Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

July 7, 2019

Not Ready Yet?  Think Again!

By Jeremy Albelda

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The most effective process for selling a business begins with putting an independent, fair market business valuation in place.  We often get apprehension from potential sellers that doing a business valuation “now” is premature.  Many say that it’s not necessary because they don’t intend to sell for a couple of years, and nearly all say that it’s best to wait until their sales and profitability get even higher in order to obtain the best sale price. From our standpoint, though, an early valuation could still prove beneficial, and in a variety of ways.

Firstly, a business valuation provides a professionally-executed, documented assessment of the company’s value now.  It will include the value metrics the valuation firm sees as appropriate – like the risk-adjusted discount rate on the company’s cash flow as well as the various multipliers (of revenue, seller’s discretionary cash flow, and adjusted EBITDA) the valuation firm is seeing in reported sales transactions in the company’s industry.  We’ve used these metrics to help a client establish various “what if?” scenarios based on expected future business results, so getting a business valuation sooner rather than later could provide a framework for assessing the effect of potential future actions on likely fair market value.

The valuation also comes with a “marketability assessment” that takes a look at what additional personnel, financial, and operational changes could do to increase the attractiveness of the company to a prospective buyer.  In other words, getting a valuation done now provides several sets of “eyes” looking at the business from an objective standpoint.  If there are deficiencies beyond those already known by the seller, he or she will have time to remedy them.

Secondly, the result might be surprising.  If the seller is looking for a particular selling price, the valuation would provide information regarding how close he or she is to that target price.  I’ve had (admittedly, only a few) clients that were actually surprised at how close the valuation was to their desired price.  So if a prospective buyer comes along before the target sale date, you’ll still be able to have a meaningful conversation that could lead to an offer premium.

If the seller has initiated a major improvement plan that promises to deliver significant increases in revenue and cash flow, the impact of these future plans won’t be a part of the valuation.  But the seller can still take advantage of expected future results through earn-outs based on these future performance improvements coming to fruition.

Thirdly, we haven’t had a recession since 2008, and while the economy looks fine despite some international trade tensions, this expansion has been long by historical standards.  What if the economy stumbles?  What if industry or competitive factors frustrate the realization of planned performance improvements?  I would suspect that it would be prudent to have a plan to sell early if conditions warrant.

Finally, it really doesn’t cost anything to do a valuation now.  Yes, there is an upfront fee, which covers the cost of the valuation firm that performs the assessment.  (Valuations are not taken seriously by buyers if they’re done for free or by someone who isn’t independent of the seller.)  However, the seller can get a nearly-free update within 2 years of the date of the valuation report, so he or she would have the best of both worlds – a defensible value now and a pre-paid valuation closer to the desired sale date.  And ultimately, if the seller chooses A Neumann & Associates to be the selling agent in the transaction, we refund the entire cost of any valuation(s) performed at closing.

In our experience, there is almost no upside – and lots of downside – to waiting for the “perfect” time to perform a business valuation.  There is no such perfect time, but we’ve seen plenty of cases where the seller wishes he or she had performed the valuation much earlier.  In other words, there’s no time like the present!

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

“I recently contacted A. Neumann and Associates about getting a valuation of my business done. I spoke with Marc, who explained the process in detail. After meeting with Marc 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 to sell my business for max value. Working with Marc at A Neumann & Associates was very easy and professional. I did not know all that was going to be involved in selling my business but they helped me through the process. 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. I highly recommend this firm to anybody who wants to sell now or down the road. Marc not only knows his stuff, but actually is a real nice guy.”

Double Diamond

“Used A Neumann & Associates to sale my business. could not imagine having done it with out the patience and experience Gary provided. Thanks Gary,”

Dennis Frazier

“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
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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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