Two Similar Companies ~ Big Difference in Value
Consider two different companies in virtually the same industry. Both companies have an EBITDA of $6 million – but, they have very different valuations. One is valued at five times EBITDA, pricing it at $30 million. The other is valued at seven times EBITDA, making it $42 million. What’s the difference?
One can look at the usual checklist for the answer, such as:
The Market
Management/Employees
Uniqueness/... Continue Reading →
Baby Boomers: Incredible Numbers are Buying and Selling Businesses (Part 2 of 2)
Oct 23, 2014 | Industry News
This article is a continuation of Part 1 which outlined several facts related to the baby boomer wave of business transaction activity.
NOW’S THE TIME FOR HARD WORKING BUSINESS BROKERS, AT THE BEGINNING OF THIS EXCITING WAVE OF BOOMER BUYING AND SELLING, TO BE ENERGETIC, ENGAGED, FOCUSED, AND “TALKING TO THE PEOPLE”…
Even in a troubled economy, or even in a recession, or a “recovery”, these dynamics will happen, no matter... Continue Reading →
Baby Boomers: Incredible Numbers are Buying and Selling Businesses (Part 1 of 2)
Oct 21, 2014 | Industry News
The following is a memo I recently published, that’s a re-write of one I did several years ago. I have found that this “Baby Boomer” prediction has turned out to be ultra true.
LOOK AT THESE FACTS…
The Baby Boomers (about 70,000,000 of them) are poised to make a great impact on the American economy.
Retiring Boomer business owners will sell or bequeath $10 trillion worth of assets over the next two decades.
These assets are held... Continue Reading →
Franchisors Need to Manage Their Brokers
Oct 21, 2014 | Industry News
As more franchisors turn to franchise brokers to assist in their franchise development program, it is important that brokers are properly managed. Contrary to the hype, the majority of brokers are marketing franchises from their portfolio of franchise opportunities. Because the broker is representing a specific group of franchises, there is a potential problem whereby a broker will “push” a particular franchise. In addition, once the broker has... Continue Reading →
Small Business Transactions Up / Sellers Earn Higher Sale Prices
Oct 16, 2014 | Industry News
For those who haven’t already read this article on BizBuySell.com’s Third Quarter 2014 Insight Report, this is excellent news! ~ Tom West
Small Business Transactions Up 18%, Sellers Earn Higher Sale Prices, According to BizBuySell.com Report
BizBuySell.com’s Third Quarter 2014 Insight Report shows transaction levels still on pace for record-breaking year, sellers now receiving a higher percentage of asking price and improved cash flow... Continue Reading →
Some difficulties in valuing small businesses (Part 2 of 2)
Oct 02, 2014 | Industry News
This article is a continuation from yesterday’s posting which described some of the challenges in valuing small businesses.
Considerations
We could list a big variety of things to consider when valuing a small business, such as:
Reputation of the business
Purpose of valuation
Location
However, there are other considerations that are the most important to keep in mind when valuing small businesses:
Assets & Liabilities
When... Continue Reading →
Some difficulties in valuing small business (Part 1 of 2)
Oct 01, 2014 | Industry News
The main difficulty in valuing small business is the record keeping of the small business owner. Since he or she is the proverbial “chief cook and bottle washer,” keeping the financial records is down at the bottom of the list in running the business. In many cases, the owner keeps the business checkbook, bills and receipts and then dumps them all on an accountant’s or bookkeeper’s desk periodically. From these “records,”... Continue Reading →
Three Basic Factors of Earnings
Two businesses for sale could report the same numeric value for “earnings” and yet be far from equal. Three factors of earnings are listed below that tell more about the earnings than just the number.
1. Quality of earnings
Quality of earnings measures whether the earnings are padded with a lot of “add backs” or one-time events, such as a sale of real estate, resulting in an earnings figure which does not accurately... Continue Reading →
What is the Value of Your Business? It All Depends.
The initial response to the question in the title really should be: “Why do you want to know the value of your business?” This response is not intended to be flippant, but is a question that really needs to be answered.
Does an owner need to know for estate purposes?
Does the bank want to know for lending purposes?
Is the owner entertaining bringing in a partner or partners?
Is the owner thinking of selling?
Is a divorce or... Continue Reading →
Creating Value in Privately Held Companies
“As shocking as it may sound, I believe that most owners of middle market private companies do not really know the value of their company and what it takes to create greater value in their company … Oh sure, the owner tracks sales and earnings on a regular basis, but there is much more to creating company value than just sales and earnings” Russ Robb, Editor, M&A Today
Creating value in the... Continue Reading →