- Creating Value for Companies
- Positioning a Company for Sale
Smart, savvy business owners can often benefit from a fresh set of eyes looking at their business. Although their companies are performing quite well, they may not be optimizing their profitability.
I was recently approached by a franchisee owner to do a valuation of their business, as they were looking to sell the business and retire. Their franchisor, which had the first right of refusal to purchase the business, required the franchisee to have a qualified individual determine the fair market value of the business.
The franchisee had a good location with a long-term lease, a respectable number of years left on the franchise license with the right to renew the franchise license for an additional 10 years, and very respectable revenue that was still growing. The franchisee did an excellent job at turning inventory and promoting products that maximized gross margin, in terms of both the percentage of sales and absolute dollars.
Notwithstanding the fact that the franchisee had successfully grown the business, upon my initial review of the financial results, I identified a few areas in which the company could materially improve its operating results. I presented my findings to the Company along with an Action Plan for Positioning the Company for Sale to optimize the sale price. My recommendations included:
- placing the valuation of the business on hold;
- the immediate implementation of the Action Plan items; and,
- the deferral of the sale of the company for 6 to 9 months to allow for: i) the bottom line financial benefits from implementation of the Action Plan to be demonstrated; and, ii) the distribution of additional earnings to the owner/shareholder.
The client adopted the Action Plan and is realizing the anticipated improvement in the company’s financial performance. In 6 to 9 months time, we will reassess the situation and market and if the time is right, I will complete the valuation report and prepare the Information Memorandum for distribution to potential purchasers.
Experience that Counts!
My years of corporate finance and valuation experience enable me to assist companies both large and small in improving their bottom line performance and optimizing cash flows.