Business
Valuation. We mean business.
In the global economy, the competitive
environment changes ceaselessly. The prospects of almost
every business change with it. This means that the potential business
buyer needs to be extra sharp when assessing purchase opportunities.
Get Professional Assistance
Buying a business? Get yourself some help, even if you consider
yourself to be an expert in the target business. Get yourself a good, practical
CPA, a battle-tested attorney, and a business operations analyst who has
“seen it all.”
The CPA has to do more than just abstract the numbers from financial
statements. He or she must understand how the financial statements were
prepared, what makes the cash flow, and what the statements would look
like if you owned the business.
The attorney must be experienced at making the kind of complex offers
that are usually required in today’s uncertain economy. He or she
must have negotiating skills that also reflect today’s uncertainties.
He or she must be appropriately flexible to help you swiftly take
advantage of fleeting opportunities.
The analyst must understand not only what the business does and how
it does it, but must also be able to highlight the “hidden” opportunities
for improvement. It is these opportunities that can add value well
beyond the purchase price. The analysits studies of market potential,
gross margins, and fixed costs are invaluable in helping you determine
the best price and negotiating options.
It's not enough that you obtain the consultation of experts in these
three fields. You must understand that they each have different backgrounds
and viewpoints on your situation. This may result in conflicting,
uncoordinated advice. CVC associates work together on a regular basis
and maintain an ongoing dialogue concerning how they apply their skills,
what they learn, and what is important to the client.
Buyer’s Valuation Tips
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Make sure that the bottom line represents the real benefit to the owner
before using it in any calculations.
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Revenues and expenses should accurately reflect periodic operations and
should be appropriately derived. Understand the difference between
a Federal tax return and financial statements.
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You don’t buy revenue, you buy profits. Don’t fall for the Amazon
model.
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Don’t base a business’s value on what you could do with it.
Base that value on what the owner has done with it.
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The quality of management is what makes a business strong. Evaluate
it carefully by asking a lot of questions. The quality of management is
not always directly reflected in any paperwork.
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In your study of the business’s markets, look at new and alternative products
and services the business might offer. Build on your investment in
the fast-chaning economy.
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Return to "Beyond the
Business Plan"
