How much is your business worth?
- June 11, 2017
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Don’t be caught unprepared!
In any negotiation you want to achieve a win-win, right!
If you own a sizeable business, you’ve simply got to be prepared well BEFORE you sell or exit your business.
- You might get lucky and have a cashed-up buyer knock on your door with an offer that is too good to be true. That happened a couple of years ago for a client where I was leading their turnaround. An astonishing 7 times earnings!
- You might need to raise capital from private sources. Discussions will likely lead to either an equity or debt investment, from the investor.
- You might be sailing along in your business with a valuation in mind that is totally wrong. Explain that one to your partner at exit time after she has made retirement arrangements based on this incorrect value.
I have seen plenty of instances of business owners not having a good handle on the value of their business and then being caught with their pants down.
Here is a recent valuation prepared for a client about to raise capital who came to the table very prepared.
This illustration depicts the 4 main techniques we employ. The result is a fair and objective representation of the business value.
Like any deal in life, you want to aim for a win-win – the sale of your business is no different. You want to make sure it is a win-win based on a credible and defensible methodology.