company. You may have a profitable, growing business but you may have issues that, to some buyers, may be concerns. Our team is extremely skilled in finding those areas and bringing them to your attention. Although, you may not like this part, it is just as vital as recasting.
If your company is not “buyer ready” today, our suggestions and guidance will help you get there. Keep in mind that our commitment to you does not end once our initial business valuation is completed. No, we are going to be by your side for at least five years, providing two no-cost business value updates during that time. This allows you put our value-enhancing strategies to work in your business and see how the value of your company is changing over time. It is a very critical output from our evaluation process!
Finally, our evaluation gives you an understanding of your business value range today so you can decide whether to sell your business immediately, or hold and grow your company for future sale. Now keep in mind that our value is an estimate based on our work and is only a guide to what the value might be.
Ultimately, the value of any business is what a willing and informed buyer will pay for it. Often your intangible assets (those off-balance-sheet items that are impossible to value) will determine if a buyer will pay a premium over our baseline valuation. Every buyer is unique, so some will value certain features of your business higher than other buyers because of the synergies they may see in your intangibles.
The business enterprise value is a starting point from where our deal makers begin and then look for optimal buyers willing to pay a premium for your business. Now, again, just like the value-enhancing suggestions we calculated for your business, you may not like our initial valuation number.
Because far too many business owners have no idea how to accurately assess the value of their companies – they simply are too close and too involved in the daily operations. Since many business owners have never bought (or sold) a company before, they have no idea of the nuances of determining the business enterprise value.
So, your initial reaction to our valuation estimate needs to be tempered, sober and prudent. Again, it is only a starting point in your M&A journey, a baseline number that our deal makers will certainly try to beat. The important thing is that it gives you a number to work with.
Without knowing your BEV, how can you even guess which offers to take when negotiating with buyers? You can’t and that is why so many sellers who don’t hire a professional M&A advisor end up leaving lots of cash on the table at close. And they usually don’t even know it!
The most important point is simply this: Starting your M&A process now will give you time to improve your business valuation so that when you are ready to exit, you can with confidence knowing you did all you could to determine what your company was worth before you sold it.
The first phase in our proven process is vital to start sooner rather than later. I have never heard a business owner lament over starting his/her exit process too soon. I have heard dozens over the years complain about waiting too long though. Don’t be one of those folks – take advantage of one of the strongest seller’s markets in ages.
And no matter what you do with your business, do not skip the most important first phase: The evaluation!
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2021 Generational Equity, LLC. All Rights Reserved.
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
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 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 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
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
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 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.
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
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
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
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
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 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
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
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
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
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
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
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
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.
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.
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 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
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
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