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How a Discount for Lack of Marketability (DLOM) is Determined
June 10, 2021 / 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 private companies …
Put Time into Planning Sale of Business
June 2, 2021 / in Exit Planning, Sell a Business / by Al Statz
Over my 19 year M&A advisory career, I have met many business owners who spent more time planning their children’s wedding, their 50th wedding anniversary, or even their fantasy football draft, than they spent planning for the sale of their business. According to the quarterly Market Pulse Report, we know that when it comes time to sell their business, less than half of all business owners plan ahead. That means that most owners wait for …
M&A Advisor Tip: Confidence in Numbers
June 2, 2021 / in Exit Planning, Sell a Business / by Al Statz
Most of our clients have CPA Compiled or Reviewed financial statements, and some go a step further with Audited statements. Reviewed financial statements are acceptable, and you can do even better with Audited statements a year or two before you sell. With validated financial accuracy, you increase buyer confidence, shorten due diligence, and help get your company sold. We’ve had buyers tell us they’ll bid a quarter to a half to a full turn more …
M&A Advisor Tip: Go ugly early
May 18, 2021 / in Sell a Business / by Al Statz
We have a common saying: “Go ugly early.” When you’re selling a business, put issues on the table right away. Whether you’ve just lost a customer, your backlog isn’t what it was, or you’re operating at capacity—be up front. Providing clarity around your business flaws serves two purposes. First, it makes the whole process more efficient. If customer concentration is a no-go issue for a buyer, let’s flush them out early before we’ve invested any …
Fair Market Value – what does it mean? Business Valuation Standards of Value Terminology
May 18, 2021 / in Business Valuation / by Louis Cionci
Fair Market Value is one of several standards of value terminology used in business valuations. The Fair Market Value (FMV) term is used by the IRS in estate and gift taxes, can be found in many buy-sell agreements, and is frequently the standard of value used in a business valuation report. Anyone who reads a business valuation report by an accredited professional will likely see the Standard of Value stated in the opening pages and …
Valuation of Intangible Assets
May 12, 2021 / in Business Valuation / by Victor Vazquez
As a follow-up to our posts “Profit from Intangible Assets in a Business Sale” and “Understanding the Value of Intangible Assets”, this post offers answers to the question, “How do you value intangible assets?” In one of these posts, we looked at a simple example for valuing the Bayer tradename associated with its sale of aspirin using a simple capitalized earnings approach to a likely royalty stream. While the valuation of intangible assets is the …
Exit Planning Pitfalls for Property Managers [#1 of the series]
May 12, 2021 / in Exit Planning / by Charles (Chip) Trimmier
Everyone knows the three most important things in real estate are location, location, and location. For property managers, it’s documentation, documentation, and documentation. Experienced property managers are all accustomed to continually documenting the relationship with tenants. Where they sometimes fall short is in maintaining their formal contractual relationship with property owners. That can become a problem when it’s time to transfer control of the business. As a former corporate lawyer, I feel compelled to give …
Ten Commandments of Successful Business Exits
May 10, 2021 / in Exit Planning, Sell a Business / by Louis Cionci
Business owners contemplating a sale may be asking the question: What are the most important principles to achieve a successful business exit? Listed below are ten practical directives to help you make better exit planning decisions and achieve a successful sale. I. I shall plan ahead. II. I shall not depend on miracles III. I shall prepare my business IV. I shall not wait for perfect timing V. I shall help buyers buy VI. I …
How to Buy a Small Tech Company
May 7, 2021 / in Acquire a Business / by Exit Strategies
There are thousands of small tech companies for sale at any time they are often websites that take 1 or 2 people to run. There are listed for sale on bizbuysell.com, Flippa.com and similar sites. They can be run from home. Sometimes they require a particular expertise but other times they can be managed by the owner and technical or time-consuming work can be done by contractors, often offshore. Some examples are Amazon reseller businesses, …
Market Pulse Survey – Why business owners are selling
May 4, 2021 / in Exit Planning, Sell a Business / by Al Statz
The following chart shows the reasons business owners decided to sell their businesses in 2020. As in the past, owner retirements led the way. These are the results from the Market Pulse Survey conducted in the 4th quarter of 2020. Each quarter, the M&A Source and IBBA (International Business Brokers Association), in partnership with Pepperdine University’s Private Capital Markets Project, publish the results of a survey of North American lower middle market M&A advisors and …
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