Ten Tips for Aspiring Intermediaries When I decided to get into this business at the old age of 28, my only advantage was a full head of brown hair, a youthful charisma, a sharp analytical mind and a strong desire to succeed. I had spent the prior 10 years in academia in undergraduate and graduate studies in engineering followed by a brief stint in teaching. I had absolutely no knowledge of business and finance, and very, very minimal experience in sales. Starting in 2006, I was also jumping into a pool as the water was draining out the bottom. In fact, [...]
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So far Laura Wright has created 17 blog entries.
EBITDA Engineering Before Selling a Business Takeaway: Take control of your financial statement by learning how accounting policies can positively impact EBITDA. EBITDA is a commonly used metric for the valuation of mid-market businesses. Now, the appropriateness of using EBITDA can be debated, but the fact is that most estimates of business value start with this number. So needless to say, increasing EBITDA will increase the value of a business. Most often, business owners of privately held companies are motivated to minimize taxes. They will try to expense as much as possible and even defer recording revenue to reduce taxable income. Business brokers or investment bankers will often normalize the results of a [...]
Can Your Clients Sell their C Corp Stock Tax Free? by Al Statz In some cases yes. Congress has long recognized that small businesses investment is an important driver of the U.S. economy. Back in 1993, to incentivize investors, they developed a rule that eliminates federal income tax on some (later revised to all) of the gain on the sale of certain C Corporation stock issued after August 10, 1993. As M&A advisors we should try to point out potential tax breaks to clients and in this article I’ll discuss Qualified Small Business Stock (or “QSBS”) from a business sale perspective. QSBS Requirements [...]
Understanding Return on Equity for Privately Owned Businesses I am a big fan of Robert Slee, an investment banker, author, and investor in the middle market. His most well-known book is Private Capital Markets: Valuation, Capitalization, and Transfer of Private Business Interests, and his teachings are centered around the following key fundamentals issues plaguing the lower middle market: Value creation occurs when returns on equity are greater than the cost of equity; 70% or so of private business owners are not increasing the market value of their firms; and Most business owners are not generating returns on equity investment greater than their company’s cost of equity capital. [...]
A Closer Look at What Drives and Influences Business Valuations Helping business owners understand what drives an enterprise valuation and what specific actions should be taken in order to enhance that value are two of the most important duties of a mergers and acquisitions advisor. Working toward a maximum valuation is a best practice within any business. Knowing what parameters drive value, what buyers want to see and the steps that increase business valuations should be important to every single business owner. It’s crucial for those looking to sell soon or in the future as well as those who plan to keep the business for the long [...]
New Research Shows an Unusual Problem on the M&A Horizon Everyone's heard about how Baby Boomer business owners will be retiring, and the wave of business successions/exits that will occur as a result of those retirements. But there's a problem that almost no one is discussing. Our research clearly shows that there aren't enough buyers for all those businesses. Here’s why and what you can do about it. The SBA reports that there are roughly 6,000,000 small employers in the U.S. Of those 6 million businesses, approximately 3,600,000 are owned by people over 50 years old (Baby Boomers) and about [...]
The Importance of Business Valuation Business owners spend considerable time and energy trying to enhance company value by developing growth plans with well-defined goals. These plans are designed to maximize value over time, but it’s hard to achieve those goals without knowing where to begin. Not only do owners need to understand what their business is worth today, they also need to know what supports and drives that value. Far too often, owner overconfidence or apathy causes this step to either be neglected or downplayed, or at a minimum, based on incomplete data or conjecture. In this case, a valuation [...]
Avoid Leaving Money on the Table Key Steps to Simplify M&A Working Capital Bryan Graiff, Transaction Advisory Partner, Brown Smith Wallace Dan Schoenleber Transaction Advisory Principal, Brown Smith Wallace Working capital is one of the most complex areas of transactions. Other than a rep and warranty claim, it tends to be one of the most contentious post-closing disputes that often requires litigation, or the threat of litigation, to resolve. While working capital is simple to define – current assets less current liabilities – problems can arise from lack of experience. Without proper working capital procedures in a transaction, either side could [...]
Takeaway: A trust advisory committee provides ongoing support, guidance and education for trustees and beneficiaries. It is very common for family enterprises to have a family trust in place. On a very basic level, someone (the settlor) transfers assets to the trustee (often one or both parents) to hold legal title to the trust’s assets for the benefit of another — the beneficiary (often the rising generation and maybe the parents). The legal relationship among the settlor, trustee and beneficiary is set out in the trust deed. Stated this way, trusts sound deceptively simple, yet they are largely misunderstood and rife with challenges, complexities, [...]
Is Your Business Ready to Sell? By Sam Thompson Selling your business will probably be the most challenging undertaking that you, as a business owner, experience. Most likely, your business is the largest financial asset you have, so make sure that you put ample time and energy into selling your "baby." I owned a hospitality business for 29 years and I can tell you that selling my business was much more difficult than starting it. Ideally, you want to allow at least two years in preparation to sell your business. Strive for the business to operate without you. Make certain that [...]