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Align Your Business Valuation Expectations With Reality!

By Generational Equity

01/19/2021

One of the biggest challenges that deal makers face in closing M&A transactions (and quite possibly one that sadly scuttles way too many great transactions) is sellers having unrealistic business valuation expectations.

We understand that there are two factors in play on this issue:

  • The tremendous sweat equity you have poured into your business and you want a good ROI
  • And the reality that most business owners have no idea how much they will need to survive on post-sale, so they push for the highest valuation possible

The good news is that our experienced team of M&A advisors at Generational can help you handle both of these issues.

The first step in any exit planning process is having a thorough and complete valuation done on your business by a team that has extensive experience in this process. This is critical because even though you may not like the outcome, it will help you align your expectations with the current market. A key part of any skilled valuation is “recasting” your financials back three years and the creation of a credible, defensible 5 year pro forma based on these recast numbers.

And, if your business valuation is too low for you, our Generational Business Consulting team can help you build a much more valuable business for a later exit.

Be aware that there are quite a few M&A firms out there that will tell you that they will take your company to market with no valuation done and let the market tell you what the company is worth. Ultimately, even using our process, the market eventually will tell every business owner what the company is worth. However, if you don’t have a valuation range in mind going in, how will you know what offers to even entertain?

You could end up leaving millions on the table and not even be aware of it.

The second issue listed above is also addressed by our team at Generational Wealth Advisors. Their goal is to help our clients with a wealth advisory plan that charts out, based on your personal goals post sale, how much you will need to thrive on in the next chapter of your life.

Quite often the amount needed is far lower than the business owner expects he/she will need and again, this helps the deal team to allow the owner to have a realistic idea of what will be required post sale, no matter what your plans might be.

These ideas are even more important in our pandemic impacted economy. Now, more than ever, you need experienced advice in:

And of course a deal team that can eventually successfully close your transaction, as our ever-growing list of M&A awards show!

Again, we have strategically built Generational to offer these services to our clients. If you are interested in learning how our work can help you on your exit journey please call us at 972-232-1121 or provide us with your details on our contact page and we will be in touch. 

And no matter what, use professionals to help you better understand your valuation expectations!

Carl Doerksen is the Director of Corporate Development at Generational Equity.

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