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FAQ

Frequently Asked Questions

  • Someone told me businesses are worth one year of Annual Revenue. My business has $1,000,000 of revenues so it is worth $1,000,000?  Why do I need an Initial Value Assessment?"
    ANSWER: First and foremost, you have put your life into your business - and understanding its value is worth more than a 5-minute “rule of thumb” analysis. All businesses are unique. It's not as easy as choosing the middle-ranked company in some NAICS code rule-of-thumb guidebook. Value is dependent upon many factors – but can be broken down in its simplest form as: Earnings X Pricing Multiple. The Pricing Multiple is based on risk. Risk is based upon many factors of your business and the industry it operates within. We analyze over 54 different value factors when analyzing your company and determining risk, pricing multiples and our Initial Value Assessment determination. This process is similar to what a potential buyer analyzes when making a determination of the value of your company and going through the purchase decision process.
  • I've already had my CPA value my business. What does your Initial Value Assessment provide beyond a typical valuation?
    ANSWER: This analysis is well worth the investment. Our report: - Analyzes 54 Factors of Value of the Company to its Industry - Analyzes the Company to Industry Pricing Multiples - Determines the Saleable Value of the Business - Determines the Income Gap - Determines the Value Gap - Provides a RoadMap to Increased Value - Actions to “De-Risk” and Increase the Pricing Multiples - Actions to Increase Company Earnings - Prioritizes activities for maximum value increase compared to effort required Our report not only captures a snap shot in time, it is forward-looking. The value of the report lies within identifying the “De-Risking” and Earnings increase activities, and then prioritizing them. This is a RoadMap to Increased Value. The company is worth 67% more – with a 33% increased multiple and a 25% increase in earnings – All realistic and obtainable goals. Planning and relentless execution go a long way. This is a real example which took a little over a year to produce.
  • What Value Metrics are used in arriving at Company Values?
    ANSWER: - Price to Revenues - Price to Owner Discretionary Earnings - Price to EBITDA - Price to EBIT - Price to Gross Profit - Price to Investment
  • How are pricing (value) metrics determined?
    ANSWER: By informed judgement and sale price information for similar companies that have sold. We do not just take the average or middle company and compare to yours. We analyze the industry and your company to arrive at reliable pricing multiples that are appropriate to the risks associated with your company and the industry it operates. Our analysis looks at companies of similar revenues, employee base, geographic location, product or service offerings, and other industry-specific nuances.
  • What is the “Income Gap”?
    ANSWER: This process compares your current company earnings to the earnings of companies operating at 'Best in Class' (top 10%) in your industry. It is a great tool to establish key KPI benchmarks that you should be targeting.
  • What is the “Value Gap”?
    ANSWER: Similar to Income Gap, the Value Gap compares your current company earnings and pricing multiples compared to companies operating at “Best in Class” earnings and pricing multiples. This establishes key areas for improvement in your business.
  • The above is great information but how is it useful? We are all busy with our current day-to-day business activites and personal lives, and the last thing we need is another 'to-do' list or book report to be thrown in a drawer to collect dust."
    ANSWER: We understand you do not need a report with theories and “what-if” scenarios. That is not us. It is great information but not useful unless absolutely selling the business or being able to execute on de-risking the business and increasing earnings. We are different in that we assist at levels you are comfortable with in the execution of the re-risking and earnings improvement activities. We can lead and “quarterback” the initiatives, or, can help in the execution of the activities themselves. Our involvement is up to you and your management teams. Dan Welch has lead businesses ranging from a low of 2 and as many as 95 persons – he understands the challenges that small and mid-sized businesses face and how to get things accomplished within them.
  • How long does the Initial Value Assessment process take?
    ANSWER: The Initial Value Assessment report is typically performed within 20 business days from the time the engagement letter is signed. This varies depending on the ability of our clients to provide the necessary data for our analysis.
  • If I want you to sell my business, how long does this take and how much does this cost?"
    ANSWER: This is a complex question that has to take into account many factors. First, we cannot guarantee that all companies will sell. Current data shows that 70% of businesses offered for sale do not sell. Businesses we engage with typically sell within 8 months and near the intended sale price. Fees typically follow scaling that ranges from 3% to 8% depending on sale price, with lower percentages for the higher valued companies ($10M or higher) and higher percentages for lower valued companies ($1M or lower).

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