Chapter 13

Case Study: Valuation on the Sell Side

In This Chapter

Anticipating common valuation problems and preparing your family

Establishing a prevaluation plan

Doing the actual valuation

Most valuation professionals get a call when a triggering event occurs in a business owner’s life or the life of his or her family. Maybe the owner just died. Maybe the owner is just burned out or suddenly realizes for a host of reasons that it’s time to retire. Maybe family members are squabbling about taking over the business. Maybe the owner is terminally ill. The designated family member calls with a familiar panic in her voice. “We don’t know if anyone wants to keep running the business,” she says, “and we can’t afford to keep it open.” And then comes the all-important question: “How much do you think we’ll get?”

At this point, the best valuation professionals often have to deliver the worst news: that without a plan made while the owner was alive, family members may not see much benefit at all from selling the business. Worse, they may actually lose money preparing the business for sale or closure.

The decision to sell without analyzing the tax consequences, advantages, or disadvantages of potential deal structures or how a sale would fit your personal and financial goals can be catastrophic to you, your company, and your family. This “sign today, sell tomorrow” mentality is common, and most experienced valuation professionals see it as a decision-making process without a process. In ...

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