Understand what factors play into valuing your business when it’s time to sell.

You typically only sell your business once, so it’s important to make sure you plan early, know your options, and stay informed. Business valuation experts help ensure you don’t leave money on the table or pass up an opportunity you ought to take.

On December 8, 2020, Edward Fowler, Forensic Valuation and Litigation Support Partner at Briggs & Veselka Co. , joined UBS Financial Services’ Josh Pottinger, Senior Vice President, and Jason Chirogianis, Senior Portfolio Manager and Senior Vice President of Investments, to discuss ways business valuations help business owners and entrepreneurs avoid costly mistakes as they manage monetizing their ownership position, the process, and life after ownership.

Key Takeaways:

  • Most valuations are done under the standard of fair market value, which assumes the prevailing economic environments at the time of the valuation.
  • There are three generally accepted valuation approaches: the asset approach, the market approach, and the income approach.
    • The asset approach is when you look at the balance sheet as reported on your financial statements and you adjust the assets to the respective fair market values.
    • The market approach is trying to look out to the market for indications of value – e.g., sales of 100% of similar companies, comparable publicly traded companies’ stock prices, etc. – to better understand what the business may be worth.
    • The market approach is trying to look out to the market for indications of value – e.g., sales of 100% of similar companies, comparable publicly traded companies’ stock prices, etc. – to better understand what the business may be worth.
  • The income approach determines how much cash flow the business can reasonably expect to generate in the future so a buyer can decide the desired rate of return on the investment, anticipating future cash flows and considering the risks of that investment versus other investments in the market.
  • Business valuation experts can determine an optimistic, pessimistic, and most likely future projections scenario, but the recommendation is to focus on the most likely scenario. The more supportable and reasonable the future projection calculations are, the more comfortable a buyer is. This should result in a lower rate of return requirement, which should translate into a higher value to the business owner. It’s all about increasing cash flow and reducing risk.
  • While valuations are grounded in accounting and finance, you also have to look at qualitative factors – e.g., strength of management team, having systems and processes in place, culture, etc. – in order to have a valuation that makes sense.
  • Most business valuation reports cite the IRS Revenue Ruling 5690’s eight specific factors to consider in a valuation, as well as refer to Porter’s Five Forces to evaluate a business within its own ecosystem.
  • Even if you’re not selling your business now, make sure you maintain diligent financial records and documentation so you can start succession planning – including a business valuation – 3-5 years prior to retirement or the sale of your business.
  • When vetting a valuation expert, ask if their valuations have ever been challenged by the IRS or other parties and what was the outcome. Also ask what types of tools they use during valuations, like if they subscribe to merger and acquisition databases.
Read the transcription here

[Josh Pottinger, UBS Financial Services] Welcome to Lightning in a Bottle, a podcast that addresses the needs of business owners before, during, and after they sell their company. As a business owner, you owe it to yourself, your family, and your employees to know your options, to be informed, and to plan early.

We hope you enjoy this program, and if you have any questions, feel free to drop us a line by visiting our team’s website at www.ubs.com/atx.

This is your host, Josh Pottinger, and joining me is my longtime business partner Jason Chirogianis, and together we run ATX Wealth Partners, a private wealth management team here focused on being a trusted resource for business owners, entrepreneurs, and the professional advisors that surround them.

Jason, welcome. How are you?

[Jason Chirogianis, UBS Financial Services] Good afternoon, Josh. I’m well, and yourself?

[Josh] I’m good. I’m excited about our guest today, Edward Fowler.

Edward, are you there?

[Edward Fowler, Briggs & Veselka Co.] Hello, Josh. Hello, Jason. How are you today? Thank you for having me on your show!

[Jason] Good afternoon.

[Josh] Good deal. Well thank you for hopping on the call with us. Given the circumstances, we’re doing this remotely here; normally we’d be doing this in person.

Just a quick high-level overview of what we’re going to be covering today. Today’s conversation is all about business valuation and what you need to know to avoid some costly mistakes.

According to CNBC, 78% of business owners expect to fund their retirement through the sale of their business. Yet, according to the IBIS World Industry Report, 98% of them haven’t had an appropriate valuation done on their business. Which seems pretty crazy, the fact that they’re relying on such an important asset and don’t really have an idea of what the current value is.

This is one of the big reasons why we wanted to bring Edward on the show today. Edward Fowler is with Briggs & Veselka. Edward has over 30 years of experience, with a background in management consulting, accounting, investment banking, and business valuation. Suffice to say, Edward knows his stuff.

So, let’s go ahead and kick it off, guys.

[Edward] Sounds great, thank you.

[Josh] I figured we’d kick off the podcast here just by walking through some of the reasons why an owner would want to conduct a business valuation, So, Edward, maybe walk us through a couple of scenarios here.

[Edward] Yeah, sure. We do a lot of valuations for a lot of different purposes. Probably the most often reason we do business valuation is going to be for either gift or estate tax planning, estate tax recording, mergers and acquisitions – if you’re buying or selling a business, we’d come in and help.

And then sometimes you need a fairness opinion to determine if the transaction is fair from a financial point of view. That may be involving a change of a controlling interest in a business where you’re buying or selling 100%. Or you may be in a situation where you’re buying or selling an individual shareholder’s stock where somebody may be retiring or you need to buy somebody out – so, not necessarily a change in control, but maybe an acquisition of a minority interest in a business.

We’ve valued businesses for employee stock ownership plans (ESOPs). We value businesses when they’re issuing stock options to employees. And under 409A of the Revenue Code, you have to have the strike price be at fair market value so there’s really no tax consequences. Sometimes when a company is valued – when somebody acquires a company, it needs to be valued for financial reporting purposes under accounting standards. To comply with GAAP accounting, you need to report the acquired company on your balance sheet at fair value, so we go in there and assist with valuing certain intangible assets that you might be buying.

And then, of course, we do some litigation support work where Shareholder A may need to be bought out because somebody triggered the buy-sell agreement, kind of a business divorce. Or a marital dissolution where a couple owns a business and they’re getting divorced and they have to divide up the marital assets, so we need to determine the value of the business.

Of course, if you own a business, you may have suffered some sort of economic damage, and we can do lost profits and damage calculations.

You know, a lot of the work we do is good solid blocking and tackling valuation work for gift and estate tax or transactions. We do a lot of different things. I’d say we’re valuation specialists and industry and purpose generalists.

[Josh] Thank you, Edward. That was a great overview on some of the reasons to conduct business valuations.

Moving along here, let’s kind of move into some of the definitions of value – such as fair market value or investment value – and why is that important to understand from a business owner’s perspective?

[Edward] Sure. Most of the valuations we do are done under the standard value, which is fair market value. And fair market value is defined as the price expressed in terms of cash equivalence in which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller when they are acting at arms’ length in an open and unrestricted market and when both have no compulsion to buy or sell and when both are reasonably knowledgeable of the relevant facts.

That is the standard of value most commonly used. It’s used in gift and estate tax, it’s used for transactions, buy-outs, etc. A lot of buy/sell agreements say it’s going to be fair market value. The important point is it’s a hypothetical buyer and seller; it’s kind of the man from the street. It assumes that prevailing economic environments at the time of the valuation. So, it’s really more from a financial perspective: what is the fair market value of this to “the man” or “the person” from the street.

That’s different from investment value, which is really the value to a particular investor. And that can actually include some strategy – if somebody really wants your business because it’s a perfect add-on to their product or service line, they may have a strategic purpose that they’re willing to come in and perhaps pay more than fair market value. Or they may have some synergistic savings where they can come in and perhaps save on trucking because they can put your product on the same trucks and deliver them to the same clients. They may have some cost savings or may be able to save on the back office staff for more cost savings.

It’s the value to the investor, and that could be different from fair market value, which is that hypothetical willing buyer and willing seller from the street. This is looking at it more from the financial perspective.

[Jason] Edward, if I may. It just so happens we’ve been privy to some of your work as we’ve reviewed your valuation work on behalf of various clients. A recurring theme is your varied approach to coming up with a fair market value and your reports – as a matter of fact one came through last night and I think it was close to 150 pages and you discussed various valuation approaches such as asset approach, a market approach, an earnings approach. You spoke to why one may or may not be appropriate for a particular situation. Can you open up the hood to that a little bit for our audience and discuss why one approach may or may not be a good fit?

[Edward] Absolutely. I will say there are three generally accepted valuation approaches: the asset approach, the market approach, and the income approach.

The asset approach is when you look at the balance sheet as reported on your financial statements and you adjust the assets to the respective fair market values. So, you mark all the assets to their market values, you mark liabilities to their market values if they’re something different than was reported on the balance sheet. Then, if you subtract the fair market value to liabilities from the fair market value to the assets, you end up with the value of the equity and an indication of the fair market value of the company’s stock.

That’s the asset approach. And we typically would use that if we’re valuing a holding company that’s not really an operating business or if we’re valuing a company that’s an operating business and you’re valuing 100% of that business and it may be that the company is worth more in liquidation than it would be as a going concern. That being the case, we don’t use that approach very much for going concern businesses.

We do use that approach when we value holding companies, like I said. And a lot of those holding companies may be partnerships such as family limited partnerships that own real property or marketable securities. We’ll take their balance sheet, we’ll adjust it to fair market value, we’ll get down to the pro rata share of that value of equity on a fair market value basis because if it’s a minority limited partnership interest or a minority membership interest and an LLC (limited liability company), it’s subject to discounts for lack of marketability and lack of control to get to fair market value.

The market approach is when you go out to the market and you look for indications of value based on actual transactions in the company that you’re valuing. You may have a situation where the company you’re valuing just recently bought out some shareholders or they recently received several offers to purchase the company. You can look to those indications of value to say, “Well, if they’re good arms’ length indications of value, that’s a pretty strong indication of that business or business interest.”

If you don’t have transactions in that company, we look to the market, and that’s the market approach. And we look to the market to say, “Are there any publicly traded companies that are comparable to this business in terms of size and markets and profitability and various factors?” Can we go to the public markets and see what the stock of those businesses are trading for in terms of pricing multiples, such as priced revenues, priced earnings in which their stock is trading for? How would that relate to the value of our particular business?

You can also look to sales of 100% of companies – and we subscribe to a number of merger and acquisition databases that provide us with that data. Or sales of typically controlling interests of privately held companies – that data is submitted by merger and acquisition professionals or business brokers, and there are a couple of databases we subscribe to. Again, we’ll look to those businesses and those databases to find transactions of very similar businesses with similar revenue size and profitability. What did they trade in terms of priced revenues or priced earnings or priced EBITDA (earnings before interest, taxes, depreciation, and amortization)?

Really, the market approach is trying to look out to the market for indications of value as to what the value of the business you’re valuing may be worth.

The income approach, at a high level, is a present value/future expected benefits. We usually measure the benefits stream in terms of cash flow. A lot of the work we do as valuation professionals is look through the accounting to get down to cash flow. That’s really where the rubber hits the road and what the business owner gets to take home at the end of the day in their pocket. So, what the income approach is doing is it’s trying to determine how much cash flow can your business reasonably be expected to generate in the future, and if you’re going to buy that business, what type of rate of return would you want on your investment, anticipating those future cash flows, considering the risks of that investment versus other investments in the market.

[Jason] I’ll follow up to that, in regards specifically to the earnings approach. When a client provides the company’s projections – let’s say through and including years 2023 and 2024 – do you take those projections at face-value without any pushback or do you weigh a probability of success?

[Edward] We will always ask questions and make sure we understand 1) the premise of the projections. We start our valuation analysis with an analysis of the historical financials. And the historical financials – particularly the operating performance of the business – we study it, but it’s really only as good as it helps you predict the future and what’s a normal anticipated cash flow stream going forward.

We look at the past, understand the operations of the business, its profitability. We like to go out and visit management, do a site visit, learn about the business, really do a deep dive and understand it. And then we’ll get the projections from the management, and we’ll compare it to the history, and we’ll go, “Okay, why is this factor different, or why is that factor different?” Not necessarily questioning the projections per se as much as understanding the projections and why.

The reason why we want to do that is we want to know what’s the riskiness of being able to achieve those projections. And the riskiness of being able to achieve those projections is going to have a direct relationship to the type of rate of return you want. The higher the risk of those projections not being made indicates there’s a lot more uncertainty, so I’m going to want a higher rate of return on my investment in that business because I don’t believe these projections as much. It lowers the value because of the higher rate of return requirement is also going to result in a lower value that you’re going to get for your business.

What I tell business owners is: you can have optimistic, pessimistic, and most likely, but I’m going to focus on the most likely. I’m always wanting to get the best estimate of future financial performance we can get, and the more supportable that is and the more reasonable that is, the more comfort a buyer would have in those financial projections. And therefore, they probably should have a little bit lower rate of return requirement, which should translate into a higher value to the business owner.

[Jason] It just so happens, in regard to this valuation report that was provided to us last night, the fair market value for this particular company was less than the IPO exit, it was less than the liquidation value, it was less than even the arms’ length recent transactions that had taken place within a somewhat recent proximity; not much less than the third of those – the recent transactions.

But I noticed that you had attributed 40% of your fair market value weighting to the recent transactions, 20% to an IPO exit, 20% to a liquidation scenario, and then you attributed 20% weighting to what if the company doesn’t achieve its goals where all of the value was allocated to the preferred shares with no value flowing down to the common share. So, on that note, that 40/20/20/20 ratio, if you will, is that pretty standard or do those weightings vary much depending on the particular situation that you’re assessing?

[Edward] I would say it’s very circumstance driven. As long as you are staying within the three generally accepted valuation approaches.

I believe the valuation you’re referring to is a high-tech startup type of business. Being here in Austin, we valuate a number of those types of businesses. That’s the type of business to where if it works out, it’s going to be great for everybody, it’s a venture capital-backed business. But you also have to recognize that 80-90% of venture capital-backed investments don’t work out as planned. The 10% which are out-of-the-park homeruns end up paying for the other 90% which are either moderately successful, breakeven and get your money back, or outright failures.

When we look at that particular scenario, yes, we had some transactions and the actual company stock between knowledgeable investors, therefore we put the most weight to it being a market approach indication of value, weighing some income and projections. Frankly, if I recall this report correctly, we put 20% weight on “you know what if this company never makes it to IPO and ultimately does not work out”. And we were valuing the common stock of the company.

If the company doesn’t work out, with the preferred stock that they had in place and the preferred stock preferences, such as preferred dividends, incorrect crude preferred returns, ultimately the common shareholders wouldn’t receive anything unless this made its relatively high financial projections going forward.

[Josh] How long does it take you from start to finish? I mean, I know that it depends on the sector, the size of the business, and I guess the maturity of the business. But, generally speaking, what do you typically budget?

[Edward] Generally speaking it takes 4-6 weeks to do a valuation, but that’s highly dependent upon getting the necessary information.

[Josh] Yeah, that can be a bottleneck.

[Edward] That, and what we have on our platter at the time. But we get the information in and we like to get working on it. A typical turnaround time is going to be 4-6 weeks with the wildcards being not getting the necessary information.

And yes, to your point, if it is a very complex company, if it has multiple subsidiaries, or it has a complex capital structure, that can take some more time to analyze. Or we’re typically just pretty busy, which is a good thing, and what all we have going on at the time.

[Josh] Right. Good work there.

The other topic I wanted to bring up in our conversation today is: in our own experience in working with our business owner and entrepreneur clients, a lot of owners tend to focus in on quantitative factors like revenue and expenses versus some of the qualitative aspects like strength of the management team and having systems and processes in place, the culture.

I wanted to bring up some of the more qualitative aspects and how that plays into your decision and how that affects valuation, just to give folks a heads-up on that part.

[Edward] Sure. I think a good place to start that discussion is under fair market value and under valuations, a lot of them are not for tax purposes like the gift and estate tax type of related issues. But there’s a revenue ruling the IRS put out a long time ago called Revenue Ruling 5960, and what we drew from Revenue Ruling 5960 is this: a sound valuation will be based on all the relevant facts, but the elements of common sense, informed judgment, and reasonableness must enter into the process of weighing those facts and determining their aggregate significance.

So, to your point, yes, what we do is grounded in accounting and finance, but at the end of the day, it has to make sense. You have to look at those qualitative factors and consider them in the context of this business, its industry, its management, its outlook. And at the end of the day, does this valuation make sense for the business and what you are valuing?

I will say Revenue Ruling 5960 has eight specific factors that anybody ought to consider in a valuation, and most valuation reports will cite these eight factors, which are:
1. The history and nature of the business
2. The economic outlook for the company as well as the specific industry
3. The book value of the interest and the financial condition of the business
4. Its earning capacity
5. Its dividend-paying capacity
6. The value of the intangible assets, such as goodwill
7. Are there any prior sales of the firm’s stock
8. And the market value of other firms that are traded actively in a free and open market

Those are the eight factors which the IRS a long time ago laid out that ought to be considered. I would say that other factors be considered that can impact the value of the business is the forming of a new business. Is it a partnership, an LLC, a corporation? A lot of that has to do with tax purposes, but how was this business formed? Does this have any seasonal or cyclical factors? Is it that you’re valuing an ice cream business and they sell a lot more ice cream in the summer than in the winter, just for example?

Obviously with products and services, what’s the competition? Are there any geographical diversification issues? Is it somebody that has a single location, or does it have multiple locations? How far does it reach? Are there any barriers to entry? Do you have any patent protection?

Management depth and what happens if the business owner sells a business and retires – is there other management depth to take his place? That’s an important factor.

Obviously, major assets or regulatory environment. Are there contingencies, potential lawsuits for or against the business that may impact the value? Are there any off-balance sheet assets or liabilities?

And one way you can frame a business is by Porter’s Five Forces. It’s quite old, but it was quite popular with the financial press, and it deals with the five forces that impact the business:

  1. The bargaining power of buyers
  2. The bargaining power of suppliers
  3. Rivalry among industry firms, so competition
  4. Substitute products
  5. And the threat of new entrants as barriers to entry.

So, buyers, suppliers, competitors, substitutes, barriers to entry are just a way to look at a business within its own little ecosystem and where it operates and what forces is it dealing with.

[Josh] There’s a lot of variables there. That’s a lot. I’m getting overwhelmed, but that’s the value of having somebody that’s been doing this for three decades. It does sound like it’s mostly science, but there is an element of art in there in gauging some of that.

[Jason] Edward, when you’re called on to perform valuation work and you are putting a company through an X-ray unlike they go through otherwise, typically. How often does your valuation morph into a business advisory hat where there are some issues that pop up that in your mind are so glaring. Do you proactively offer your unsolicited opinion or do you just stick to the framework of valuation work and do that particular job and move on?

[Edward] In all honesty, I try to stick to the valuation work. I would say if issues do arise, I absolutely raise my hand because I want to understand; I want to make sure I’m understanding this component to this company because I want to know how it may impact the value and the work that I’m doing.

I’m engaged to do my part of what may be a much larger puzzle. Being unbiased I think is an important part of the puzzle, and I take my part of the puzzle very seriously. But I know there’s other things going on with businesses and the transactions and the lives of the business owners. So, we do try to stick to the valuation component, but by all means, if something looks strange or I don’t understand, we absolutely ask about it because I want to understand, I want to make sure we’re doing the best job we can.

[Josh] Understood. Business owners and entrepreneurs have a couple of unique challenges. Number one, everybody’s coming to them usually for answers. So, they’re trying to run a business, answer questions, and then they’re trying to get their arms wrapped around all of these areas of the business that need to be worked on to help accelerate value.

And then the second issue is typically they have a very large percentage of their personal balance sheet tied up in the company. So, that’s where the pre-liquidity event planning comes in and the value of understanding different types of structures and how that can potentially accelerate that value in the future.

[Edward] I’ve had a lot of business owners ask me, “How can I increase the value of my business? I want to exit in three years. I’ve got this valuation now. How do I get ready to sell my business to maximize its value?”

And my response is: keep doing what you’re doing. Typically, business owners have done a good job, and typically they’re very proud of what they’ve done, and they should be. But a lot of times they may neglect the corporate documents.

I’d say the first thing to do, really, to focus in on is to make sure your house is in order and your financials are in good shape, your corporate books are in good shape, your inventory counts are in good shape, your customers. Go through all those things, these checkboxes because what you want to do is you want to increase the value of the business by obviously increasing cash flow. And that’s just running your business as efficiently and profitably as you can, but you want to lower the risk to a buyer. That means if they’re coming in to do due diligence and they find errors in your financial statements or the books aren’t clean, it’s just going to raise red flags and it’s going to increase their uncertainty.

Again, going back to the valuation side, the higher the uncertainty, the higher the risk that they’re going to perceive, and the higher the rate of return they’re going to want, and the lower they’re going to be willing to pay you for it. I think it’s all about increasing cash flow and reducing risk.

[Josh] Absolutely. You mentioned – and I think I read a statistic – that nearly 80% of businesses that are put on the market don’t sell, and that’s mainly because it starts breaking down in the due diligence process.

We’ve had several clients go through that due diligence process and I try to give them a heads up: this is going to be brutal. The bankers come in and they take them through two months of…

[Jason] Root canal.

[Josh] Yep. It’s just tough. But they’re getting them ready for all of the questions they’re going to be asked.

In some of our previous conversations I mentioned a pilot that our team is on at UBS that is a tool – it’s a scoring tool – that goes into some of these qualitative factors that we’ve been talking about and helps them self-analyze the company and all of these different areas of the company to ensure that they’re ready for an exit and that they’re attractive to a potential acquirer and that the business is transferable because if everything relies on the owner and if they’re gone, this business is going to fail in a few months, then there’s not a lot of value there without that person.

[Jason] It’s a lifestyle business.

[Josh] And there’s nothing wrong with lifestyle businesses either, it just depends on what the goals and objectives are of that owner. At some point, they’re going to have to transition out of the business one way or another.

There’s a huge lack of planning – real exit planning – that goes on with owners, mainly because they’re so busy.

That’s great stuff, Edward. We’re talking about a lot of stuff. We’re unpacking a lot of details here.

[Edward] Josh, your point is really well-taken. Your ability to go in and run those “are you ready to sell” – some of those qualitative aspects; your point is well-taken.

Lack of management depth: if somebody wants to sell their business and exit and retire, if they don’t have management depth to take over their roles and responsibilities, 1) they’re not going to get a good price, or 2) they’re going to end up working for the buyer for a period of time until they can transfer that to somebody within the buyer’s organization and they can take their knowledge of the business, the operations, their customer relationships, etc. That has to be transferable.

[Josh] Absolutely. If you think about the time, the lifecycle there – not including starting the business and building the business, raising money, and what have you – the time that you say, “Okay, I would like to exit this company, I would like to monetize all of this hard work for the last 20 years, I would like to monetize this.”

I think the first step is to sit down and really go through all these details and look for ways to, first of all, get a good business valuation and getting a starting point. Then identify the potential holes and things that can be worked on to help accelerate the value. If you’re in an industry that trades between a four multiple and a 10 multiple, what’s the difference between somebody that trades at a four versus a 10. If you can help that company move from a six handle to a seven handle, that’s a big move. It’s really, really important stuff.

For these business owners, for what is most likely the largest financial asset on their balance sheet, not to have a good plan in place – and a plan can’t be done by just one person, you have to have a whole team wrapped around you: M&A attorneys, bankers, business valuation specialists, and hopefully a good wealth management team that can help you walk through those and check those important boxes.

[Edward] As I say to most people that come to me saying, “I want to sell my businesses,” I tell them, “You only get to sell your business once, typically.”

You want to do it right. And they come to me and say, “What my value or worth and what does that mean?”

I say, “My goal is to give you the best valuation I possibly can. One, because obviously I don’t want you to leave money on the table. But two, I don’t want you to pass up an opportunity you ought to take.”

[Josh] Absolutely. A proper business valuation is a very, very important component in the advisory team that an owner needs to have around them.

What should they be looking for? What questions should they be asking the valuation specialists?

[Edward] Obviously start with their experience and their qualifications. Have they done valuation work for a while? Do they have any valuation certifications or qualifications specifically? And then beyond general business valuation experience, do they have any experience in your industry itself?

Then what processes do they use? If they start describing they’re going to value your business using something that doesn’t sound like an asset approach, an income approach, or a market approach, I would start asking them why because they really ought to be sticking to generally accepted approaches or methods.

You may ask them how they would treat specific issues or maybe unusual situations that may be present in your business. Does your business own the real property or is the real property owned by a separate partnership that the business rents the property from? Does your business have any excess assets, such as cash value of life insurance and how might they deal with that?

You might ask what tools they have. Do they subscribe to these merger and acquisition databases? They’re not cheap, so if they don’t have the necessary tools to do the valuation properly, that could be something to ask about.

I’d ask them if their valuations have ever been challenged by the IRS or some other parties, and what was the outcome of that.

In terms of your business, you have to be open and honest with the valuation professional about your business. They may have a lot of experience valuing businesses, and they may have a lot of experience valuing businesses like yours in your industry, but all businesses are different. We’re valuation professionals. And again, we may have a lot of experience and a lot of industry experience specific to your niche, but every business is different, and nobody is going to know the business as well as you.

We definitely rely upon getting good information, and most of that is going to come from the business owner or their designated party – their CFO, controller, operations person, whoever that may be.

[Josh] Well, I was going to wrap this up by saying there you have it: business valuation 101, but I think it might be more like 201 or 301 with some of the details here. This was all very good, very helpful information. I certainly learned a lot and I hope the audience learned something here.

We walked through the reason why you would want to have a valuation done on your company; some of the key definitions, methodologies, and some of the qualitative factors that can affect the value; and some advice on what questions to ask a valuation specialist.

Edward, a sincere thank you very much. You were very generous with your time, and we thank you for that.

[Edward] It was my pleasure. I appreciate the opportunity to spend this time with you all and if you or anybody in the audience ever has any questions, please reach out to me. I’m Edward Fowler with Briggs & Veselka. My direct office line is 512-823-1215 and I’m happy to help any way I can. I appreciate it, you guys. Thank you.

[Josh] Awesome, Edward. Thank you.

This is Josh Pottinger and Jason Chirogianis. And remember this: know your options, be informed, and plan early. Until next time, take care.