DALLAS, March 29, 2016 /PRNewswire/ -- If you own a business, chances are good that you can eventually find a buyer for it. But not every business owner realizes the full potential value of the company they have created. Whether you plan to exit the company and spend time on the beach or want to stay involved but diversify your assets, it is wise to avoid these all too common mistakes business owners make that can leave money on the table.
What is the value of the business?
That depends on factors some people don't take into consideration. For example, intangible assets such as patents, trademarks, brand names, blue chip customers, location, franchise agreements and software are just some of the factors that can add value. "Some buyers will pay a premium over the economic value (baseline value solely based on earnings) if they value these or other intangibles," said Terry J. Mackin, Managing Director, Mergers & Acquisitions with Generational Equity.
Not Recasting Earnings
Buyers are paying for your company's future. The only way to accurately highlight your future profitability is by recasting your historical financials by removing one-time expenses, discretionary expenses and non-recurring revenue and expenses. Use accounting professionals to make sure that the items recast are adequately documented and are realistic.
Selling to a Buyer Unwilling to Pay a Premium
"It is our experience that the best way to approach the buyer is to cast a wide net. Most sellers believe that a local or regional competitor is the optimal buyer," said Mark Breheny, Vice President Generational Equity. Equity firms with portfolio companies may have synergies with your business that they find attractive. For example, your patented process might add to the efficiency of their entire organization. Offshore buyers who need a presence in your industry might be attracted as well. Retired executives with high networth looking for a job might take a pass at your company.
Not Structuring the Deal in Your Favor
"Mistakes in structuring a transaction can significantly erode the hard-fought value a seller managed to negotiate," said Mackin. For example, structuring an earn-out or employment agreement can add significant value. For a seller that desires only partial liquidity, structuring a stock transaction allows the business owner to realize monies over time and capitalize on favorable tax deferred treatment.
Not Selling at the Optimal Time
Some sellers wait until death, illness, divorce or a myriad of other circumstances that force the sale usually at a substantial discount. The right time to sell is when the market tells you it is time.
Understanding and controlling the process is the best way to maximize value and obtain the rewards for your hard work.
About Generational Equity
Generational Equity provides mergers, acquisitions, strategic growth advisory services, and information for privately held and family-owned businesses to exit their companies successfully. Generational Equity uses a four-phase approach that includes education, financial analysis and reporting, sales documentation and deal-making ability to offer business owners an unparalleled level of commitment and experience, all focused on helping to release the generational equity and wealth in every business. Generational Equity is headquartered in Dallas, TX, has more than 200 professionals in North America, and was recently recognized by the M&A Advisor as the Valuation Firm of the Year. For more information visit the following websites at www.genequityco.com, www.gecpress.com or http://blog.genequityco.com/.
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SOURCE Generational Equity