I just got out of meeting with a potential client that recently attended a national sell-your-business workshop. There have always been one or two national companies putting these on (Geneva Group, Great Western/GW Equity and The March Group among others). They can be informative, and the pitch at the end is usually to sell you a valuation and/or engagement to sell your business.
The aspect of this I don’t like is that this seminar company charges to do a financial analysis and opinion of value, and during the seminar they talk about “the hidden value” and “off book assets”. They are clearly raising hopes that your company has hidden value that can be unlocked and that can be exploited to increase the selling price.
For most companies that just isn’t going to happen. Most definitely the positive aspects of the business need to be identified, emphasized and clearly articulated in “the book” and in discussions. There are many quality M&A firms that can research and analyze a company, and create a selling prospectus. That is important, but in my opinion that isn’t the secret sauce in maximizing value.
I’ve seen a couple of these valuations, and the ones I’ve seen have “unlocked hidden value” by placing a value on future sales and earnings. In one case the company (with the initials GW) actually did the forecast for the business owner. We asked the business owner (as a buyer would) how he came up with those numbers and he said, “I don’t know, GW did it”. That unlocked value probably isn’t going to be realized in his case because having an inflated value based on future sales may make the present owner happy, but buyers just don’t fall for that unless there is very compelling historical and present evidence to support the growth.
If there is any “secret sauce” for maximizing value, it is in the marketing of the business. Maximizing value for middle market businesses means searching for, and engaging with, the most appropriate buyers. Pay not for a valuation, pay for searches, mailings, advertising campaigns and telephone campaigns that can directly impact the value.