3 Tips for Business Owners and Business Sellers – July 2020

3 Tips for Business Owners and Business Sellers – July 2020

Since the outbreak of Covid-19,  the business brokerage / investment banking world seems to change dramatically every 30 days.

As we enter the middle of summer, here are three tips we are giving business owners and business sellers:

 

1. After the 30 to 45 Day Shut-Down Starting in Mid-March, There is a Market Again  

But, banks and institutional lenders have gotten much more cautious, taking marginal buyers out of the market.

We are qualifying prospects more carefully so we do not risk wasting a lot of time on transactions that cannot be financed.

We do recommend that if you receive a good offer, take it seriously as it will be harder to obtain as many offers as before this started.

 

2. Run Your Business Like You are Going to Own It Forever Particularly During a Sale Process

Your best negotiation strategy is that you are making money and will keep running it if you must.  Be profitable every day.

Clearly, due to current circumstances, some businesses cannot do that.  They should not sell at this time unless they do not have a choice.   Unfortunately, there are going to be a lot of unavoidable bad outcomes due to Covid.

If your business is in the middle ground, make the tough choices and get pricing up if necessary. Always work toward having your costs in line with your likely revenues.

 

3. Good Companies will Attract Buyers

The discount you will need to give from your February 2020 price is going to depend on the uncertainty in your industry, your supply chain, your customer concentrations etc.

The sense of risk has been elevated.  How high that perceived risk is will vary from no perceived increase in risk with liquor stores to incredible going concern risk with high end sit down restaurants.

Most businesses are somewhere in the middle and it appears they can sell with price reductions that make sense compared to the increase in risk.  Buyers and sellers may consider forms of risk sharing through earn outs and the like.

If you would like to learn the value of your business as you make important decisions, please connect with us. We would be happy  to discuss your business’ market appeal.

 


Clients choose Harvest Business Advisors for our accurate business valuations and our proven ability to deliver the highest price in the smoothest sale transaction possible. Harvest Business Advisors provides business brokerage, business valuation, and business succession planning services. We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland and Virginia. Connect with us at info@harvestbusiness.com or 877-838-4966 to discuss selling your business, ordering a business valuation or buying a business.

 

NACVA’s “Around the Valuation World” Webinar- 1/27/2020

NACVA’s “Around the Valuation World” Webinar- 1/27/2020

“Around the Valuation World”, a monthly business valuation webinar sponsored by NACVA,  features current topics by leading experts in the Valuation World.

The next episode will air on Monday January 27 at 1 p.m. ET and will be recorded.

The show will begin with Core Body of Knowledge, a discussion featuring Mike Gregory, Janae Castell  and James Ewart reflecting on Top 5 Critical Issues from 2019.

Next, during Expert Insights, Ed Mofrad will be interviewing Paul Hamann (Founder and President of RC Reports) on Reasonable Compensation for Closely Held Businesses.

Melissa Gragg and Stephen White discuss two hot topics, highlighting Cyber Security and Business Valuations: Increasing Value & Reducing Risk on Valuators and How IRS Guidance Makes it Impossible to Comply with Section 2801 in 2 Hours or Less.

 Kim Tavares will review recent Valuation Verdicts focusing on key Federal  and/or State Case Law Summaries.

Carl Steffen brings his expertise to an often-requested topic, sharing his Tips on Standards.

To close this month’s program, Brien Jones will discuss Growing and Building Your Brand, important to both new and established practices.

We expect this show to be packed with essential and timely information and hope you can join in live or listen to the replay later.

“Around the Valuation World” is a monthly webinar on business valuation topics hosted by the NACVA and edited by Greg Caruso of Harvest Business Advisors.  For more information please visit the “Around the Valuation World” website.

 

Business Valuation: Who does the Valuation Analyst Represent?

Most business valuation analysts belong to associations (such as the AICPA for CPA’s, the NACVA for CVA’s, USPAP for ASA’s) that require certain standards be followed in preparing a business valuation.  These business valuation standards tend to be quite rigid for a Conclusion or Opinion of value and more flexible for a Calculation of value.  Valuators doing work to these standards (which are required by any group the valuator belongs to and can be voluntarily agreed to by anyone who understands the standards) always represent only their findings (the Opinion found or the Calculation estimated).  This means they do not represent you or any other party even though you pay them and you may retain them.

Third party obligations when performing a business valuation require the valuation analyst to be impartial.  An example is the bank’s interest in having a fair and impartial business valuation if the analyst is preparing a valuation for a prospective loan and those obligations override allegiance to you.

If the valuator has a conflict of interest that must be stated in the report and it will cause the opinion to not be fully compliant.

Finally, if your purpose is for litigation or potential litigation such as divorce or partnership disputes all experts (including valuation experts) must be impartial or they can be disqualified by the court.  Court expert witnesses represent the court to allow the court to better understand a matter.  Having said this, in many matters experts hired by the opposing sides may find very different values.  Usually this is because facts are not agreed to, risks are assessed differently because underlying assumptions are seen differently by the parties, therefore the found value or result can be quite different.

  • Clients choose Harvest Business Advisors for our accurate business valuations and our consistent ability to deliver the highest price in the smoothest sale transaction possible. Harvest provides business brokerage, business valuation, and business succession planning services. We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at info@harvestbusiness.com or 443.334.8000 to discuss selling your business, ordering a business valuation or buying a business.

 


Clients choose Harvest Business Advisors for our accurate business valuations and our consistent ability to deliver the highest price in the smoothest sale transaction possible. Harvest provides business brokerage, business valuation, and business succession planning services. We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at info@harvestbusiness.com or 443.334.8000 to discuss selling your business, ordering a business valuation or buying a business.

Ed Davis, Business Broker and Business Valuation Expert is participating on fuel oil panel

Ed Davis, CPA, CVA, Business Broker and Business Valuation Expert in the Mid-Atlantic

Ed Davis, CPA, CVA business broker and business valuation expert, will be participating in a panel discussion at the Atlantic Region Energy Expo in May 12-14 at the Taj Mahal in Atlantic City, New Jersey.  The Atlantic Region Energy Expo is an annual trade show for companies that deliver fuel oil, propane and alternative fuels (bio) to a variety of residential and commercial customers. The topic, that all owners of privately owned companies think about, “Navigating A Successful Transaction”, will be hosted by Steve Abbate, Managing Member, Cetane Associates, LLC. Click here for more information.

Connect with Harvest Business Advisors today – email info@harvestbusinessadvisors.com or call 443.334.8000