After running a successful business over the years, many owners feel they know the industry well but have very little experience when it comes to selling their company. As sell-side advisors, Dexter Braff provided insight to Axial regarding how The Braff Group manages valuation expectations for our clients during a sale process.
“We approach potential valuation disconnects in several ways. First and foremost, we acknowledge the client’s expectations. Toward that end, we ask how they arrived at their number. Absent documented comps that apply to their businesses and an understanding of individual factors that can detract – or add – to them, it is not at all unusual for clients to make mistaken assumptions here. And rightsizing comes down to a sober explanation of the market as it exists and applies to them. It becomes trickier when the decision to sell is based largely on an unlikely outcome. Here, we often introduce a concept we call the ‘Goal Price Trap.’ Quite simply, we begin to lay out what would likely need to be done to increase the probability of achieving their goal price. Sometimes, clients are willing to invest time and resources to reach their targets. And for them, we support their decision to delay, and closely monitor their progress to be sure they remain on track. But if they are not, they readjust, rather than fall into the Goal Price Trap and bear the risk that business or sector factors may erode the value of their company over time.”
– Dexter Braff