In this episode of “Show Me The Way,” Dave sits down with Stephen York, Exec VP of Stern Brothers Valuation Advisors, to discuss how businesses are valued, advice for people looking to buy or sell a business, and pontifications for the 2023 financial year.

Introducing Stephen York, Exec. VP at Stern Brothers Valuation Advisors

Dave asks Stephen to introduce himself and give a bit of the background, all the way back to the UK.

• Stephen begins by noting that while he was born in Britain, he was raised in Kansas City.

Dave talks about his interactions asking clients what they think their business is worth, and then asks Stephen when people selling a business should contact a valuation advisor.

• Stephen says business owners should become familiar with the standards and procedures evaluating their company, but often are caught up in the day-to-day of running their business.

Dave flips the question around and asks Stephen how he handles valuation when working with someone wanting to purchase a business.

• He says their number one charge is to determine how long it will take for an investor to get their money back.

Dave then asks what the work looks like when doing valuations for a lender.

• Stephen says this typically involves three types of reports: valuation of stock or debt being sold, financial fairness opinion, or a solvency opinion.

Dave questions what the client engagement timeframe looks like from a seller side versus buyer side.

• Stephen says the seller side is usually about six months.

Dave then asks Stephen about any interesting stories from business valuations that he has experienced over the years.

• Stephen recalls a story from 2005 about raising funds from multiple investor rounds, noting how the company increased in value and cash flow over the following years.

Dave asks Stephen about what attorneys do right or wrong when working with a business evaluator.

• Stephen says the best thing to do is listen more to a business evaluator, rather than asking for what price they want the business to be valued at.

Dave pontificates about 2023 and asks Stephen what he predicts this new year will hold for mergers and acquisitions.

• Stephen clues in on a few things such as the tax cuts and jobs act of 2017 will expire at the end of 2025, and discusses the ramifications of this.

Dave follows this line of thinking by asking how inflation has changed valuations over the last year and a half.

• Stephen says that inflation isn’t the primary driver, but rather the struggling supply chain.

To conclude, Dave asks Stephen to give a few pieces of advice for someone interested in transitioning their business.

• He begins by saying to hire an outside expert to review your financial statements and administration policies, and clean them up before going to sell.

To get in contact with Stephen search for Stern Brothers Valuation Advisors, or email him at [email protected]

To reach out to Dave for advice or consultation, please visit www.davidseitter.com or email him at [email protected]

Disclosure

This podcast is provided for educational purposes. It does not constitute legal advice and is not intended to establish an attorney-client relationship. The recommendations contained in this podcast are not necessarily appropriate for every individual or business. In determining the best course of action, business owners should consult with an attorney on their distinct circumstances.