In the fast-paced world of mergers and acquisitions (M&A), success hinges on informed decision-making and strategic negotiation. An integral component of this process is independent business valuations—an invaluable tool for M&A advisors seeking to guide their clients through complex transactions with confidence and clarity. The Importance of Commitment: At the outset of any M&A engagement, commitment is key. Charging a fee for the valuation process ensures that clients are serious about selling their business, weeding out those who are not fully dedicated. A committed client not o ..read more

Recently, a lender (who now has become a client) came to us looking for a second opinion on a valuation of a Massage Envy Franchise. Their appraiser came back with a negative value conclusion which centered around deferred gift card liabilities transferring with the sale. We took a step-by-step review of the business and how these liabilities are treated when determining the value of the franchise. Here are some key points from that discussion. A deferred liability occurs when a company has been paid for a service that a customer has not yet received or that has not been fully completed. This ..read more

Steve Mize, ASA July 21, 2023 In small business transactions, purchase agreements can be written any number of ways. For those businesses that are dependent on inventory to generate revenue and cash flow, you’ll typically see the purchase agreements structured where the Price includes Inventory or Price + Inventory. All qualified appraisers agree that inventory is REQUIRED to generate cash flow and therefore the inventory should transfer with the new business as part of the final transaction price. The sticking issue is how to value a business when the purchase agreement states inventory is ..read more

Steve Mize, ASA Business Valuations are critical for sale, transition, and business planning. If you’re in one of these dynamic time periods in your own business, you may be left with the question, “What is business valuation?” Put plainly, a business valuation is the value that has been determined by an accredited appraiser of the ownership of a business. Basically, a business valuation helps you know what your business is worth from an all-encompassing perspective. If you are an entrepreneur or business owner, understanding business valuation, why, and when you need one is essential. Here’s ..read more

One year later . . .and the small business acquisition market has changed significantly. COVID has impacted most businesses, positively or negatively. As a valuation firm, we are constantly being asked how COVID has impacted business values. Our response is not so simple, but let me try to explain: Steve Mize, ASA September 27, 2022 Basic Valuation Methodology In basic terms, you value a company with two variables, (1) cash flow to the owner (dividends to the investor), and (2) a required rate of return based on the risk of that investment. In small businesses, it is usually th ..read more

Last year we wrote an article on how to value a “personal service” franchise. In the original article we discussed some of the concerns. One being a continued decline in revenue trends for this industry, due to competition and overall saturation in the market. Another, and more importantly, the reliance on “cash flow”. Steve Mize, ASA & Partner Fast forward 12 months… COVID has put an absolute halt on business acquisitions in this segment of the industry. GCF Valued 7 Massage Envy / Hand & Stone / European Wax franchises in 2019 and zero in 2020 or 2021 (for acquisitions). The only va ..read more

Jason Pagan, CPA A Quality of Earnings (QoE) analysis is a deep dive into the financial statements to understand where the business generates value. The QoE is not an audit but rather a detailed financial analysis, and the two are not mutually exclusive but complementary.  An audit is balance sheet focused, whereas the QoE is concentrated on the income statement, emphasizing a company’s true ongoing earnings and cash flow potential, often measured as EBITDA. Both focus on the importance of getting the accounting correct, but the QoE’s primary goal is to allow a buyer to gain a detailed un ..read more

Recently, a lender (who now has become a client) came to us looking for a second opinion on a valuation of a Massage Envy Franchise. Their appraiser came back with a negative value conclusion which centered around deferred gift card liabilities transferring with the sale. We took a step-by-step review of the business and how these liabilities are treated when determining the value of the franchise. Here are some key points from that discussion. A deferred liability occurs when a company has been paid for a service that a customer has not yet received or that has not been fully completed. This ..read more

Recently, a lender (who now has become a client) came to us looking for a second opinion on a valuation of a Massage Envy Franchise. Their appraiser came back with a negative value conclusion which centered around deferred gift card liabilities transferring with the sale. We took a step-by-step review of the business and how these liabilities are treated when determining the value of the franchise. Here are some key points from that discussion. A deferred liability occurs when a company has been paid for a service that a customer has not yet received or that has not been fully completed. This ..read more

Earlier this month, our team celebrated National Small Business Week. This past year has been a turbulent time for business owners and the SBA lending community, and we are proud to be part of a resilient community.  Usually, National Small Business Week is hosted by the Small Business Association (SBA), and this event takes place the first week of May. This year, the SBA is holding a virtual summit later in the fall. However, you never really need an excuse to celebrate small businesses and the surrounding lending communities. More than half of Americans work for or own a ..read more