May 1997

Business Valuation

Preparing a business for sale

Charles O'Connor in the March-April 1985 Harvard Business Review, makes the following observation: "More often than not, the successful sale of smaller companies is the result of a carefully orchestrated long-term strategy. Making the strategy work are effective financial planning, internal organization, timing and valuation analysis." Over the years I have seen many prospective business sellers regret not properly preparing their businesses for sale. The following are six suggestions for preparing a business for sale:

Litigation Services
Managing financial information in complex lawsuits

I once accompanied an attorney into a large conference room filled with documents supplied by the opposing party. During the first hour or so, I observed my attorney friend feverishly reading document after document in what appeared to me to be a haphazard manner. When I asked him what he was looking for he said, "a smoking gun".

During this same period of time, I had spent my time making an inventory of the documents in the room, comparing our document requests with the information produced, and considering how to organize the mass of documents into a usable form. It has been my experience that the "smoking gun" approach to discovery works well when the amount of financial data is small. However, when there are hundreds or even thousands of documents to review, the "smoking gun" method, in my opinion, is seriously flawed.

To use an analogy, raw data in a complex lawsuit, is like low grade uranium ore. In its raw state, it is of little value. But if properly mined (discovered), properly refined (organized), and properly assembled (analyzed and presented), it becomes weapons grade plutonium. Properly discovered, organized, analyzed, and presented financial data will result in:

Mediation
Preparing to negotiate

Successful negotiations don't just happen. They require preparation. CDR Associates, a mediation training center in Boulder, Colorado, suggest the following items be considered when preparing to negotiate:


  • Valuation Report Critiques
  • Business Valuations
  • Financial Litigation Support
  • Expert Witness Services
  • Mediation of Financial Disputes
  • Divorce Valuations
  • Buy/Sell Formulas
  • Court Appointed Special Master
  • Court Appointed Receiver
  • Economic Loss Analysis
  • Gift & Estate Valuations
  • Financial Issues in Divorce