Businesses create value for their owners and shareholders by developing a business model that effectively leverages their asset base. The basic factors that influence the value of a business are:

• The value of the hard, tangible assets
• The amount of re-cast cash flow — normalized Earnings Before Income, Tax, Depreciation and Amortization (EBITDA) to account for the owners economic benefit less manager salary and benefits
• The value of intangible assets and the influence of subjective factors on the business

It is crucial to understand that assets can be tangible-like plants and equipment-or intangible, which are categorized in the following areas:

• Marketing related
• Customer related
• Artistic related
• Contract related
• Technology related

Generally, these intangible assets are not recognized as assets in the historical financial statements.

A DEFINED AND PROVEN PROCESS
The first step is to document the full set of resident assets and create a plan aimed at broadening, strengthening and leveraging them. Both the tangible and intangible assets need to be analyzed and documented because they affect the sustainability and transferability of the revenues and earnings of a business. Our objective is to provide a buyer or investor with complete information about the resident assets that are in place and insure the business's ongoing success. Adventum Group refers to this process as value enhancement, and it is conducted during the Exit Planning stage of our Compass Merger and Acquisition (M&A) Service.

The next step is developing and carrying out the exit strategy, which includes positioning the company for acquisition, taking it to market, seeking strategic transactions and completing the transaction. This is the Dealmaking phase of the Compass M&A Service and it is where our clients achieve value realization. As experienced entrepreneurs and M&A transaction experts, we guide you through this process. We work hard to understand your business so we can help you realize your financial and personal goals when you sell it.

APPROACHES TO VALUING A BUSINESS
There are various methods to value a business, such as on its balance sheet, income/earnings or market dynamics. Most competent M&A transaction firms can calculate general valuations based on these traditional methods. But at Adventum Group, we go much further. Our Compass M&A Service applies all the traditional valuation methods, but we also closely examine the intangible assets and document the value of these assets to position sellers to achieve preferable financial terms.

We have found that all businesses have one-or-more of these subjective factors that can enhance the value of a company — and many have dozens of subjective factors that are capable of enhancing the company's market value. During our Exit Planning phase, we define, catalog and articulate these subjective factors in a perspective designed to influence buyers to value the business above pure financial considerations and increase their willingness to pay above average prices.

A company's value is closely tied to its ability to generate income by leveraging its asset portfolio. But a strong asset base doesn't by itself guarantee successful selling prices and transactions. Buyers are willing to pay more for assets which generate durable revenues and earnings only when they understand how they are leveraged by a thoughtfully conceived and conscientiously applied business model. The value of a business increases substantially when the business model is viewed as sustainable after a transaction.

MANAGING SUBJECTIVE FACTORS
Adventum Group goes far beyond the offerings of traditional business brokerage services. When traditional business metrics are analyzed, valuation estimates can usually be modeled on a bell curve, with the majority of valuations within a tight range. But even within that range, some businesses will command higher transaction values while others will be valued by the market below the average.

Any business intermediary will look at comparable data of past transactions. When this data is graphed as a bell curve and the graph is steep, it is very easy to determine the value because the data is all close to the middle, or the mean. An example of a market with a steep bell curve is the residential real estate market. If you're selling your home, a real estate broker can clearly map it against recent sales of homes like yours in your neighborhood. You are likely to get slightly above or below the value estimated by a good realtor.

Standard deviation is a statistic that shows how tightly all the data points are clustered around the mean. With the residential real estate example, the size, age, condition and location of the house are objective statistics that enable easy comparisons.

But analyzing the value of a closely held business is much more difficult than analyzing the value of a home. That's because when the bell curve is flatter — instead of steeper — there is a greater range of deviations from the mean. The reason? Subjective factors are more challenging to define and measure, but they add value to carefully targeted buyers.

In any sale of a business, some companies will obtain value above the mean and others will settle for deals below the mean. Adventum Group quantifies the value of subjective factors and identifies the buyers that will perceive value in these factors. The management of subjective factors is a cornerstone of our Compass M&A Service. We analyze valuations based not only traditional financial and operational data, but we also analyze the subjective factors that contribute to a buyer's perception of a company's value so that sellers can truly understand how their business can be valued.

Our guided approach avoids last-minute surprises and uncovers the subjective factors that can increase — or decrease — a company's market value. During the Exit Planning stage, we will identify subjective factors that a business owner can manage to enhance the value of a business. That is why it is crucial that we understand your business and market.

At Adventum Group, we do not just pour your financial data into a pre-packaged spreadsheet that spits out a report of your market value; we also consider the subjective factors that will inevitably be considered by your prospective buyers. Perhaps your contracts are not as transferable to a new owner as you had thought, or your record keeping is not as clean as you thought. Maybe the technology used in your business is becoming obsolete, or your market is shifting to a new approach. We identify the factors you can manage to create additional value so your business is best prepared for the Dealmaking stage where we find the right buyer and manage the transaction.

COMMANDING TOP DOLLAR
Adventum Group works closely with you to understand the objective and subjective factors that drive real-world valuations so you can make an informed decision when selling your company. We help you make sure that the market values your business above the mean of the bell curve so that you receive maximum returns for the risks you have incurred and the sweat you have invested in building your business. Guiding you through this process from start to finish is the core competency of the Adventum Group.

Please read more about your Compass M&A Service, find out how we find the right buyers or learn more about how we protect the confidentiality of M&A transactions. We also encourage you to review our FAQs, learn more about why business owners should select Adventum Group, and view summaries of highlighted transactions.

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