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估值 Math Can Lead You Astray

I met Ryan (not his real name) about six years ago. He told me then he wanted to sell his manufacturing business in two years when he turned 50. But his company was not likely to generate appreciable exit value. Though driving annual revenue consistently above $10 million, Ryan could never seem to get profit margins above 5%.

自从我们第一次见面, Ryan has called me every 12 months or so to check in on what was happening in the market. 不幸的是, he hadn’t been able to move profit margins into double digits, so he hadn’t improved his prospects for a meaningful exit value.

A few weeks ago, Ryan called to say he wanted to sell his company in 2021. “I’ve finally got this where I can sell it for what I need.他接着说,I have prepared a spreadsheet to show you how I am calculating my market value, I’ll send it to you and let’s talk about it.”

Ryan’s spreadsheet was his 2020 income statement and a list of expenses he assumed would not be part of the valuation calculus since they were personal and discretionary, hence not necessary for the continued operation of the business. I had no problem with his math to that point. These adjustments brought his EBITDA to about $1,000,000. We discussed what multiple he could expect; my preliminary observation was 3.25 to 3.75.

So far, so good, but Ryan had more lines on his spreadsheet. He assumed his market valuation would also include the value of his assets (i.e., machinery, inventory, and work in progress) which would add another $1,000,000 to the valuation.

I explained to Ryan that asset value is 没有添加剂 to an income valuation. When a business’ value is based on its income-producing results (i.e., 调整后的息税前利润), the valuation assumes the assets used to create that value are included in the valuation. 只是说, if a business can’t generate income without the assets, asset valuation is inclusive, 没有添加剂.

Having quarterbacked the buying and selling of businesses for over 25 years, I sometimes forget that even seasoned business owners don’t have a good handle on how their business will be valued. Ryan based his valuation on incorrect assumptions and is now having to reassess his entire strategy. This is why it’s a personal passion to help business owners think through the exit strategy long before they are ready to exit. Good information leads to better decisions, which almost always leads to a better outcome.


JIM CUMBEE is President of 田纳西河谷集团, Inc. 一个retainer-based business brokerage and transition mediation 公司位于田纳西州富兰克林. Cumbee is an attorney and has an MBA from Harvard Business School. 吉姆是这本书的作者 韦德体育app官网 Run, A Pro’s Guide to Selling a Business. .  He has a wide range of corporate 和企业家ial experiences that make him one of the most sought-after business transition advisors in the state of Tennessee. The principles above are true, 但是故事, names and fact patterns are changed to preserve the parties’ identities.

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吉姆Cumbee established 田纳西河谷集团 to help business owners fulfill their dreams for life after business ownership. It’s a mission that his 30+ year career history had prepared him well for—in addition to being an attorney, transition mediator and business broker, 吉姆是一个买家, 卖方, 和企业家. His broad range of experience gives him unique insight into how business buyers and 卖方s can achieve their goals.

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