The Art of Business Valuation

CHAPTER 13Assisting the Small Business Buyer or Seller

This is a book about business valuation. Many small business owners or future business owners rely on their accountants, particularly those with valuation certifications, as trusted advisors concerning exit planning and buying or selling a business. This book is only going to touch on these topics. It will not touch on the many variables of deal structures for internal, family, or market sale transactions. It will address creating business value, SBA financing, and some market sale issues.

Suffice to say, planning an exit to family members or management can take five years of planning and another ten years to execute the sale of stock over time or for the payment of notes. All cash, third party sales often take two to three years.

There are a great many misconceptions about the exit planning process and buying or selling businesses. Perhaps the most costly to sellers is the lack of preparation. Next is the concern or belief that growth is more important than profitability. Finally, a reluctance to talk to family members or key management about succession plans. Many owners are shocked to find out that their key employees do not want to buy the business.

Example

Many employees when asked, “Would you like to be an owner?” hear, “Would you like an upside bonus plan?” not personal guarantees and real ownership risk. This requires a clear and detailed conversation – early.

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