Business Valuation | Strategic Endeavors LLC

Now look at your tax returns and financial statements. Do they reflect the value you identified above?

If your business is like most, your physical capital has been depreciated at the maximum accelerated rates permitted by the tax code. Investments in human and technological capital, advertising and marketing have been expensed against income. Customer and supplier relationships, trade name, brand and reputation are no where to be found.

It is because of this disconnect that you do not want to use your existing financial records to communicate the value of your business to a potential buyer.

Balance sheets need to be normalized to reflect the true market value of the tangible assets. Income statements need to be recast to reflect the true economic earning capacity of the business as opposed to the income that you showed the tax man. Goodwill needs to be identified to capture the value of intangibles that are not identified by traditional accounting.

The fact is, experienced buyers expect to see adjusted financials that are clearly documented and footnoted to explain the true economic value of your enterprise. Traditional financials just aren't up to the task. This isn't fancy accounting. It's common sense.

Now some people will tell you that your company is worth some multiple of sales or EBIT or EBITDA (the multiple being called a rule of thumb).

Do you really believe that such a formula can capture all the uniqueness and inherent value of the business you have created?

Suppose your sales are more profitable than the average firm's sales in your industry.
Or perhaps your earnings are spread over a more diverse customer base?
Or you have a unique product or process with competitive advantages that mean the earnings are much less risky or more likely to grow?

The truth is that rules of thumb are approximations that undervalue good businesses and overvalue poor ones. They are useful as a sanity check, but not adequate to go to market or determine a price for your specific business.

The biggest risk a business owner can take is to go to market without a professional evaluation to determine what his/her company is really worth. Not having a good understanding of value shifts control and leverage to the buyer, with the seller most likely leaving money on the table.

We Have a Better Plan

At Strategic Endeavors our focus is always about getting the maximum value for your business enterprise. We consider the unique attributes of your business, sophisticated financial concepts used in the mergers and acquisitions field, leverage and funding available in the private capital markets, and tax and other structuring issues that can save you huge amounts of taxes that would otherwise go to your silent partner (Uncle Sam). We call it our professional Market Pricing Analysis^©.

Our Market Pricing Analysis^© starts with a face to face meeting. We sit down with you to identify the information necessary to uncover the hidden value in your business. Then we add qualitative information that a typical business appraiser would use and combine this with market research and our proprietary price modeling that reveals the highest selling price that can be justified to prospective buyers.

The result is a good understanding of the maximum realistic selling price for your business or a valuable road map to work on your business to reach your desired exit goals. While in the end the buyer determines price, the Market Pricing Analysis^© is an invaluable tool to negotiate from a position of strength and influence what that price will be.