Category Archives: Financial Planning

Upcoming Webinar: EBITDA and Other Scary Words

Thursday, March 15 at 3:00pm CST J. Richard Claywell, CPA, is a panelist for this upcoming webinar, which explores the ins and outs of financial language and how you can navigate the seeming labyrinth of a language that can sound foreign and in some ways counterintuitive. This webinar is part of the series: MBA IN A DAY…  Continue Reading »

Buy-Sell Agreements: How to Cover all the Valuation Bases

It’s common for businesses, in Houston as well as other locations, with more than one owner to need a buy-sell agreement to handle voluntary and involuntary ownership transfers. It’s also important to update the agreement regularly to ensure it’s still valid and addresses all of the business valuation issues that may arise. Determine which structure…  Continue Reading »

Consider the Cost Approach in M&A

A company’s value equals the difference between its combined assets and liabilities, so the cost approach has intuitive appeal. Although a cost approach analysis is laid out similar to a balance sheet, a document that most business owners are familiar with, it requires a substantial amount of work to convert a cost-basis balance sheet to…  Continue Reading »

3 Reasons Earnings May not Equal Cash Flow

Business valuation pitfalls Although price-to-earnings multiples may be shared by word of mouth in certain industries by business owners and business brokers may share, valuations based solely on these oversimplified rules of thumb won’t pass muster in court. And especially when pricing a business for sale, they shouldn’t be used as a sole method of…  Continue Reading »

4 Ways to Add Value Before Selling a Business

Ready, set, sell A company that is well positioned for future growth is one that investors want to buy. If you’re looking to sell, it’s important to make your business more attractive to potential buyers. Here are some strategies: 1. Obtain a professional valuation A professional valuation can provide objective market evidence of what similar…  Continue Reading »

Valuation Looks to the Future, Not the Past

Often, the list of documents appraisers use to value a business include the last three to five years of financial statements. Historical trends may be used to help forecast future performance, but historical results are only relevant to the extent that similar results are expected in the coming years. How do business valuation professionals handle…  Continue Reading »

Market a Business to Maximize its Selling Price

Deal of a lifetime How a private business is marketed can have a significant impact on the cash available for distribution to owners when it’s time to sell. For many private investors, their business interests are their primary assets, so their livelihoods often depend on receiving top dollar. It’s a hot market In recent years,…  Continue Reading »

Spotlight on the Market Approach

The three general ways to value a business include: the cost, income and market approaches. Here we compare and contrast two methods that fall under the market approach. Market approach overview Valuators typically compute pricing multiples when they use the market approach. These compare the prices paid in comparable, real-world transactions to some performance metric,…  Continue Reading »

A Business Interest Can Have Many Different Levels of Value

Define it before you assign it Two key issues when valuing a private business interest include control and marketability. If a business interest possesses elements of control, such as the rights to declare dividends and liquidate assets, then most investors will pay more. They also tend to prefer investments that sell with relative ease and…  Continue Reading »

Relying on Management’s Estimates of Expected Cash Flow

Business valuations are often based on estimates of expected cash flow made by the company’s management. Even when estimates are prepared by a valuator or the company’s CPA, it’s often based on management’s representations about the company’s future plans about potential threats and market opportunities. So, it’s important to evaluate whether expected cash flow seems…  Continue Reading »

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