March 5, 2013 – 10:00 AM - Whether planning the sale of your business in the near term or positioning for a future transition, it is crucial to continuously build value into your business and best position yourself and your company for a future exit strategy. This discussion will benefit owners that want to apply these concepts to their businesses. Particular emphasis will be placed on value enhancement strategies that will maximize value and marketability.

Selling a business is a once in a lifetime event for most owners. Awareness and preparation will maximize the total value that can be achieved and the probability of a successful sale.

Questions that will be addressed:

• What are the primary factors that impact the value of a business?
• What strategies can be employed to increase the value of your company?
• What should a business owner be doing to prepare his or her company for sale?
• What are the most common mistakes or common challenges facing business owners that tend to limit the value or marketability of their business?
• What is the optimal timing to pursue the sale of your company?
• If someone wants to sell their business, what are the first steps they should be taking?
• What are the benefits of a business owner doing a business valuation?
• As a professional Merger and Acquisition advisor, what is your role in working with a business owner in preparation for and during the business sale process?

Broadcasting Information:

This show can be seen on the following local channels, March 5, 2013 at 10:00 AM EST:

Piscataway TV (Click Here)

Channel 15 on Cablevision: Seen in Bound Brook, Bridgewater, Dunellen, Green Brook, Manville, Middlesex, Piscataway, Raritan, and South Bound Brook.

Channel 40 on Verizon FIOS: Seen in Berkeley Heights, Branchburg, Bridgewater, Fanwood, Franklin, Manville, Mountainside, New Providence, North Brunswick, Piscataway, Somerville, South Bound Brook, South Brunswick, Summit, and Warren.

HomeTowne TV (Click Here)

Channel 36 Comcast: Seen in Berkeley Heights, Millburn/Short Hills, New Providence, Springfield, and Summit.

Channel 33 Verizon: Seen in Berkeley Heights, Millburn/Short Hills, New Providence, Springfield, Summit, Chatham Boro, Chatham Twp, Cranford, Florham Park, Kenilworth, Maplewood, West Orange, and Union.

Healthcare Technology including health information systems, health information technology, consulting, and training.

Purpose:

Sun Business Valuations was recently engaged to provide a business appraisal of a Healthcare IT Company owned by three equal Owner Groups. One of the Owner Groups was in discussions and considering buying out the other Shareholders and requested the services of Sun to assess the profitability and fair market value of the IT services firm. The challenge, however, was that the acquiring Owner Group would not continue utilizing the IT Company’s services after acquisition and did not foresee the other Shareholder Groups interested in using the IT services if they were going to be charged market pricing for services provided.

Sun Business Valuations was called in by the Owner Group considering acquiring the IT Company to perform a business valuation to be used for the following purposes:

1. Help the Shareholders better understand the fair market value of the IT Company as an earnings generating entity versus a cost center.
2. Present the valuation conclusion to the Shareholders to assist in their consideration of becoming sole owner of the IT Company.

Conclusion of Value:

Sun based this report on a thorough analysis of the Company’s historical financial statements. Since the purpose of this report is to determine the value of the Business for a potential shareholder buyout, we examined the Business based upon actual historical performance, as well as making certain assumptions that reposition the Company as a profit generating entity going forward.

An analysis was conducted based on the most current year ending 12-31-11 financials as well as hypothetical scenarios that involve a modest 10% increase in revenue from Non Owner Groups. Various operational and intangible factors that impacted valuation were also considered and influenced the five valuation methodologies utilized in arriving at a valuation conclusion.

Sun reviewed the Business Valuation conclusion with the Principals, which led the Principals to make an informed decision that buying out that entity would not be viable.

Valuator’s Summary of Engagement:

When valuing businesses, a significant factor influencing fair market value is customer concentration. In this case, about 80% of the customer base was comprised of the 3 company owner group. The business would not exist without the related owning groups. In order to derive value from the business as a standalone operation, the customer base must expand beyond the related companies and an independent clientele must be secured.

The Wounded Warrior Project
www.WoundedWarriorProject.org

Our sincerest wishes for a very happy holiday season and prosperous New Year! We look forward to working with you in 2012.

About The Wounded Warrior Project

The Wounded Warrior Project was founded to provide tangible support for the wounded and help them on the road to healing, both physically and mentally. To read more click here.

For more information, visit the EO Albany website.

About EO

The Entrepreneurs’ Organization is a dynamic, global network of more than 8,000 business owners in 40 countries. Founded in 1987 by a group of young entrepreneurs, EO is the catalyst that enables entrepreneurs to learn and grow from each other, leading to greater business success and an enriched personal life.

• What impacts the value of your company?
• What pro-active steps you can take to further enhance your company’s value?

If you are a successful business owner who has thought about transitioning your business either now or in the future, this seminar will provide a significant benefit for you. Each person attending will receive a Value Enhancement Workbook and Diagnostic enabling you to identify and address areas that will impact your company’s valuation.

Event Details:

Presented by: Carolyn Lloyd-Cohen, CLU, ChFC, AEP, AIF Founding Member & Principal of Carolyn Lloyd-Cohen, LLC/Preferred Pensions, LLC

Dates & Times:

• Wednesday, October 12 – 4:00 to 6:30pm, or
• Tuesday, October 18th – 8:00 to 10:30am

Location:

Carolyn Lloyd-Cohen LLC/Preferred Pensions LLC

3 Garret Mountain Plaza, Suite 201

Woodland Park, NJ 07424

RSVP: Please RSVP by September 30th. Call or email Pamela at (973) 807-0101 Ext. 18 or moc.nehoc-dyoll@alemap.

Space is limited to 10 per session. There is no charge for attending this seminar. Continental breakfast or light snacks will be served.

For more information about the presenters please visit: www.lloyd-cohen.com, or click here for a bio on Stephen Goldberg.

The following will provide insight into one of our recent engagements involving the Shareholder better understanding the valuation of their company to determine the best time to purse a sale of the company.

Industry:

Contract Manufacturing Company

Purpose:

Sun Business Valuations was engaged by the Shareholders to perform a business valuation that would enable the founders to better understand their exit strategy options. The Company was a family owned business founded by a husband and wife who had grown the business both organically and through acquisition over a 19 year period. Fortunately, the Shareholders were not in a position that forced a sale (i.e. health or financial challenges). The company was thriving and the Shareholders were considering a sale for in order to relocate and achieve other lifestyle goals.

Valuator’s Summary of Engagement:

When evaluating exit strategy options, it is critical to have a realistic understanding of the fair market value of the company prior to pursuing a business sale transaction. It enables the parties to make an informed decision rather than “shooting from the hip” when considering such a critical decision. It enables the shareholders to use this valuation as a benchmark and approach future negotiations on an informed basis.

Sun Business Valuations based this report on a thorough analysis of the company’s historical financial statements as well as the various operational and intangible factors that impacted valuation. Five alternative valuation methodologies were used in arriving at a valuation conclusion.

Since financial statements are generally tax driven and not prepared for business valuation purposes, Sun analyzed each line item to identify any applicable recasting adjustments to determine the adjusted EBITDA (adjusted earnings before interest, taxes, depreciation and amortization). In doing so, we examined one-time or non-recurring expenses, shareholder fringe benefits, normalized shareholder compensation, non-cash expenses, and various other applicable recasting adjustments. We also made applicable adjustments to the company’s balance sheet.

Numerous intangible and operational factors needed to be assessed in addition to the overall financial health of the business. We analyzed how the company stood up to the dozens of risk factors and value drivers that impact valuation. These include shareholder dependency, quality of the management team, customer concentration, vendor dependency, industry stability, and barriers to entry to name a few.

In this particular case, the subject Company excelled in most of these areas, having put management and processes in place to facilitate efficient operations and lessen dependency on Shareholders. A main issue arose in the area of customer concentration as the company’s largest customer accounted for 54% of the total revenue. This and many other factors were considered in performing our business valuation engagement.

Sun Business Valuations reviewed the valuation with the Principals and their professionals and they are now preparing to pursue a sale of the company from an informed vantage point.

To read more about customer concentration issues on our sister company, Sun Mergers & Acquisitions’ website.

For more information on our valuation process or to discuss your particular valuation needs, contact Stephen Goldberg, Managing Partner of Sun Business Valuations, LLC, at 201-727-1300 or SG@sunbusinessvaluations.com.

About Sun Business Valuations’ Sister Company, Sun Mergers & Acquisitions
Sun M&A is a full-service professional business intermediary firm specializing in all aspects of the confidential sale, merger, acquisition and valuation of privately, held middle-market companies. For more information on Sun Mergers & Acquisitions, visit our website at www.SunMerger.com.

The following will provide insight into one of our recent engagements involving a partnership dispute and buy-out.

Industry:

Media Production Company of videos and commercials used in website marketing

Purpose:

Sun Business Valuations was engaged to perform a business valuation relative to a partnership dispute. There were four equal shareholders and the objective was for three of the shareholders to acquire the shares of the departing shareholder. The challenge; however, was that the parties did not have a buy-sell agreement that defined valuation in the event of a buyout. The parties were at an impasse and could not reach an agreement as to the fair market value of the 25% interest.

Sun Business Valuations was called in by the firm’s CPA to perform a business valuation to be used for the following purposes:

1. Help the shareholders better understand the fair market value of the Company.
2. Present the valuation conclusion to the remaining shareholders to ensure a thorough understanding of its conclusion and justification of the determined opinion of value.

Conclusion of Value:

In this particular case, we were able to bring the feuding shareholders together, culminating in an agreement between the parties and an amicable buyout.

Valuator’s Summary of Engagement:

Shareholder buyouts (as well as shareholders buying in) occur frequently in closely held companies. It is critical that departing, remaining, or incoming shareholders believe they are being treated fairly in a transaction between the parties.

Sun Business Valuations performs many valuations relative to Buy/Sell Agreements between shareholders. In the event a Buy/Sell Agreement does not exist, a well documented professional valuation is critical toward enabling the Shareholders to reach an amicable negotiated agreement.

A third party valuation serves as a great foundation to negotiate and facilitate an agreement that appeases all parties involved in a shareholder transaction. With a professional business valuation, shareholders are more likely to negotiate successful transactions and avoid costly, distracting, and time consuming disputes.

For more information on our valuation process or to discuss your particular valuation needs, contact Stephen Goldberg, Managing Partner of Sun Business Valuations, LLC, at 201-727-1300 or SG@sunbusinessvaluations.com.

About Sun Business Valuations’ Sister Company, Sun Mergers & Acquisitions
Sun M&A is a full-service professional business intermediary firm specializing in all aspects of the confidential sale, merger, acquisition and valuation of privately, held middle-market companies. For more information on Sun Mergers & Acquisitions, visit our website at www.SunMerger.com.

Each month, Sun Business Valuations will provide insight into some of our recent engagements to inform Business Owners and other financial professionals to the various inquiries we receive for valuation reports and how each of these individual needs are addressed.

These case studies can be found in our “News & Articles” section of this website, or in the “Recent Articles” section of our sister company, Sun Mergers & Acquisitions’ website.

For more information on our valuation process or to discuss your particular valuation needs, contact Stephen Goldberg, Managing Partner of Sun Business Valuations, LLC, at 201-727-1300 or SG@SunBusinessValuations.com.

About Sun Business Valuations
Sun Business Valuations is a preeminent Business Valuation and Appraisal firm serving the needs of Attorneys, Accountants, Financial Planners, Shareholders, and Business Owners for over a quarter century. For more information on Sun, contact Stephen Goldberg at 201-727-1300 or SG@SunMerger.com.

About Sun Mergers & Acquisitions
Sun M&A is a full-service professional business intermediary firm specializing in all aspects of the confidential sale, merger, acquisition and valuation of privately, held middle-market companies. For more information on Sun, visit our website at www.SunMerger.com.

Multiple of Seller’s Adjusted Net Cash Flow
The most widely used method to value privately held companies is based on adjusting or recasting of a business’s financial statements. This is also referred to as adjusted EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization). Financial statements are prepared for tax purposes, not business sale or business valuation purposes. It is critically important to “read between the lines” of the financial statements to determine the true earnings capability of the company. At Sun, we thoroughly review each and every line item to identify any one-time or non-recurring expenses, shareholder fringe benefits and perks, non-cash expenses, and more. There are over 50 potential adjustments that we look for during this process. The goal is to determine the true earning capability of the business by adding back all of the non-essential, non-recurring, or discretionary expenses to the net profit. This demonstrates a more realistic net cash flow for a potential acquirer.

Once the adjusted earnings or EBITDA number is determined, the next step is to apply a multiple of earnings. This multiple is impacted by a vast number of risk factors, intangibles, and value drivers. During our valuation process, we typically review and rank the company in approximately 30 value driver factors to determine how the company is positioned. Examples of risk factors and value drivers that influence valuation include: years in business, proprietary content, industry life cycle, industry stability, customer base concentrations or dependencies, supplier dependencies, product or service differentiation, strength and size of market, management quality and tenure, employee dependencies, impending regulation, new technology, and many others. Each of these risks is unique but has one common trait – an ability to either reassure or cast doubt on the predictability of future cash flow. As a result, the better a business can mitigate or control these potential risks, the more positive the impact on valuation.

It is important to determine the predictability and sustainability of earnings. We generally will utilize a comprehensive questionnaire to obtain the information needed to evaluate these factors. A few examples of questions analyzed include:

• Why is the business more/less profitable than a comparable company in the same industry?
• What degree of dependency does the business have on the current owner, vendors, employees, key customers, etc.?
• How reliable are the historic financial statements of the business?
• What is happening in the industry that casts doubt on the future income of the business?

These intangibles play a significant role in the valuation process, which is why one cannot solely examine financial information and arrive at a proper valuation.

Market Comparables & Industry Rules Of Thumb
There are a variety of resources available to research cash flow multiples that may be relevant or specific to your business. These include well known guides such as the Business Reference Guide by Tom West, and private transaction databases such as Pratt Stats and Bizcomps. These databases track thousands of completed transactions and the valuations that were achieved relative to sales or earnings. The appropriate multiple of earnings and gross revenue using the Industry Comparable method is determined by reviewing similar private transactions that have taken place within the same or similar industry, and applying the average and/or median multiples incurred in these transactions to the earnings and revenues of the subject company.

Business owners many times refer to common “rules of thumb” that are used in their industry. A rule of thumb valuation basically consists of using a simple formula that estimates the value of a business through a set of established and very general business pricing guidelines that relate to specific industries.

We find these Market Comparable and Rule of Thumb methods to potentially be very misleading as they do not take into account the individual characteristics, strengths, and weaknesses of each different and unique company. Even if companies appear to present similar financial information, whether it is the mix of business, vendor contracts, management team, customer base, and concentration, or countless other factors, no two companies can be considered mirror images. This hinders an exact comparison. Additionally, due to the quality and accuracy of the financial reporting in the non-public, middle market sector, information is limited and adjusted earnings calculations commonly differ from company to company.

Summary
Private company valuation is both an art and a science. Other than what was discussed, there are many other factors that influence business valuation, including strategic value driven by synergies with complementary businesses and potential acquirers. Ultimately, at the end of the day a business is worth what an acquirer is willing to pay for it. It is, however, critical to have a realistic understanding of the value range that your company would likely yield if you were to pursue a transaction.

The Wounded Warrior Project
www.WoundedWarriorProject.org

Our sincerest wishes for a very happy holiday season and prosperous New Year! We look forward to working with you in 2011.

About The Wounded Warrior Project

The Wounded Warrior Project was founded to provide tangible support for the wounded and help them on the road to healing, both physically and mentally. To read more click here.