Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

November 9, 2015

Increase Transaction Value When Selling A Business

By Joseph Eneldas

By Achim Neumann

A significant portion of our efforts have been to develop “Strategic Business Valuations” for owners. “In other words,” says Achim Neumann, President A Neumann & Associates, LLC, a full-service M&A advisor and business brokerage firm based in Atlantic Highlands, New Jersey, “we are approached by business owners to have the value of their business determined two to four years prior to its contemplated sale.”

One of the key outcomes of such strategic business valuations is the definition of weak points in company operations and a plan of action to make changes to maximize value. Generally speaking, how can a business owner improve value?

Consistent Cash Flow

Investors consider top-line revenue and cash flow to be the two most important criteria in buying a business. “The more consistent the cash flow is,” says Frank Arcoleo, Managing Director of Central Pennsylvania, “and the more secured by ongoing agreements, the higher the premium that can be obtained.”

Growth Potential

Every investor will look to grow the business – “Status Quo” is not acceptable. Thus, a business owner who can convincingly demonstrate growth opportunities, and, better yet, has a formal business plan in place for obtaining such growth, can successfully defend a strong asking price.

Diversification of Customer Concentration

A wide customer base, with few customers constituting more than 5% to 10% of revenue, significantly diminishes investor risk. This diversification minimizes the cash flow impact should one or two customers leave after the sale, thereby ensuring the ability of the business to survive – and prosper – in such a scenario.

Product Spectrum

A wide spectrum of products and services not only offers more opportunities for growth, it also mitigates the financial risks associated with only a few products or services. Thus, businesses for sale with a good product mix will always obtain a higher transaction value.

Financial Reporting

Reliable, consistent, and systematic financial records are an essential part of the management of any successful business. Whereas the current owner might run the business “from the hip,” only solid financial records will convince an investor of the viability and value of the acquisition.

Employees

Long-term employees able to assist in the business transfer, a dedicated management team that does not solely rely on the owner, and a good reporting system are all factors to enhance the value of a business.

Facilities & Equipment

Clean facilities, well-maintained equipment, and easy-to-locate inventory should all be in place PRIOR to the commencement of the sale process. Nothing is worse than for a prospective investor to conclude that the current business owner does not exercise proper care for the business and its assets, as reflected in the condition of facility and equipment. The immediate, implicit conclusion will be that the remainder of the business is similarly disorganized.

In sum, just focusing on these seven simple criteria will allow a business owner to obtain a higher asking price when they’re ready to position their business for sale. More importantly, if a strategic business valuation has been put in place well ahead of the actual sale, it will help to identify any shortcomings and provide plenty of time to implement corrections.

About A Neumann & Associates, LLC

A Neumann & Associates, LLC is a professional mergers & acquisitions and business brokerage firm having assisted business owners and buyers in the business valuation and business transfer process through its affiliations for the past 30 years. With an A+ Better Business Bureau rating, the company has senior trusted professionals with a deep knowledge based in multiple field offices along the East Coast and has performed hundreds of business valuations in its history. The firm’s competitive transaction fees are based on successfully completing transactions. For more information, please contact A Neumann & Associates at 732-872-6777 or info@neumannassociates.com

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Client Testimonials

“Working with Marc and his company was a pleasure. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. Marc handled most of the interaction and he has one of the greatest demeanors. Again, it was a pleasure working with him and his firm.”

Douglas DiCeglio

“I recently completed an acquisition using A Neumann & Associates. Tony Valentino was very helpful and accessible during the entire process. They do a thorough job vetting both parties and got us to the finish line.”

Srini Mudambi

“Claus out of Florida helped us with the sale of our business. We had never done anything like this and him and his team walked us through the process from start to finish. We had some challenges through the process and Claus continued to show up even in the difficult conversations.”

Colby Harris, Co-Owner, Del Mar Designs

“Claus Madsen thoroughly helped us with selling our company. From the 1st introductory meeting explaining to us what was possible, to providing us with resources to assist with the sale. Claus was invaluable throughout the whole sales process. Claus was with us every step of the journey and always made himself available for any questions or issues that came up along the way. If you are interested in selling your business, I encourage you to reach out to Claus and the ANA team so that they can let you know what’s achievable. These guys will make it happen!”

Ron Harris, Co-Owner and Vice President, Del Mar Designs

“A Neumann & Associates is the only business broker I would use or consult with. They have assisted with 3 business sales over the past 15 years with me. They are honest and sincere and have always performed better than my expectations. They are the only one i would use for the sales of my businesses.”

James Belanger, Business Owner

“I wanted to take a second to commend the exemplary customer service from both you [Karin Neumann] and Mr. Valentino. It’s both a rarity in the industry, and very much appreciated.”

Andrew G., Investor

“We worked with Neumann & Associates to investigate the purchase of a research company in 2010 and found Achim to be capable, forthright and realistic. His depth of experience enabled us to fully understand our options, offering creative options that might enable the acquisition. While we didn’t acquire that particular company at that time, we know exactly who to call whenever we’re looking to buy or sell a business.”

Daniel Coates, Buyer

“Purchasing a business through this firm was a pleasure. Gary was very professional and transparent throughout the entire process. I look forward to working with A Neumann & Associates in the future.”

William Klemens, Buyer

“I utilized A. Neumann & Associates to assist in an M&A process. They are VERY thorough in using their time-tested process to calculate the value of investment opportunities, a process which provided a very detailed explanation for the value of the potential opportunity. Additionally, they also went above and beyond to extend other services including connecting with others who specialize in your industry and can assist with necessary steps including legal and accounting. Highly recommended!”

Edward Lane , Business Owner

“I recently contacted A. Neumann and Associates about getting a valuation of my business done. I spoke with Achim, who explained the process in detail. He had his colleague Gary come to my office in order to get a clear understanding of my business, and what I was hoping to accomplish. His patience in answering all my questions and his knowledge of the proper way to market my business gave me great confidence that this is the firm I will be using when the time comes for me to sell my business for max value. They gave me great insight into the steps I need to take now to get the best deal in the future. I highly recommend this firm to anybody who wants to sell now or down the road. They not only know their stuff, their actually just real nice guys.”

Robert Kardane, Business Owner
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Contact A Neumann & Associates, LLC

If you are considering selling your business, please contact us to learn more about our comprehensive service spectrum. Our experienced professionals will answer all your questions about selling a privately held business in complete confidentiality. Please fill out our contact form, or call us at 732-872-6777. We will contact you directly and will never identify ourselves to your employees.

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