Is It Time to Sell?

business valuation data collection

What You Need to Know

Are you preparing to sell your business or looking to sell within the next three to five years? Are you needing to sell your business as soon as possible? We can value businesses anywhere in the United States. We are a “generalist” valuation firm meaning we can value almost any type of business. We specialize in owner-operator businesses with revenues between $500,000 and $10 million. However, we can also value franchise restaurants that are typically investor owned and not actively managed by the owner.

A site visit is not necessary in most cases. The C.V.A. designation is a national designation. We can help you determine an asking price. 

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The Process

  • We will need a minimum of the previous two years of tax returns. If the valuation date is in the middle of the year, we will need an internal profit and loss statement and balance sheet as of the valuation date. For example, a valuation date of June 30, 2021, requires tax returns from 2019 and 2020 and internal financial statements dated June 30, 2021. Accounts Receivable aging schedules are needed for partner buyouts and potential stock sales.
  • Please notify us immediately of any non-essential and/or personal expenses that the business is paying for. Examples include but are not limited to personal auto expenses, cell phone expenses, excess compensation, etc. Equally important is any employees paid below market value for their various duties.
  • We will analyze the financial statements first and then contact you and/or the management team to dive into the details of the business. We will discuss the history of the business, the management team, employee headcount, top customers, competition, and the facility you operate from. We will also ask questions and get clarifications regarding the financial statements at this meeting.
  • A report will be returned in 7 to 10 business days. We will provide an asking price in a stock sale and an asset sale.

Asset Sale or Stock Sale?


What is an Asset Sale?


The majority of small owner operated businesses change hands via an asset sale. An “asset sale” refers to the acquisition of individual assets and liabilities. The seller is required to transfer their individual net assets at their fair market values in an asset deal. The most common arrangement is for the buyer to purchase the furniture, fixtures, and equipment (FF&E), inventory if the business carries any, and goodwill. The buyers receive a step-up on a tax basis to fair market which allows them to depreciate or amortize the acquired assets each year. The seller will settle all liabilities at the closing table so buyer purchases the business free of liens and encumbrances.


What is a Stock Sale?


Through a stock sale, the buyer purchases the selling shareholders’ stock directly thereby obtaining ownership in the seller’s legal entity. With stock sales, buyers lose the ability to gain a stepped up basis in the assets and thus do not get to re-depreciate certain assets. Sellers often favor stock sales because all the proceeds are taxed at a lower capital gains rate, and in C-corporations the corporate level taxes are bypassed. Likewise, sellers are sometimes less responsible for future liabilities, such as product liability claims, contract claims, employee lawsuits, pensions, and benefit plans. However, the purchase agreement in a transaction can shift responsibilities back to a seller. It is important to note that all partner buyouts are valued as stock sales.
 
The deal structure of any transaction can have a major impact on the future for both the buyer and seller. Many other factors, such as the company’s structure and the industry, can also influence the decision. It is important for a business owner to consult with their business intermediaries, legal counsels, and accounting professionals early in the process to fully understand the issues with each transaction type and reach a decision that will be most advantageous for the business owner.

value of business