By Generational EquitySep 13, 2016, 04:00 et
We have heard the term EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization). Many people believe that a multiple of this figure is the best way to determine the value of a business. Although this is certainly one method of business valuation, in order to obtain the optimal value for your business, it is wise to use a variety of valuation methods.
"The old Latin saying from the first Century, B.C. still holds true today," said Terry Mackin, Managing Director Mergers & Acquisitions with Generational Equity. "Everything is worth what its purchaser will pay for it."
"Understanding what the potential buyer values is one key to obtaining the best price for a business. A spreadsheet often doesn't tell the whole story," said Carl Doerksen, Director, Corporate Development with Generational Equity, a firm that specializes in helping business owners release the wealth of their business by providing merger, acquisition and strategic growth advisory services.
"There are numerous reasons that one potential buyer is willing to pay significantly more for a business than another," said Mackin.
"Identifying the underlying value of a business (often termed the off-balance sheet assets) is a key part of the pre-sale offering process that is often overlooked."
Here are some examples of hidden value (a.k.a. intangible assets):
"It takes specific expertise to identify and evaluate these assets and their value to different potential buyers," said Doerksen.
"Failure to take these steps and to cast a wide net to find buyers who will see this value can leave significant money on the table when selling a business or can lead to less favorable terms for the seller.
"For example, some buyers are willing to pay for an owners' involvement and for the technical expertise and customer relations that can help generate a continuing positive revenue stream after the sale."
About Generational Equity
Generational Equity, part of the Generational Group headquartered in Dallas, with over 200 professionals located throughout North America, helps business owners release the wealth of their business by providing merger, acquisition and strategic growth advisory services.
Our four-step approach features M&A education, financial analysis and reporting, sales documentation and deal-making. The team was recently recognized by M&A Advisor as Valuation Firm of the Year. For more, visit www.genequityco.com.
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