Buyers Beware of the Paper Tiger
Evaluating the numbers is the starting point for assessing value as a prospective buyer. Current performance is only one indicator of future potential, with opportunities for both growth and decline. The business evaluation needs to take into account both the positive and negative impact the transition will have on future potential.
We always evaluate the vulnerabilities and opportunities resulting from a variety of areas such as:
- How critical is the current owner in the companies operations?
- Will the current customer base and employees remain through the transition?
- How diversified are the revenues?
- Does the business depend upon a few key clients or employees?
- How difficult is it to replicate the business?
- What expertise and knowledge will be necessary to run the business?
- How will the expertise and knowledge be transferred?
- How will changes in market conditions, competitive landscape, or technology impact future revenue potential?
- What is the value of tangible company assets and when will they need to be replaced?
- How will access to financing impact future revenues and growth potential?
- What stake does the seller have in the ongoing profitability of the company?
We take a comprehensive approach to consider a number of different alternatives such as valuation of:
- physical assets
- financial assets
- revenue, cash flow and profitability
- quality and strength of client/customer base
- history, track record, reputation, and good will
- expertise and knowledge