VIDEO: Business Valuation FAQs

Why are forward-thinking organizations evaluating their business quarterly?

Progressive, forward-thinking organizations, whether it be privately held or private equity groups, regularly look at different drivers of their business and determine the enterprise value of that business which they use as one of the key performance indicators on a quarterly basis.

How long does it take to evaluate a business?

A standard analysis which consists of several hours of in-depth discussion provides good baseline for the organization and where it is at. Our goal, at a high level, is to determine what the business value is today. Then we compare that baseline to the market. The difference between the current space versus where the company wants to be is called the gap. Our experts then recommend the steps to close that gap and ultimately increase the company’s value.

The benefits of acquisition strategies to grow your business faster

Acquisition strategies are a great way to scale organizations quickly. One of the most significant benefits of acquiring a company is human assets, especially in a skilled labor shortage like today.
You will see it in professional firms all the time. CPA firms acquire other CPA firms – they integrate the systems and controls, get revenue and a client base, and a skilled labor force through the transaction.

What are some KPIs when evaluating your business?

When talking about KPIs, it really boils down to developing a thoughtful set of key performance indicators for each organization. Different things will need to be looked at, depending on what’s important to that business and what are their goals?

Should I buy or sell a business where the face of that brand is retiring?

If somebody is preparing an organization for sale, we evaluate the middle-management and their ability to take on the role of that business owner. A business owner or ownership group often has their hands in a lot of different elements in the business (finance, sales or head of operations) and the company should be capable to drive these responsibilities from a business owner down to the next layer of management.

What are the conversations and emotions like with sellers who want to leave a legacy?

There is legacy, livelihood, and sense of purpose for many business owners. The conversations are very emotional. We first want to understand what the business owner is feeling. What they’re trying to do from a goal perspective? What do they need to get out of the business in order to sustain their quality of life or their next step?

What’s your exit plan?

How do you get business owners in the mindset to plan for an exit?
Develop the old big, audacious goal. Develop the big plan. Develop the big idea. Where are you heading and make decisions to head towards that direction, but also recognize you can’t be married to your one, two or three-year plan.

What is the supply and demand for businesses in 2021?

We see a lot of organizations heavily disrupted by Covid that are now starting to rebound. On the other hand, we have construction and manufacturing sectors that did fairly well and are looking to get out there and earn profit. Demand and transaction levels are slowly growing because there’s an end to the pandemic and businesses are starting to consider acquiring new organizations as part of their plan for 2021 into 2022.

How are R&D Tax Credits Calculated?

Calculating R&D tax credits is complex. But essentially, we start the calculation process by looking at what qualifying activities a company has and the allocated expenses directed at those activities. That expense becomes the pool of those applicable costs. Then, depending on state and federal guidelines, the credit is calculated from that total expense pool. 

Why do poorly structured businesses lose up to 30% in value?

There is a significant discount for organizations that haven’t gone through the process of preparing for a sale. To put it on a multiple, we generally see between 1.5 and 2.5 X, which is significant.

On the other hand, we see a roughly 30% increase in value if the organization has clean financials, good middle management, and the right systems and processes in place.

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