News from The CBB Group

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Maximizing the Value of Your Exit Strategy

Do you have an exit strategy for your company?  Do you know what you need to do to get the maximum value for your company?  This article will give you six ways to maximize you company’s value.

This article addresses common misconceptions and mistakes that we have found business owners make when selling a company without an exit strategy in place.  Recognizing these misconceptions and mistakes, and how you can avoid them, come from three decades of selling privately held companies.  If you are looking at retiring and or selling your company in the next three years, this is a must read.

 

Having an exit strategy two to three years ahead of time allows you to maximize your company’s value. 

I fail to understand how good business men and women can invest 20 – 30 years of work in building a company that has supported their family, provided for retirement, employed countless folks from the community, supplied a great product or service to their customer base, but when asked if they have an exit strategy for their business, they look you straight in the eyes with a blank stare – like you just asked for their first born.

Just recently, my partner Bill and I had been called by the president of a multi-state wholesale distribution business that has historic revenues in excess of $15,000,000 annually to meet with him and the board about selling their company.  The President explained that their goal was to sell the business in the next 12 months as several of the majority owners were ready to retire.  As Bill and I started to ask our usual questions regarding the business it became very clear that the owners did not have an exit strategy and had done absolutely no work in preparing the company for sale.

To read the full article, click here.

How to Find and Attract Capital

If you’re company needs capital then this article is a must read.  We discuss the “how” and “where” to find capital in an ever changing landscape.

How to Find and Attract Capital for your Company

Company leaders who are the most successful in finding and securing capital are the ones that understand two things.  How to prepare an investment request, more commonly known as an offering memorandum and how lenders or investors evaluate risk and return.  This article walks through the process of how to prepare an offering memorandum and how to find capital.  When dealing with capital placement, it is paramount that you understand how lenders evaluate risk and return in addition to the different availability of capital.

Offering Memorandum:

The first step is the most time consuming but is also the most important.  I cannot over emphasize the importance of a well written and documented offering memorandum.  You will only get one chance to make a first impression regarding your investment opportunity.  A couple words of caution  when writing an offering memorandum,  be incredibly honest and upfront.  Under no circumstance hide anything that is negative.  In fact, inform the capital group about the issue and explain how you are overcoming the issue.  The last thing you want to create is an atmosphere of distrust with investors.  A well written memorandum should allow investors to come to a very quick decision regarding your opportunity. Most memorandums are split into four sections.

To read the full article, click here.

Finding the Street Value of a Privately Held Company

Summary, if you don’t understand the Value of your company how can you improve it?
Are you looking to determine the real (street) value of your company?  Are there too many opinions and methods for you / your team to work through? Do you need to straightforward way you can repeatably determine your street value?

This article will help you get there.

“What is the Value of My Business?”    

When dealing with the owners of a closely held business, one of the first questions we are asked is to determine the value of their business. The valuation of a company is different depending on who is doing the valuation. Banks value business differently than buyers. Buyers can be broken down into two main groups:  financial buyers and strategic buyers. Each has a different view of value.

Financial or economic buyers are willing to base value on assets, earnings, growth potential and return on investment. While financial buyers are looking for companies with growth potential, they usually base the price they are willing to pay on current and past performance, not future or projected profits.

Strategic buyers may or may not place much weight on the economics of the business and instead may have strategic reasons for acquiring the company. The reasons could include such benefits as distribution rights; the ability to eliminate a major competitor; gaining market entry without startup cost; patented products, and the reduction of manufacturing or production costs. For these reasons, a strategic buyer may pay a higher price than a financial buyer would. Strategic buyers represent less than 10% of the total buyers. As we do not recommend setting value based on this group of buyers.

To read the full article, click here.