“So just how much is my business worth?” is a question we get regularly when we meet privately with business owners at our exit planning conferences. Our answer is always the same: We have no idea until we do a thorough business evaluation on your company.
Although this answer does not please many who ask us the question, the reality is the steps we take to determine a company’s business enterprise value are very detailed and complex, and until our analysis is complete (which usually takes 60-90 days if a client’s financials are in order), we cannot possibly “ballpark” a company’s value.
But the real answer to the question of “how much is my business worth” is actually pretty straightforward:
The value of any business is what a willing and informed buyer will pay for it!
Ultimately, the market will determine your company’s value. Even after our analysis is complete, we often tell clients that are hoping for a higher number: Look, let’s take the business to market and see what buyers will tell us about its value.
You may be asking: Why would there ever be a variation between what your stated opinion of its value is and what buyers may pay for my business?
And the answer is simple: Your company has intangible, off-balance sheet assets that have value but the “value” of them will vary from buyer to buyer.
For example, Buyer A might be more interested in your blue chip client base, but Buyer B might be more attracted to your brand and reputation in the industry. Buyer C might be drawn to your tenured base of experienced employees and Buyer D might be more interested in your equipment and processes.
So, you see, your intangible assets, which by their very definition are nearly impossible to value numerically, could play a huge role in what buyers will pay for your company. And until you go to market, you really won’t know what your business is truly worth. Here is a partial list of some intangibles that can drive value:
Keep in mind that this is just a partial list of off-balance-sheet assets that can add value to your business. And again, the “value” of these will vary from buyer to buyer.
Here is the key: You have to get your opportunity in front of as many buyers as you can so that your intangibles are marketed correctly. And, you need the help of an experienced M&A firm to “package” and present your business in a way that will help buyers clearly see what you want them to see in your company.
And this is really why Generational Equity has been one of the leading middle-market M&A firms in North America for years and years. Our team of deal makers is comprised of very experienced people, who have the proven ability to attract the optimal buyers to our clients. This is an art and a science but requires ultimately the ability to understand what buyers really value.
If the concept of off-balance-sheet assets and intangibles that add value to your business are intriguing to you, then you really need to consider attending a Generational Equity exit planning conference soon. We have designed these to be highly educational for business owners and enable them to learn a significant amount of information about, not only intangible assets, but also all the key steps involved in closing an optimal deal with an optimal buyer. Here is what a few of our clients have to say about the benefits of attending one of our conferences:
So, if you have no exit plans in place and have no idea where to begin formulating them, attending a Generational Equity exit planning conference is a must. To learn more, follow these links:
And don’t forget the answer to this question:
By Carl Doerksen, Director of Corporate Development at Generational Equity.
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