Exit Strategies Insights

Industry insights, knowledge base and announcements for business owners and professional advisors

Business Valuation Insights

Gifting Window for 2020 May Be Closing

With a Global pandemic and prospects of a sustained recession with double digit unemployment coupled with West Coast wildfires and East Coast hurricanes, I would say that everyone in these United States is looking forward to ringing in the New Year on January 1st. But before the ball drops on a socially distanced crowd in Time Square, you should think about other changes that may occur as we put 2020 in our rear-view mirrors. Specifically …

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Winery Valuation 101

It was either Churchill or Napoleon who said that “in victory you deserve champagne, in defeat you need it.” In a post-COVID world, consumers certainly haven’t admitted defeat but they’ve taken to wine to deal with the “next” normal. Case in point; wine sales (along with beer, hard seltzer and distilled spirits) are up…big. Whether you are a producer making an Estate Pinot Noir from grapes on your Russian River vineyard or a consumer searching …

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Exit Strategies Adds Machinery & Equipment Appraisal Services

Exit Strategies Group, Inc. (ESGI) is pleased to announce that we are expanding our valuation services offering to include Machinery and Equipment Appraisals, also referred to as asset appraisals. Asset appraisals can be an adjunct to a business valuation, or provided as a stand-alone service. Adam Wiskind, CBI, CMEA will be leading this practice out of our San Francisco Bay Area (Sonoma County) office. Our appraisers are Certified Machinery & Equipment Appraisers (CMEA) through the …

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Valuing a Business in the Time of COVID-19

Business owners and investors alike are asking themselves the same questions in the current COVID-19 environment.  Are there opportunities in downturns? If so, when do you know when buy and sell? What are my illiquid assets worth? A former boss and one of the best bond traders I’ve ever met frequently used a popular trader’s phrase that predicting when a market will bottom and turn is “like trying to catch a falling knife.” A recent article revisited …

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Valuing a Business in Bankruptcy

According to data collected by the U.S. Bankruptcy Courts, business bankruptcies declined from 60,750 (or 4% of total filings) in 2009, just after the 2008 financial meltdown to approximately 22,750 in 2019 (or approximately 3%).[1]  With overwhelming challenges ahead as a result of the Coronavirus Pandemic, the question is not if these filings will go up over the next 12 months but by how much. Before I dig into valuing a business in bankruptcy, let’s …

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Company Size Matters in Business Valuation

According to well-known business valuation authority Dr. Shannon Pratt in his book The Market Approach to Valuing Businesses, “smaller companies in most industries tend to sell at lower multiples of most financial variables than larger companies in the same industry. This conclusion, reached from analysis of market data, is consistent with income approach (cost of capital) research, which shows that smaller companies have higher costs of capital (higher discount rates) than larger companies. Higher discount …

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Secrets to Business Valuation – a Lesson from Curly

Remember that scene from the 1991 movie City Slickers where Curly (Jack Palance) shares the secret to life with Mitch (Billy Crystal) shortly before he dies? Curly holds up his index finger and says to Mitch that the secret to life is to figure out his one thing and then stay with it. Channeling Curly today, I will share with you the three things that determine the value of any operating company, with rare exception. …

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How Discounts for Lack of Control are Determined

I recently penned a summary on valuation discounts for lack of marketability. As a follow-up, this post is about the other common valuation discount, the discount for lack of control (DLOC), which is often used when valuing minority interests in operating businesses. In the business valuation context, control refers to the ability to manage or control a business. A controlling shareholder enjoys many benefits that are not enjoyed by minority interest holders. Minority interests are …

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Business Interruption 101

If you are reading this blog post from the Left Coast today, you know all too well the front page pictures and stories on the wildfires affecting Northern and Southern California in the past few weeks. The devastation is unimaginable. As I write this, the Kincade Fire in Sonoma County (just north of our Petaluma office) is 60% contained and 76,825 acres have burned. In local terms, that is about the size of San Francisco …

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California’s AB5 Law May Impact Small Business Values

Assembly Bill 5 (AB5), signed into law last month by governor Gavin Newsom, will impact the valuation of many small businesses in California that have grown to depend on independent contractors.  For impacted owners intending to sell in the near term, this new law may require a change of plan. The new law, which goes into effect on January 1, 2020, creates an explicit three-part test for whether a worker can be classified as an independent …

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