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- Download Green Exit | Principium Group: Mergers & Acquisitions
- Myth #1: Private Equity is a real option for most sellers:
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- Myth # 2 Your Company is worth 1x revenue or 5x your earnings:?
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Understand this , earnings or free cash drives the value of your organization not revenue. The more profitable a company is the more valuable it is period. Historical performance of more than 12 months becomes less important in an analysis of value. How are you trending? Are you on budget for your plan?grouz-lait.com/layouts/2018-12-15/cebot-january-5.php
Here’s How Landscapers Can Legally Stuff an Extra $22,014.63 in Their Pockets by December 31, 2016
We support not paying more taxes than necessary, but this becomes a balancing act equation and thus it is important to coordinate a profit plan with tax planning and with the timing an of an exit. Be sure to be diligent in recasting financial performance to include add-backs, depreciation, and interest. Is your company marketable? Revenue ruling defines value as:. So what factors are important and how does it affect your multiple?
Each deal is unique. In every transaction there are motivating factors for sellers and buyers. A good exit strategy is often time executed and planned over a 24 month time period. Market conditions are having an impact on deal structure. Deal structure means how and when someone gets their money.
We say structure kills more deals than purchase price or valuation. Often times there are earn-outs or pay-outs tied to profit or revenue.
This is due to economic conditions, pricing and competition. That being said it is negotiable and each deal is unique.
Your deal and deal structure will only be as good as the team who negotiates it. Beware, as the industry is full of pretenders. If an advisory team has not closed more than 12 deals in the green industry then keep looking. Do you want a heart surgeon who is performing his first surgery? Same principles apply here. Get going! Make sure your operating plan coordinates with your exit strategy. Get it done!
Download Green Exit | Principium Group: Mergers & Acquisitions
However, we all have to retire some day. Your inevitable exit from the business is somewhere on the horizon whether you have allowed yourself the time to reflect on this or not. Further, most entrepreneurs anticipate that selling their business will be the largest single source of funds for their retirement. Knowing what your business is worth can give you a solid platform from which to make your financial decisions, like: How much can you expect to sell for?
Is this enough to fund my retirement?
And what do you need to do before selling? If the value today is enough to meet all of your retirement needs then you can proceed to the sale. You are responsible for all selling, client relationships, and scheduling. You pay the bills and negotiate with vendors and deal with insurance. You also spend a good amount of time out on job sites. Sound familiar? In that context how much is the company worth to a buyer?
Myth #1: Private Equity is a real option for most sellers:
Not much. In most transactions the buyer wants to see you exit the business. We call this concept Personal Goodwill. In the context of a sale it does not add value to a company- afterall, how could a buyer purchase it? In order to enhance the value of your business you will want to make necessary changes to show that your business can exist, thrive, and grow without you.
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Two quick fixes for shifting the weight of this personal goodwill are to:. Create well-defined systems and processes. How do you run your business? Is it all in your head?