2018 Fall issue of Horizons

Even though you and your management team may not be contemplating the sale of your company, it might still be a good time to consider ways to enhance the value of your organization over the long term in anticipation of a transfer to the next generation or sale to the core management team or an outside buyer. There are many issues to consider, but understanding the methodology and reasonable value of your company today is very important. Too many business owners’ expectations are substantially different from reasonable market value estimates. Knowing your company’s estimated market value today is key to planning for what it could be worth in the future. Further, understanding the drivers of value will allow you to implement strategies and action plans to enhance the price a willing buyer will pay in the future. The following is a list of items that you and your team should consider as you contemplate ways to improve your organization and enhance its value: ∙ What is your most likely exit strategy? Will you attempt to transfer to the next generation or sell to key employees, a customer or a strategic or financial buyer? ∙ Have you built a strong management team throughout all key areas of the business?

∙ Are your internal financial statements and key operational reports accurate? Are your annual statements audited or reviewed? ∙ Have you eliminated all “personal” expenses in your business? Are you running your business the way a third-party, professional investor would run the business? ∙ Do you have any lingering or potential federal, state or local tax issues that have not been addressed? ∙ Do you really understand the current and future trends in your business, the drivers of profitability, your competitors and your suppliers? ∙ Do you understand your current challenges within your business and have you developed specific plans to address them? ∙ Have you developed specific plans to grow your business and have the resources to implement and execute those plans? ∙ Have you developed a forecast that outlines your planned growth and profitability? Is it reasonable or attainable? ∙ Have you eliminated spending that is not critical to executing your plans and objectives? ∙ Have you made sure all of your key arrangements with vendors, suppliers and customers are documented in contracts or understandable agreements?

34 Manufacturers & Distributors Feel Impact of Mergers & Acquisitions