Exit Strategies Insights

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

Business Valuation Insights

Financial exit planning, Is your business ready?

I recently had a client looking to sell their medical supply business and retire. I worked with management to pull together all the documentation and financials needed, and conducted conduct a probable selling price analysis. With report in hand I met with our clients to review the results and plan a go-to-market strategy. Unfortunately, the probable selling price fell slightly short of what the client needed to retire (after taxes). We identified excessive inventory as one …

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Ken McCauley Joins Exit Strategies as Senior Valuation Analyst

Exit Strategies Group is pleased to announce that Ken McCauley, CPA, ABV, has joined us a Senior Business Appraiser in our North San Francisco Bay Area California office. Ken will provide a broad range of business valuation services for our clients. He has been appraising businesses since 2010, including wineries, medical and professional services, software, retail, restaurants, manufacturing, construction, and businesses in other sectors. Prior to joining Exit Strategies, Ken was a partner in AL Nella …

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Understanding Seller’s Discretionary Earnings

If you have acquired or sold a small company, or had one appraised, you’ve probably heard the term “Seller’s Discretionary Earnings”. Or you may be thinking “Earnings are discretionary? My earnings aren’t discretionary at all!” Let’s examine this often-misunderstood term, and how it compares to EBITDA, another common earnings measure. What is Seller’s Discretionary Earnings? Seller’s Discretionary Earnings (“SDE”) is a calculation of the total financial benefit that a single full time owner-operator would derive …

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Manage Working Capital to Increase Business Value

As you likely know, working capital equals current assets minus current liabilities. Companies that have a high level of cash tied up in current assets (primarily cash, accounts receivable, and inventory) without similar levels of current liabilities are not as attractive as those who tightly manage their working capital. Buyers are often leery of businesses that require high working capital to sales ratios because as sales grow the company must continually invest more cash in …

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One Business Appraiser that All Parties Know and Trust

Jointly retaining a single trusted business valuation expert in disputes over value is becoming increasingly common as owners seek ways to streamline the valuation process, protect their companies and control costs. Naming one appraiser in buy-sell agreements is also becoming more popular. In this slightly long-winded rant, I will discuss the pros and cons of using one appraiser that all parties know and trust, and explain why you should give serious consideration to this option. Where …

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Business Valuations Can Create Value, Not Just Report It!

I recently completed a valuation engagement for two shareholders of a California manufacturing company who were going through a buy-sell transaction. After the sale, the buying shareholder called to tell me how my valuation report gave him the confidence he needed to complete the purchase, take on debt, and revamp the company’s business plan. Besides making my day, his call made me think about why almost every business owner can benefit from a valuation. When …

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Why You Should Know the True Value of your Business

The most common time to know the value of your business is when businesses are sold and ownership changes hands. As an owner, you might be retiring from business due to failing health, divorce or other family changes and you want to know the value of your business to get a fair price. Another motive might be that you have to raise debt or equity financing to meet sudden cash flow requirements or expansion. In …

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The Skinny on Valuation Report Options

Users of valuation services should know the most common types of business valuation reports: Detailed, Summary and Calculation of Value reports.* Detailed and Summary Valuation Reports Detailed and Summary valuation reports can only result from a full valuation analysis, not a limited scope analysis. A Summary report covers the same topics as a Detailed report but in less detail. Both sufficiently document the facts, data and information relied upon and the assumptions and analyses made, …

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Protect your Trade Name and Protect your Business Value

From my experience as an M&A Broker, I can tell you that your company’s trade name will be a valuable asset to most prospective buyers of your business.  Your trade name, which identifies your company’s brand and distinguishes its reputation with customers and suppliers, is worth strengthening and protecting if you plan to sell your company some day. It may surprise you that the name of your business, even if it’s not officially registered, receives some …

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What are the current expectations for interest rates?

One of the important factors that effect business value is macroeconomic conditions which include interest rates and the cost of capital. Business owners who want to know what is going to happen to interest rates should be aware of new leadership at the Federal Reserve. On February 5, 2018, Jerome “Jay” H. Powell took the oath of office as the new Chairman of the Board of Governors of the Federal Reserve System, succeeding Janet Yellen. …

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