There are many different factors that impact the value of a business, but at the end of the day the best way to set realistic expectations is by realizing that price is ultimately set by what a buyer is willing to pay. It goes without saying that a CEO considering such a transaction should be intimately familiar with the business’ financials, but in approaching a sale he should focus extra attention on the metrics a would be buyer will evaluate.
There is danger in relying solely on public market multiples, past transactions, or “best guess work.” In order to set reasonable expectations, an owner truly has to see his business through the eyes of the buyer and understand where it fits in the overall M&A landscape, the potential it yields for the buyer and the valuation that can be assigned at the time of sale.
Hiring a skilled advisor can help keep expectations level when entering into the sale process. Not only will this individual lead the company through the necessary valuation exercises, evaluate the competition and suggest ways a company might add value before going to sale, but he will also help jumpstart the next most important phase of the process – building a list of potential buyers.
There is danger in relying solely on public market multiples, past transactions, or “best guess work.” In order to set reasonable expectations, an owner truly has to see his business through the eyes of the buyer and understand where it fits in the overall M&A landscape, the potential it yields for the buyer and the valuation that can be assigned at the time of sale.
Hiring a skilled advisor can help keep expectations level when entering into the sale process. Not only will this individual lead the company through the necessary valuation exercises, evaluate the competition and suggest ways a company might add value before going to sale, but he will also help jumpstart the next most important phase of the process – building a list of potential buyers.
RSS Feed
