White Knight and a Bucket of Gold

WhiteKnightFrom time to time, we see business owners with the “White Knight” mentality. This mentality assumes that a buyer is going to be happy to come in and give the owner a bunch of money, even when the financials don’t support their emotional value for their business.

People will read the Wall Street Journal’s Mergers and Acquisitions baseline. Company A buys Company B for millions of dollars. Our seller reads this and assumes that because she has a patent or process her company is probably worth millions of dollars as well.

Another owner may assume that the buyer wants the brand or market position and that it is worth so much…even though the cash flow is only $100K per year.

A buyer can only afford to pay enough for the business to support the following:
Cash flow to run the business on a daily basis
Satisfy monthly debt payments supporting the business
A salary for their family so that they can continue making a living

If the asking price is too high, the numbers just don’t work. White Knights carrying buckets of gold are rare. The odds are that you will have to value your company based on actual math. There are no shortcuts.

For more information on determining the value of your business, please give us a call at (913) 383-2671.