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Business Valuation Insights
Business Interruption 101
October 31, 2019 / in Business Strategy, Business Valuation / by Exit Strategies
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 …
California’s AB5 Law May Impact Small Business Values
October 2, 2019 / in Business Valuation, Exit Planning, Sell a Business / by Adam Wiskind
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 …
Ten Factors that Affect the Cost of a Business Valuation
September 25, 2019 / in Business Valuation / by Joe Orlando
In the world of pricing, there are simple models (e.g. cost plus a profit markup) and complex models (e.g. dynamic pricing based on real time supply and demand algorithms ). If you have ever purchased an airline ticket online, you’ve seen how a complex model makes prices impossible to decipher. Fortunately, we can offer greater transparency and consistency on business valuation pricing! Like most professional service pricing models, business valuation pricing is largely a function …
Understanding the Value of Intangible Assets
September 6, 2019 / in Business Valuation, Exit Planning / by Joe Orlando
As a follow-up to our recent post on profiting from intangible assets in a business sale, this post introduces intangible asset valuation. As our last post outlined, “intangible assets are identifiable, non-physical in nature. They are something you can describe, document … and, most importantly, transfer.” Once identified, there are several ways to value intangible assets. I’ll discuss a common approach called the “with and without” method, using a simple and recognizable case study. Let’s …
How a Discount for Lack of Marketability (DLOM) is Determined
July 14, 2019 / in Business Valuation / by Joe Orlando
In a prior chapter of my professional career, I focused on equity security valuations for tax and financial reporting purposes. I led a team of valuation experts who determined the strike price of options granted to employees of up and coming technology companies on their way to IPO. For most, that strike price represents the basis (or cost) of an employee’s future wealth (and tax bill). In simple terms, the valuation of these shares in …
Joe Orlando Joins Exit Strategies; Portland Office Open
March 31, 2019 / in Business Valuation, News / by Al Statz
Exit Strategies Group, Inc. (ESGI) is pleased to announce that Joe Orlando, ASA, has joined us as Vice President of Valuation Services. Joe will perform the full range of business valuation services for our clients and provide technical leadership to our team of accredited valuation experts. Over the past 15 years Joe has valued hundreds of early to late stage companies in various industries. Some of his focus areas have been technology (software, ecommerce and …
Financial exit planning, Is your business ready?
March 13, 2019 / in Business Valuation, Exit Planning, Sell a Business / by Mike Lyman
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 …
Ken McCauley Joins Exit Strategies as Senior Valuation Analyst
February 20, 2019 / in Business Valuation, News / by Al Statz
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 …
Understanding Seller’s Discretionary Earnings
February 15, 2019 / in Business Valuation / by Exit Strategies
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 …
Manage Working Capital to Increase Business Value
February 8, 2019 / in Business Valuation, Exit Planning / by Jim Leonhard
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 …