This morning marked our last Access to Capital installment of 2012 – Business Valuation 101. We were joined by Chris Andersen, PCV Advisor and owner of Atlas Capital Strategies, Ariel Jaduszliwer of Pacific Community Management and Michelene Moayedi from Parties That Cook. Chris and Ariel spoke about the valuation process – tips, things to remember and things to avoid – and Michelene shared Parties That Cook’s experience with going through valuation, a process that was at once helpful and a headache. Below are some general valuation themes uncovered in this morning’s meeting. Please contact me at apentecost@pcvmail.org if you have any questions at all.
Types of buyers
1.) Strategic Acquirers (companies looking to expand)
2.) Financial Acquirers (private equity, wealthy individuals)
3.) Management/Employees
Questions to ask before beginning valuation:
1.) Financial: How much do you need in order to meet personal financial goals?
2.) Role: What role do you want after valuation (sit on board, leave company, etc.)?
3.) Management/Employees: What do you want the management and employees to achieve through valuation? What is most important – employee pay bonuses, long-term careers, etc.?
4.) Company: What do you want the company to look like at the end of the process? Is it a surviving brand, a family business or simply a sale?
What you can do right:
1.) Identify likely investor/buyer segments
2.) Align business and investor/buyer goals
3.) Determine value drivers for your specific industry and drive performance
What you could do wrong:
1.) Don’t get distracted and/or complacent and lose focus on business. Performance must stay consistently good to close any deal.
2.) Allow avoidable negative surprises to pop up, which will inevitably lead to loss of credibility.
3.) Simply wanting the process to be over, accepting deals that aren’t the right fit out of frustration or exhaustion.