ESTABLISHING THE RIGHT VALUE IS KEY – in fact it is critical to a successful sale
Valuing Your Business
Mike Redman has helped a lot of people find success in buying and selling businesses.
Establishing the right market value of your business or the value of a business you want to buy is more complicated than it seems. It is in fact absolutely crucial to the success of the transaction. As the saying goes “If the price is right, the money is no problem!”
There are detailed cash-flow analysis, sales multiples, earnings multiples, and asset valuations to determine. There are also critical non-financial considerations to take into account. You need someone who knows what components really make a business more or less valuable.
How attractive is your business going to be when it is put on the market. Are there growth opportunities for the new owner, or are we looking at some ‘soft areas’ which could possibly lead to a decline in the business. How much reliance is placed on the direct involvement by the current owner – could a new owner take over the business and keep the business going without a hitch.
How about your competitors, are they aggressive and sharp, would they welcome the opportunity to attack your customers if the business was sold and those vital relationships that you have had with your clients fall away.
All these and other ‘non-financial’ considerations have a major impact on value. A careful analysis is required and the various risk factors weighed up to determine their impact on value of the business.
Mike Redman will look at the value of the business’s assets. He will consider the current inventory and equipment. With certain types of businesses, the premises, location and lease duration are extremely important.
Mike has the necessary technology to assess the business’s financial performance over time, so that he will gain a clearer idea of the business’s overall value. Mike is able to develop a company specific valuation model supported by an enormous database of historical sales in a wide range of industries, both in New Zealand and overseas. This enables him to provide his clients with market appraisals that are grounded in reality and avoids the lofty expectations created by academic formulas.
Every element of the business will be scrutinised by Mike to ensure the value determined is objective, rational and reflective of the market for those types of businesses.
Several different methodologies will be used to develop a valuation matrix, which will then be considered against the full risk and business assessment exercise referred to above. The final valuation will be derived from this process and is more likely to be a range, rather than a single figure. Together with you Mike will then determine the recommended sale price for the business.
Note that the value of a business is inextricably tied to the actual and perceived degree of risk associated with its future cash flows. The higher the risk, the lower the (present) value of those projected cash flows.
Mike will identify those specific risks which ‘attach’ to your business and if required, develop strategies to eliminate, minimise or mitigate these risks to ensure you receive maximum value for your business. It may well be that a more comprehensive business strategy will need to be developed to ensure you achieve your desired sale price.
Such a strategy could take weeks or in some cases many months to fully implement.
If you need to figure out the value of your business – you can count on Mike Redman to go above and beyond to find out what it’s truly worth. Mike has extensive knowledge in business valuations and will be totally focused on ensuring you get the most out of the sale of your business.
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Mike Redman is a licensed Real Estate Salesperson (#20039560) with DoubleWinkel Real Estate Limited (Licensed REAA08). All views, resources & opinions on businesssalepro.co.nz are of that of Mike Redman and his alone and are not necessarily the views, resources & opinion of DoubleWinkel Real Estate Limited.