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Published in Minnesota Business Magazine, June, 2004 Case for Representation, Part I (continued) The Valuation How much is a business worth? How much should it be sold for? Making that determination is not a simple process, and most business owners do not know how to make that determination. An investment banking professional who is able to understand the pertinent value points of your business will be able to provide a greater understanding regarding valuation, and may be able to translate that understanding into a fair value for the business. But it is not the job of the investment banker to create value, but rather to help the client find it and understand it. It is the job of the investment banker to help the prospective buyer understand the value, and pay top dollar for it. Sometimes a company's true worth is not obvious at first glance. But sellers can demonstrated value based on more than just performance by understanding the wants of potential acquirers as well as the company itself. For instance, a business may provide a service that most of its competitors don't and which cannot easily be replicated. Or a firm may have long-term multi-year contracts that guarantee a minimum revenue stream for years to come. A business could have long-term employees with critical expertise that is rare, and important strategically to future growth. The business may have proprietary technology and methodologies. The company may have a strong reputation in the marketplace. Such sources of hidden value are not always obvious to the potential acquirer. And even if they are, the potential acquirer may not value them if those value points are not identified clearly.
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Click here to continue to Part II of this article |
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