Both sellers and buyers often ask me how to properly value a company for sale. Today we'll look at valuing a company in the lower-middle market, or a business worth up to $25 million.
You'll often see discounted cash flow, comparable company analysis and EBITDA quoted as metrics by which to value a company, but those are really only practical for larger, publically traded companies.
Comparable transaction analysis is a much more reliable metric for businesses in the lower-middle market range. In order equalize the companies being compared, we look at something called Seller Discretionary Earnings (SDE).
In this video, I dive into these metrics and how we utilize them to value the businesses I assist in the sale and purchase of as a corporate attorney and business broker.
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My 20+ years of experience in business finance, business law and entrepreneurship have led me to believe that numbers and logic are awesome tools, but understanding human nature and emotions is the first step to business success.
The Cenkus Law Firm provides services related to mergers & acquisitions, general business issues and startups, including founders’ agreements and fundraising. I also consult with entrepreneurs and have invested my own capital as an angel investor.
From 2010-2013 I served as Chief Legal Counsel of a publicly-trade international oilfield services company. From 2001 to 2006 me and a partner founded and built Paragon Residential Mortgage. Paragon was sold to Bridge Investments in 2006.
I hold a Juris Doctorate from Harvard Law School and a Bachelor of Arts degree in Economics from Messiah College in Grantham, Pennsylvania.
Now, I live in Austin, TX with my wife and two kids. I enjoy reading, running, classic movies, great food and wine and some great American football.