Increase the Valuation even when company stops growing 

Increase the Valuation even when company stops growing 

Strategy, Valuation
Why would two companies in the same industry, with the same financial performance, command a vastly different valuation? The answer often comes down to how much each business is likely to grow in the future. The problem is that a lot of successful businesses reach a point where their growth starts to slow as the company matures. In fact, the price of doing a great job carving out a unique niche is that the specialty that made you successful can start to hold you back. If you make the world’s greatest $5,000 wine fridge, you may have a successful, profitable business until you run out of people willing to spend $5,000 to keep their wine cool. Demonstrating how your business is likely to grow in the future is one of…
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Your birth certificate and your exit plan

Your birth certificate and your exit plan

Strategy, Why Sell
In our experience, your age has a big effect on your attitude towards your business and how you feel about one day getting out and your exit plan. Here's what we have found: Business owners between 25 and 46 years old Twenty- and thirty-something business owners grew up in an age where job security did not exist. They watched as their parents got downsized or packaged off into early retirement, and that caused a somewhat jaded attitude towards the role of a business in society. Business owners in their 20’s and 30’s generally see their companies as means to an end and most expect to sell in the next five to ten years. Similar to their employed classmates who have a new job every three to five years; business owners…
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Danger of market timing the sale of your business

Danger of market timing the sale of your business

Deal Structure, Sale Process, Strategy
The other day I was speaking with a successful CEO in his fifties who runs a heating and air conditioning company generating eight million dollars in revenue and over one million dollars in profit before tax. Even though he was tired and nearing burnout, he was planning to wait another five to seven years before selling his business because he “wanted to sell at the peak of the next economic cycle.” On the surface, his rationale seems to make sense. If you speak with mergers and acquisitions professionals, they’ll tell you that an economic cycle can impact valuations by up to “two turns,” which means that a business selling for five times earnings at the peak of an economic cycle may go for as low as three times earnings at…
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9 Warning Signs You’re a Hub-and-Spoke Owner

9 Warning Signs You’re a Hub-and-Spoke Owner

Exit Planning and Its Benefits, Factors Affecting Business Saleability, Strategy, Uncategorized
If you were to draw a picture that visually represents your role in your business, what would it look like? Are you at the top of a traditional Christmas-tree-like organizational chart, or are you stuck in the middle of your business, like a hub in a bicycle wheel? If so you are a hub and spoke owner. As anyone who has tried to fly United when O’Hare has been hit by a snowstorm knows, a hub-and-spoke model is only as strong as the hub. The moment the hub is overwhelmed, the entire system fails. Acquirers generally avoid hub-and-spoke managed businesses because they understand the dangers of buying a company too dependent on the owner. Here’s a list of nine warning signs you’re a hub-and-spoke owner and some suggestions for pulling…
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