CEO Advisor Newsletter March 2016
Understanding Your Valuation and Why This is Important
The value of your business is likely the most valuable asset you will ever own so it is important that 1) the business is managed to be highly desirable and sellable, and 2) you optimize the value of the business and sell it at the right time to maximize your return.
The value of your company depends on several important factors. These value factors include:
- Size of the Industry
- Type of Industry
- Your Management Team
- Size of Your Company
- Recurring Revenue Model
- Customer Acquisition Cost
- Growth Rate of Your Company
- Gross Profit and Gross Profit Margin
- Net Profit and Net Profit Margin
- EBITDA and EBITDA Margin
- And others
- Reasons Why You Want to Understand and Know Your Business' Value
- If you are making an acquisition or selling your company
- If you are setting up a Shareholder or Buy-Sell agreement
- If you are considering taking on a new partner
- If you are considering an employee buyout, or employee stock ownership plan (ESOP)
- If you are starting a Stock Option Plan
- If you are raising capital for organic growth or growth by acquisition
- If you are considering selling all or part of your company to a Private Equity firm
- If you are considering re-capitalizing your business or applying for a large bank loan
- If you need to report estate or gift tax
- If you are having a shareholder dispute, divorce, etc.
I can honestly tell you that in my eleven years as a business advisor to CEOs, presidents and business owners of small and mid-size companies, there have been many instances where I engage with a client to assist them in preparing for fund raising or a sale of their company and a prospective buyer contacts us before we have even completed this thorough two or three month preparation process.
The most common method of determining your approximate valuation for a small or lower mid-market company is Multiple of EBITDA. Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) is fairly straight forward to calculate, but determining the multiple of EBITDA greatly depends on the important value factors discussed at the beginning of this article. Other valuation methods include the Discounted Cash Flow Method, Asset-based Valuation Methods, Comparative Transaction Methods and others.
Consult with a seasoned business advisor to assist you in determining your valuation range and, more importantly, to increase your sales, profits and the value of your business. After all, it is the most valuable asset you will ever own.
CEO Advisor, Inc. is an expert in strategy, growth and focusing its CEO clients on the value factors that drive the business, profits and value of the company for an optimal exit.
Contact Mark Hartsell, MBA, CEO of CEO Advisor, Inc. today for a no cost, no obligation meeting at your office to discuss your key business issues at (949) 629-2520 or email MHartsell@CEOAdvisor.com.
Learn How to Optimize the Value of Your Company and
Sell Your Business at the Highest Price
- Your company is your most valuable asset. Preparing to sell, optimizing your company's value and effectively and efficiently selling your business for the best price is paramount for every CEO, president and business owner.
- CEO Advisor, Inc. is offering an exclusive, one-on-one business consultation at no cost. Take advantage of this opportunity to discuss the value of your business with our expert for an optimal exit strategy. This discussion will include critical aspects of selling your business for the highest price.
- Call Mark Hartsell, MBA, CEO at (949) 629-2520 today.
- Certified in Mergers & Acquisitions, Wharton Business School, University of Pennsylvania
- Master's Degree in Business, Loyola University; University of Maryland Undergraduate, Business Admin.
- 37 Years of Experience in Senior Management Positions, Mergers and Acquisitions, Business Consulting, Fund Raising and Turnarounds
- Founded, Funded, Grew and Sold a SaaS (Cloud-based) Software Company to a NASDAQ Company (DRIV)
- CEO of CEO Advisor, Inc. (Business Consulting, Growth Capital, Mergers & Acquisitions and Turnarounds) for the Past 11 Years
- Points of discussion in the Mergers & Acquisitions consultation will include:
- How to Develop an Exit Strategy
- Valuing Your Company
- The Selling Process
- Letters of Intent and Due Diligence
- Questions to Ask Before Selling Your Company
- Do the Numbers Add Up for You
- Indicators of the Best Time to Sell
- Asset Purchase vs. Stock Purchase
CEO Advisor provides business consulting and mergers and acquisitions advisory services affordably and effectively to meet the specific needs of small to mid-size companies in a wide range of industries, including software, technology, media, professional service firms, healthcare, manufacturing and many more.
CEO Advisor's mission is to advise CEOs, presidents, business owners and principal executives with the needed expertise and focus, coupled with hands-on advice and work performed to grow your business to the next level or realize your life's dream through a successful exit.