The Pacific Exit Team (PET) offers, as a first step in the exit planning process, a complete assessment of the company’s optimum circumstances to exit and what actions need to be taken to meet the owner’s personal and financial objectives. A key section of the assessment is an independent business valuation, completed by the leading nationwide valuation company.
Why should a business owner consider an independent business valuation? In today’s market, many business owners still leave substantial money on the table when they sell their company’s – most often because they do not truly have a handle on their company’s value. For that reason, the valuation process is a true asset to the business owner. A thorough, professionally prepared valuation will assist them in:
- Helping identify the key value drivers, major strengths, and more importantly, the major weaknesses of a company. This enables the owner to address both obvious and hidden problems prior to beginning the selling process. PET’s multi-disciplinary team can recommend and help implement improvements in a company to increase the attractiveness and value of the company to a potential buyer.
- Determining a reasonable selling price. Many owners rely on general rules of thumb, casual advice from friends, or other similarly unreliable sources. Values determined by general multiples or “rules of thumb” may be too high or too low. Unless the business owner goes through a rigorous valuation process, the true – and defendable – valuation will remain a mystery. If the owner’s expectation of value is too high, it will prolong the selling process until a price concession is made. If the price is too low, money is left on the table.
- Fully understanding the value of the business will assist during negotiation. In the current, challenging market, one can expect buyers to be sophisticated and experienced. They will conduct a rigorous analysis of the company even if the seller has not. They will look at those factors and value drivers that the owner and his advisors should consider in valuing the company, and they will use that information against the seller in negotiations if allowed.
The Pacific Exit Team has a five step valuation process:
- Determining the purpose of valuation, date of value, and ownership interest being appraised.
- Obtain and review key elements of the business which includes but is not limited to: Corporate Documents, Financial Records, Market, Key Personnel, Key Customers, Industry Trends, and Comparable Sales of Similar Companies.
- Determine value indications of the business and owned non-operating assets using 3 categories of valuation approaches: Asset, Market, and Income. The Asset approach looks at hard assets owned by the Business – real estate, machinery, inventory, patents, etc and does not take into account “goodwill”. The market approach looks at the past three years of actual sales data on similar businesses around the country. Finally the income approach looks at the cash flow earnings generated by the business and assumes an appropriate capitalization rate to arrive at valuation.
- Determine final opinion of value after consideration of all information obtained, reviewed, and analyzed and making appropriate allocations for goodwill and other intangibles the business possesses.
- Prepare written report.
The Pacific Exit Team considers this independent business appraisal essential to the process and employs the nation’s preeminent valuation firm to prepare the valuation. Clients are delivered hard and soft copies of the 80 page valuation report within 4-6 weeks of engagement.