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Many business owner’s when they want to sell their business, often read about an EBITDA (earnings before interest, taxes, depreciation and amortization) valuation multiples. But when they’re questioned further, what they really mean is they want to sell for a higher EBITDA valuation multiple than discussed in the industry journals. Here, I will identify occurrences… Continue >>>
The term “value” means different things to different individuals. I’m not sure who made that statement many years ago, but it still holds true today. The perceived value depends on the interpretations, circumstances and role of the shareholder(s). Without carefully defining the term “value”, a conclusion reached in a valuation report will have no meaning.… Continue >>>
Most business owners know that planning for retirement is crucial. However, according to Entrepreneur magazine, very few business owners are aware of the true value they have. Many have not taken the necessary steps to receive an accurate business valuation well before considering retiring. This makes it somewhat difficult to ensure they receive adequate value… Continue >>>
The Federal estate tax is a tax on the transfer property at death. It is applied to estates for which at-death gross assets, the “gross estate”, exceeds the filing threshold. Included in the gross estate are real estate, cash, stocks, bonds, businesses, and decedent-owned life insurance policies. Deductions are allowed for administrative expenses, indebtedness, taxes,… Continue >>>
What is a reasonable selling price for a business? This is a question that arises for many business owners and others interested in pricing a business. To some degree, every business is unique and therefore, no one-size-fits-all valuation formula works for all businesses or for a particular industry. For example, sometimes a dentist may hear… Continue >>>
Top Five EBITDA Adjustments Oftentimes, earnings before interest, taxes, depreciation and amortization (EBITDA) are used as a proxy for a firm’s operating cash flow. While EBITDA can be interpreted in different ways, this type of earnings stream can be used to produce a value for a business or business interest by the application of a… Continue >>>
This is a good time to reflect on three important and misunderstood aspects of the role of the valuation professional: The valuation professional. The nature of the finding. How are the findings used. Role of the Professional: Valuation professionals may act as either an “appraiser” or “consultant” – but not both in a single engagement.… Continue >>>
A value-minded owner should search for ways to lower the company’s perceived risks to potential buyers or investors by: Creating a formal business plan. Forecasts and projections facilitate due diligence and demonstrate management depth. But buyers might critique a seller’s business plan and modify them with their own assumptions. Budgeted and actual results should be… Continue >>>
In finance, we use words like price and value, as if they were interchangeable. I have been guilty of this myself at times. It is worth noting, price and value not only come from different processes, but are determined by different variables and yield different numbers at the same point in time. The essence of… Continue >>>
What exactly does the term “goodwill” mean when it comes to buying or selling a business? Usually, the term “goodwill” is a reference to all the effort that an individual(s) puts into a business over the years that he or she has operated that business. In a sense, goodwill is the difference between an array… Continue >>>
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