Ten Common Mistakes to Avoid While Valuing Your Business

Transcript

In today’s episode Andrew and Jessica will go into a deeper dive into valuation — they will talk about ten common mistakes people make while valuing their business. To bring some clarity to the topic of valuation, Andy and Jessica are bringing the experts to share their knowledge and experience in this field. Listen to this episode which is aimed for buyers and sellers to have a deeper understanding of business valuations.

Listing of the week: Michael Ziff (London). Leather accessory business, in business for 15 years. Purchase Price: 1 million pounds; the owner wants 750,000 pounds upfront and the balance over a couple of years; he will stay to help develop the business. Email Michael Ziff at [email protected] or call (0044) 771-286-7215

Key Takeaways

[3:02] 1: Add back distributions

[5:10] 2: Only add back one owner’s salary.

[6:40] 3: You have to value each location as it was run by a business owner.

[8:13] 4: Adding back personal credit card bills on top of the business’ expenses.

[11:04] 5: Adding balance sheet numbers on top of the cash flow valuation that has been calculated.

[12:30] 6: Taking a multiple and applying it to the wrong number

[14:09] 7: Applying the wrong multiple

[14:50] 8: Adding back expenses for failed business ventures

[16:50] 9: Playing the revenue in earnings’ game of good years

[18:00] 10: Not having any negative add-backs.

[22:18] Paul Corrigan (North Shore Boston)

[24:17] The secret is to look at valuation from the perspective of a nonbiased third party.

[30:01] Paul Corrigan shares several valuation approaches to different businesses.

[33:32] Paul Corrigan talks about the biggest mistakes he sees people make while valuating their businesses.

[36:54] Deal of the week: Michael Shea (Central Florida). Printing shop. 40 years in business. The business was booming as a result of the COVID-19. 40% financed, the buyer got in the deal with $50,000.

[40:32] Listing of the week: Michael Ziff (London). Leather accessory business, in business for 15 years. Purchase Price: 1 million pounds; the owner wants 750,000 pounds upfront and the balance over a couple of years; he will stay to help develop the business.

Call us — (888) 711-9018

Email us [email protected]

Rosetta Valuations (617) 320-4812 or [email protected]

Call Michael Shea at (321) 287-0349 or email [email protected]

Email Michael Ziff at [email protected] or call (0044) 771-286-7215

Mentioned in This Episode

• The Deal Board Podcast
• Transworld Business Advisors
• Transworld on LinkedIn
• Transworld on Facebook