You have spent blood, sweat, tears (not to mention time, money and sleepless nights) in building your business and now you are looking to cash out. How can you maximize the value of your business in the eyes of a buyer? Preparation. Make sure you understand the current market conditions in the industry and who are the active buyers. What… Read More
Pricing your service business for sale Valuation of closely-held businesses requires estimating future cash flows and then discounting those cash flows at an appropriate rate. Historical financial information is only important in so far as it suggests what to expect in the future. Historical information is never by itself sufficient—business conditions are constantly changing. Estimating future cash flows requires an… Read More
The case of law firms: An adventure Valuation of closely-held businesses is deceptively straight forward. It requires the discounting of future cash flows at an appropriate discount rate. Estimating future cash flows and selecting an appropriate discount rate are not easy, but they can usually be done. This process results in an estimate of what the valuation profession calls “fair… Read More
Law Firms – Overview Valuation of closely-held businesses is deceptively straightforward. It requires the discounting of future cash flows at an appropriate discount rate. Estimating future cash flows and selecting an appropriate discount rate are not easy, but they can usually be done. This process results in an estimate of what the valuation profession calls “fair market value” – i.e.… Read More
EBITDA, an acronym for Earnings Before Interest, Depreciation & Amortization, is one of the most widely used terms in the world of business valuation, mergers & acquisition, and financial analysis. One hears all the time that businesses are priced as a multiple of EBITDA—e.g. five times EBITDA. Why is EBITDA used this way and what does it really mean? Income… Read More
My business valuation clients are frequently surprised by the in-depth analysis required in order to do a business valuation. The classic statement of business value is the “present worth of future cash flows”. This statement requires determining two key variables: 1) a good estimate of future cash flows, and 2) an appropriate discount rate that is calibrated based on the… Read More
When valuing a business, I will sometimes ask the business owner what he/she thinks the business is worth without the owner. This question will elicit various responses. Occasionally, the owner will look indignant and say something like, “What do you mean? I started this business, built it up over 20 years, and am responsible for its success! I am the heart and soul… Read More
