Theory of Constraints POOGI - Part 50

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn.}

What's my business worth ... now?

Recent events have affected the value of privately held companies, including machine shops. The market is different. Demand is different. Supply is different. Availability of credit is different. Buyer's taste for risk is different.

In most cases-but not all-that means your business is worth less. We want you to bring your exit strategy up-to-date so you can manage your most valuable asset, your business. For an insider's view of what's happening and current business valuations, we're interviewing one of the top sell-side merger and acquisition specialists in the country, Bob Forbes.

Brad: "Bob, help us understand what's happened to market conditions for selling a privately owned business"

Bob: "As you know, with the turmoil in financial markets since last year, credit availability from traditional institutions has significantly decreased for financing business acquisitions. There has been a big drop, perhaps 90%, in completed transactions."

Brad: "Wow, that's huge, and at a time when many business owners have planned on selling."

Bob: "One complicating factor is a change of policy at the SBA. Both the buyer and seller could count on the SBA to guarantee loans up to $2,000,000 for goodwill (the difference between the value of assets sold and the total selling price). Now the SBA is only willing to guarantee $250,000. More than that requires a large application fee without any assurance of being approved. That's one reason fewer deals are getting done."

... to be continued.

Here's to maximizing YOUR profits!

Dr Lisa Lang

(c)Copyright 2009, Dr Lisa, Inc. All rights reserved.