According to the New York Times bestseller The Millionaire Next Door (Stanley & Danko, Pocket Books, 1996), 64% of American millionaires achieved their wealth by owning a business. While this is an exciting statistic, it may be surprising that most business owners do not actually know what their business is currently worth.
Some owners have an exagerated idea of value, based on what the owner wants or needs, rather than based upon the "realities of the marketplace".
In fact, we've found that many business owners under-appreciate the value of their business. Some are the victims of poor/incorrect advice. Some simply aren't aware of all the value factors that buyers and lenders are willing to consider in evaluating what a qualified buyer might pay for a business.
Even when an owner counsels with accountants or other advisors, it is not unusual for those opinions of value to be based not on actual experience with "making deals", but with the academic "rules of thumb" that most business consultants incorrectly use for pricing businesses.
ABMI, having brokered the sale of thousands of different businesses over the last almost 30 years, has developed our own proprietary valuation/pricing methodology, based upon that considerable experience of actually successfully consumating transactions that "real" buyers and "real" sellers have made, and "real" lenders have financed.
Sometimes, a third-party valuation is recommended to support the ABMI preliminary pricing/estimate of value, and provide third-party validation of value to potential buyers. ABMI partners with some of the most respected business valuation firms in the country and through our alliance partner relationships can pass sustantial cost savings through to our clients for those third party services.
Most business owners consider the business as part of their retirement planning. In fact a large part of the retirement "nest egg" is usually tied up in the value of the business. With so much individual wealth taking the form of privately held business, taking chances on the value is not a wise decision.
Whether you're buying, selling, planning for retirement, planning your estate, taking on a partner, or getting a divorce... a professional, independent business valuation from ABMI should be considered an essential decision-making tool.
Professional third-party business valuations should be completed by qualified, reputable business consultants.
"BUSINESS OWNER BEWARE" Here are a few landmines to be aware of related to having a business valuation completed on your company.
- Make sure you use a credible company: Some valuation companies may market their services to you as a stand-alone service. Check their references before paying them in advance for the valuation. There are companies "out there" that make a living out of charging for valuation services that simply build an impressive-looking document designed to support an unrealistic value to make you happy and take your money. Make sure the company is credible before proceeding.
- Use a qualified, experienced company: Not all CPA's or accountants are qualified to complete a thorough business valuation. It takes specialized training, experience, knowledge of "real world" comparable sales, and market presence to complete a credible business valuation. Business lending institutions are a good resource to filter out the qualifications of a potential business valuation company. If well recognized business lenders such as Wells Fargo, CIT and USBank approve the valuation company, it is a pretty good bet the company is qualified. If not, it is advisable to reconsider.
- Be careful of "brother-in-law advice": It seems that almost everyone has heard a "rule of thumb" that is used to value businesses. Unfortunately these "rules of thumb" taken out of context can be very misleading. Listening to advice from unqualified people should be avoided.
- Update the Valuation regularly: If you have had your business valued congratulations. If the valuation is more than three years old, you should consider having it updated. A number of factors tend to change over time such as market conditions, economic conditions, business assets, competitive landscape, revenues, and cost structure. If there have been a number of changes you may need a full valuation.but it will be worth it. In fact, ABMI recommends that all business owners contact ABMI annually for a fresh evaluation/pricing of the business.
Free Information And No Obligation Consultation
Entrepreneurs (business buyers or sellers) who are considering buying or selling a business should register with this ABMI web site to arrange to receive information which can help you investigate how you might buy or sell a business enterprise with minimum risk and maximum benefit to you.
ABMI will then provide you with information and a free, no cost, no obligation consultation, including a free evaluation of your project. To register, click on "Register with ABMI"
ABMI is proud of our unique consultative approach to serving clients and customers. We understand the importance of relationships and realize that there is no "one size fits all" approach to selling or buying a business. We take the time to learn about each client and tailor an approach designed to help each client achieve their individual definition of success.
Offering customized services, ranging from confidential marketing of business assets for business owners, to targeted acquisition assignments for buyers, to acquisition financing information and introducing buyers to likely sources of financing, to exit/transition planning for business owners, our team of skilled professionals are here to serve.
Free Business Evaluations/Pricings, And More
Evaluations/pricings performed by ABMI for Business Owners: ABMI performs many services during the listing engagement, including providing the business owner with a preliminary free evaluation/pricing to help determine the market price for the business. This pricing/evaluation service helps the business owner understand the "realities of the marketplace" and is based on understanding what qualified buyers are likely to pay for a particular business.
ABMI, having brokered the sale of thousands of businesses, has a high level of understanding about business values and pricing, as well as considerable experience in consulting with business owners about the various acquisitions terms that might be offered to buyers.
ABMI also invests the energy and the knowledge of our many years experience in finding qualified potential buyer candidates. ABMI has developed a unique multi-media "Buyer Discovery System" that is very successful at finding qualified buyers.
With proven expertise in the valuation, pricing and marketing of privately owned and closely held companies, ABMI handles each client competently and confidentially. ABMI assists in all phases of the transaction, linking initial analysis, planning, valuation, pricing, marketing, qualification of prospective purchasers, negotiation, due diligence and ongoing interaction until the transaction is successfully completed. When selling a company through ABMI, business owners benefit from a refined and proven professional process.
ABMI represents companies in a wide variety of industries. Our broad base of knowledge provides the ability to assist the seller in not only pricing, but also in preparing the company for sale and facilitating a smooth transition of ownership.
Evaluations Performed By ABMI For Business Buyers: Some buyers contact ABMI for an opinion of the merits of an acquisition the buyer is considering, prior to the buyer going "beyond the point of no return". These are usually acquisitions that the buyer discovered apart from ABMI's efforts (such as acquisitions the buyer may be considering that were found using some other business brokerage). ABMI offers this service to buyers, so buyers can confirm "the realities of the marketplace", and so buyers can confirm that the acquisiton they're considering is, in fact, priced within generally accepted rules of pricing and terms.
Evaluations Performed By ABMI for Buyers, Prior To The Buyer's Identifying The Buyer's "Ideal Deal": Many prospective business buyers contact ABMI for advice, prior to the buyer choosing a business, and prior to a buyer deciding what business might be "just right" for him/her to acquire. ABMI offers this "pre-selection" service to help buyers understand the various elements included in a business acquisition, inlcuding financing options, SBA details, information on how to choose a business to buy, how to find a business once a buyer identifies the "type" or size of business, options available to the buyer in the terms sellers might offer the buyer, how to conduct thorough and low risk due diligence in acquiring a business, etc. This service is offered to buyers by appointment, at no charge to the buyer.
To schedule a no cost, no obligation consultation, you may phone ABMI at 913-341-6300 or register with this ABMI web site. We will then contact you.