Valuation of a business (large or small) comes down to forecasting its future cash flow. When the business is sold, the seller and buyer have to agree to how to allocate the valuation between tangible asset value and goodwill (intangible asset value). Since goodwill is subjective, there is a risk of overvaluing or even undervaluing a company’s goodwill. Therefore, it is a mistake to try to value goodwill. Read More
Friends Don’t Let Friends Go Into Business Together
“Good grief, I’m an attorney, I should have known better.” Paul (not his real name) is a successful mid-40s year old lawyer with one of Knoxville’s preeminent law firms. Based on what I’m about to tell you, your first instinct will be to agree with Paul, he should have known better. Thirty years of handling business transactions have taught me a lot about human behavior. There are some mistakes I see over and over, Read More
Lessons Learned in 2017 and How They Signal a Fantastic 2018
2018 is going to be a fantastic year for those of us in the business of helping others buy and sell businesses. In fact, I expect activity levels and valuations to be through the roof. Why do I speak with such confidence you ask? Simple, the lessons of 2017 tell me exactly what to expect going into 2018. Lesson #1 - Owners of strong businesses were reluctant to put their business on the market in 2017. I think this Read More
Selling Your Business, Part 3: Getting a Head Start on the Due Diligence Process
Due diligence is the process a potential buyer goes through prior to closing on an acquisition. The process might uncover problems or challenges in the business, but at the very least it helps the potential buyer know that all representations made by the seller during the selling process are accurate. The Importance of Due Diligence The seller of a business can improve his chances of a deal going through if he does Read More
“H___ No!” or Just Ignore Them?
“These guys made a ridiculously low offer for our company. Should we say ‘h— no’, counter, or just ignore it altogether?” Rob and Sally (not their real names) have been in business together for almost 20 years, even before they were married. Now in their mid-60s, they want to move to Texas to be near Sally’s grandchildren. Rob is excited about the move, too. He has his eye on building a home on one of the area’s Read More
The Syndrome Known as “This Is How We Do It In Our Industry”
“You have to understand, Jim, people in this industry have a real attachment to their business. It might just be a thing to you, but for us, it’s our life.” Randy (not his real name) and I recently met at a conference. He came up to me after the session I led on preparing to sell a business and told me he had just started to think about the process. He didn’t tell me his age but I assumed he was past 70, though he Read More
Who Makes the Decision Might Determine If It’s a Home Run or Strikeout
“Dad expects me to run the company, except he won’t let me run the company.” Clay (not his real name) was one of the most interesting businessmen I’d ever met. Prior to taking over his Dad’s cement manufacturing business, Clay ran a large coffee harvesting company in Central America, and before that he was in the US Army Special Forces. Clay got a degree in economics from an Ivy League college expecting to become a Read More
The Truth Can Hurt
“They offered $8.5 million for my company, and now you’re telling me it’s only worth $5 million. What did they know that you don’t?” Sandra (not her real name) was not happy with me. After reviewing her company's financial history and her forecast for 2018, I told her that her company could be sold for $5 million, maybe $6 million, if a couple of things fell in our favor. I could see her obvious frustration as she Read More
Let It Go! An Awesome Song and Great Business Advice
Elsa just had a big fight with her sister, Anna. She decides to run away and live her life in exile. As she enters her icy mountain palace, she sings the now well-known song, Let It Go.* It’s one of those memorable songs …once you hear it, it’s hard to get it out of your head. I find myself singing that song in my head when I talk with business owners who have waited too long to sell their company. It breaks my Read More
Selling Your Business, Part 2: Understand Your Business’s Market Before Selling It
Understanding your market is absolutely vital to developing a successful business. Knowing what your customers want will help you create products and tailor services that align closely with your sales strategies and inventory. Knowing your market is also helpful for selling your business. Being able to explain to potential buyers the characteristics of the customers you serve and their potential for growth will be Read More
