PART 2 - What to consider when determining the value of an M&A Advisor. Is it worth the fee?

Every skill we master involves a learning curve - from driving a car, or attempting athletic endeavors, to completing business transactions with myriad accounting, strategic and legal complexities. Most people would agree that practice improves our performance. Taking this into account, when you think about selling your business do you really want to handle such an important financial transaction without the experience of handling other similar transactions?

Very basic, but important issues to consider when a business owner is contemplating an exit event. 

PART 1 - How much is my business worth, and why does the structure of the transaction matter?

Ever wonder to yourself, "Why hire an outsider to sell my business when I have grown it and know it better than anyone else?" Fair question.  Given the often towering obstacles CEOs and owners have overcome in building up a business, and bringing it to the point where it becomes attractive to a strategic or financial acquirer, that confidence is understandable.  Some CEOs and Owners think M&A is a do it yourself type of transaction.  However, the skills and expertise gained from growing a company are not necessarily automatic qualifiers to handling the single largest financial transaction of your life. 

In his widely read annual letter to shareholders, Warren Buffett often includes a few folksy comments that provide pearls of wisdom and common sense for all of us.  One of my favorite pearls is  - "It's only when the tide goes out that you learn who's been swimming naked."

Below are a few pearls of wisdom for entrepreneurs (and all of us) that appear in Mr. Buffett's 2009 annual letter to Berkshire Hathaway's shareholders.

There are 54 factors that affect the value of any closely-held business. Below is a list of the top 10 factors that sophisticated buyers look at when determining the price to pay for a business.  They are not listed in order of importance, but taken together, these factors directly impact the value of any business.

Can you handle the truth? Of course you can - if you really want to sell your business!

I'm still amazed at how many business owners do not understand the importance of knowing the "realistic" value of their business before they decide to sell their company. In this "breakthrough business strategy," my goal is to help you understand how going to market with a realistic price and realistic expectations is essential to your transition success.

In our investment banking practice, most clients come to us wanting to know what their company might be worth if it were sold it to a third party buyer, a member of management or to the employees. As a result, clients want a clear idea of the value of their company and how it impacts their future financial security.