Quantive Welcomes Luke Conger!

We recently had a new member join the Quantive team. Please join us in welcoming Luke Conger, our new Director of Business Development!  

Hailing from Bagley, Minnesota, Luke started out his working career learning the values of hard work through working on a cattle ranch in Northern Minnesota. Luke believes that all his work on the ranch instilled the work ethic and integrity that he has today 

After graduating from Liberty University with a degree in Sports Medicine, Luke started his career as a Nutraceutical Sales Representative in Maryland. He then transitioned into working as a Human Capital Consultant where he gained valuable experience advising business owners and their teams on how to streamline their processes, better utilize resources, mitigate risk, increase attractiveness, retention and positively impact EBITA.  

Before joining #TeamQuantive, Luke continued his experience as a Benefits Consultant for a local brokerage firm in Fairfax, Virginia. It was there he helped company’s control one of their largest business expenses – employee benefits, which in turn positively impacted those company’s bottom line.

Luke currently lives in Martinsburg, West Virginia with his wife Madalynn and his two boys, Wesley and Oakley. He is very much looking forward to Quantive opening Site Bravo (Coming Soon!) in Winchester, Virginia as his current commute is almost two hours each way to Quantive’s HQ in Tysons, Virginia!   

Be sure to connect with Luke on Linkedin and stay up to date with his latest videos. 

Welcome to the team Luke!  

Quantive’s 2020 Editorial Calendar – Call For Presentations!

It’s a brand new year! Which means we’re planning on bringing you fantastic content to start off the new decade right. Also new this year? We want you to be part of the story. Check out our content arc and themes below. If you have an idea for an article you’d like to contribute or would like to be on our podcast, please reach out.   

Any of the themes below jump out at you? Interested in being a guest on our podcast or co-authoring an article? This is our official call for presentations! Reach out to Quantive’s Marketing Manager to find out more. 

Without further ado, here are our overarching content themes for 2020:   

January: New Beginnings 

This is happening right now. It may be well after the new year, but this is the time where entrepreneurs are looking to set new goals for 2020. This can mean getting a business valuation, an ownership transition or building value. We want to play to these themes on why someone would need a formal business valuation and how that correlates with real life events where someone would be looking to engage with a valuation expert.  

Why to get a formal business valuation: 

  • The business is probably your largest asset. Now isn’t the time to work on the back of a napkin. 
  • A qualified, certified Valuation Analyst can help get the RIGHT number for your business 
  • A formal valuation serves as a blueprint for demonstrating value in your company 
  • A certified valuation helps back up your asking price during negotiations 
  • Considering a sale or perhaps received an unsolicited offer  

Additional valuation topics of interest: 

  • 409(a) valuations 
  • Buy-sell agreements 
  • Trust and estate valuation 
  • Divorce matters 
  • Financial reporting 
  • SBA loans 

You can’t negotiate from a position of strength if you don’t know the value of your business. Our main initiative is to fire home this theme to our readers on why step one to value engineering is a business valuation. 

February: Doom and Gloom / Winter Feelings 

I don’t know about you, but for me February brings winter moodiness and restlessness. Statistically speaking, early February is also peak divorce season (seriously- this is a thing). With this in mind, we’ll be hitting some heavy topics related to Business Valuation for Divorce, including:  

  • Allocating assets in a divorce 
  • When to hire an appraiser 
  • Personal vs. Enterprise Goodwill 
  • “Double Dipping” 

Our goal is to touch on all these common issues in divorce valuations and start answering some FAQs on everything that could potentially come up in a divorce litigation.  

Of course, it’s not only marriages that fail – business partnerships do to. We’ll spend some time discussing Business Divorce as well – and a range of items around buy-sell agreements (and sometimes the lack thereof). Even the strongest business relationships among partners can be tested by retirement, transition or some other form of transaction. 

A buy-sell agreement sets the parameters for any potential transaction which may take place. It is necessary in order to avoid potential litigation upon the departure of an owner, as is often the case the leaving owner believes that his shares are worth more than the remaining owners believe they are worth. 

Other topics of interest include:  

  • Business Divorce prevention 
  • The importance of a shareholder agreement in any partnership 
  • The important functions of a buy-sell agreement  

March: Turning the Corner 

For most entrepreneurs their business is the largest asset that they own. Most entrepreneurs have built their company with an eye towards and eventual sale and retirement. Given these facts, a successful and enjoyable retirement is largely contingent upon the successful sale of the company. 

Exit planning ultimately comes down to asking (and answering) one key question: “Can my company be sold for enough money to fund my retirement and lifestyle requirements?” In many cases the answer is no – but you are now well positioned to attack the problem and position yourself for a successful exit. 

A robust exit plan considers all three elements: 

  • The Company – Value and “Saleability” 
  • The Estate – Value & Health of Portfolio 
  • The “Life After” plan – What will you do post-closing? 

In addition, we’re looking to cover these topics in relation to exit planning: 

  • Mitigating risk  
  • Growing value 
  • Planning a succession 
  • Involvement of a Fractional CFO 
  • Involvement of a CEPA (Certified Exit Planning Advisor) 
  • Due diligence in pre-deal prep if looking to sell/transition ownership 

April: Time to Wake Up / Focus on Growth 

What should business owners do once they know their value? They involve a deal team. Selling a business of any size is a significant undertaking. Ideally their exit planning team should have these trusted advisors: 

  • Transaction Attorney 
  • CPA / Tax Advisor 
  • Valuation Expert 
  • Financial Planner / Wealth Manager 
  • “Improvement” Consultant 
  • Business Broker / M&A Intermediary 

The goal for this theme is to go in-depth on building a rockstar exit planning team and spend some time on why these roles (individually and jointly) are so necessary to a seamless exit and how they play into value engineering.  

May: Spring Cleaning 

Statistics tell us that for most entrepreneurs and family business owners, their operating business makes up about 80% of their net worth.  What’s more is that most business owners that we work with are what we think of as “business rich and cash poor.” They’ve built a very valuable – yet very illiquid – asset. The vast majority will rely on the liquidation of this asset in order to meet their retirement goals. That liquidation may be: 

  • A traditional M&A exit (i.e. a sale to a strategic or financial buyer) 
  • A sale to family members 
  • A sale to management 
  • A sale to employees 

Regardless, if the proceeds from the transfer are needed to fund retirement, creating a financial plan focusing on the liquidation outcome is the cornerstone of sound transition planning in addition to a business valuation. Enter the two key data points business owners need to know: 

  • Financial Plan – How much do you need? 
  • Valuation – How much is the business worth today? 

Financial planners and valuation experts can help business owners better understand the need for gap analysis in business valuation. However, it all starts with a completed certified business appraisal and working with a financial planner.  

June: Catching Summer Vibes 

Due diligence is the one opportunity for a buyer to get a clear and detailed picture of how the business works and the profits it can generate over the long-term. A seller, on the other hand, needs to realize that buyers are looking for potential problems that impact the business. Sellers need to invest the time and effort to address potential problems before the due diligence process starts. 

An effective due diligence process will help a sale close sooner, and both sides can negotiate a sale price that is reasonable. 

Due diligence items to highlight: 

  • Completing due diligence in a timely manner in order to close a sale 
  • Why preparing for due diligence in advance can make the overall due diligence process easier (I.e. financial statements, customer agreement, vendor contracts, employee agreements) 
  • Why all accounts need to be reconciled in a timely manner 
  • Why accrual method of accounting should be the only method being used in a business 
  • Why sellers need to invest the time and effort to address potential problems before the due diligence process starts  

July: Dog Days of Summer 

One of the challenges that we often face is correlating value to “sellability.” In many cases a business may have value to the owner, but there may be a very limited market for the company. (In fact, this notion is the basis of the concept of a Discount for Marketability.) For example, a small 3-person company with a single working owner may generate significant value for the owner.  But that same business might not have significant conveyable value to a buyer. 

What should a business owner do? They can first begin by doing things to make their business more sellable by:  

  • Understanding risk  
  • Getting clarity on what happens post-closing 
  • Getting smart about the deal structure 
  • Knowing the numbers of your business 
  • Building out a sales team 
  • Establishing high volume, reoccurring revenue 
  • Diversifying your client base 
  • Knowing your niche 

We want business owners to understand that selling a business is hard work and isn’t as easy as just listing a business for sale.  

Other items of interest: 

  • Discount for Lack of Marketability 
  • Discount for Lack of Control 

August: Back to School 

When forming a business, one of the first things every entrepreneur should think about is their ultimate exit. For most, this is the farthest thing from their mind.  As any corporate attorney will tell you, in the same way in which you would plan to protect your children with the creation of a will, your business should also be treated with kid gloves. A Buy-Sell Agreement should be a top priority.  

Buy-sell agreement benefits:  

  • Providing a market for the ownership interest of the closely held business upon a specified “triggering event.” 
  • Setting in place an exit strategy when the time comes and minimizing the potential for conflict. 
  • Defining how ownership interest(s) can be transferred if one or more of the owners can no longer or do not want to continue in the Business.  Typically, the owner’s interest must be sold back to the company, the remaining shareholders, or any combination thereof. 
  • Protecting the interest of the surviving owner(s) and/or to not jeopardize the liquidity needs of the business to fund a buyout. 
  • Providing an agreed upon method for valuing an ownership interest (where we come in!). 
  • Providing a mechanism to fund the agreement, typically using an insurance policy. 
  • Allocating entity control among owners and management. 
  • Setting up a fair payout for heirs of a deceased partner. 
  • Establishing a valuation upon death of an owner which is integral in estate planning and taxation. 

We would love to partner with any corporate attorneys for content on this theme as we believe discussing the benefits of a buy-sell agreement on a high level can help benefit business owners currently in the process of considering one.  

September: Getting 4Q Ready / Finish Strong 

A phrase we hear frequently is “a business is worth what someone is willing to pay for it.” And of course, this is a true statement. When a business sells… that’s the number. 

But the problem with this statement is that it’s reactionary. Reactionary is bad.  

 Here’s what business owners should be considering: 

  • Playing Offense – working with a certified valuation expert gives you an advantage at the negotiations table 
  • Demonstrating Value  To get a more accurate value, valuation experts work through a process to dig in and understand why your business more or less is valuable than the market average  
  • Increasing Value – Regardless of method used to value a company, the number one concern for a buyer is their ability to generate profit. The most reliable indicator of this ability is your past performance. Valuation experts work with you to document those and build them back into the value of your business. This has a direct, significant impact on increasing both actual and perceived value. 

All business owners should be looking to finish strong and get their businesses 4Q ready. Taking some of the given points above, the main idea is to help someone understand why they should pay more for a business. In order to do this, you need to play offense, demonstrate value and increase value.  

Most business owners perform a business appraisal only once or twice during the ownership of their company, (I.e. exit planning, tax considerations and litigation). However, a company can be appraised for many of the following reasons: 

  • Buy/Sell agreements 
  • Gifting 
  • Economic damages 
  • Shareholder dissent 
  • Due diligence 
  • Litigation support 
  • Estate tax and tax planning 
  • SBA financing / SBA loans 
  • Gift tax 
  • Recapitalization 
  • 409(a) compensation / stock options 
  • Financial Reporting  

Any of these valuation reasons speak to your wheelhouse? Drop us a line!  

October: Pumpkin Spice and Everything Nice 

Running a business isn’t always “pumpkin spice and everything nice”  

A common objection we see from owners exploring an exit is ‘well if my company is only worth X annual earnings, I could just keep running it” 

We want to strike down this stereotype and bring to light several issues that could be caused with this scenario:  

  • The reason small businesses trade at such low multiples is because of the huge amount of risk involved in them 
  • The reason you might want to sell is to transfer that risk from you to someone else in exchange for compensation 
  • Operating your company from Year 0 through infinity always retains the risk.  Our model tells us that at some point in time you are likely to feel the sharp end of whatever form that risk takes 
  • You started this process to EXIT the company. Not exiting is the exact opposite of the reason you started this process 

Business owners can run their company forever, but how ideal is that logic? Eventually they’re going to want to slow down and they’re going to want to have the proper assets in place in order to do soWe want to touch on all these scenarios above and drive home why “playing the waiting game” to exit plan within a business is for the birds.  

Other topics of interest include: 

  • Gap analysis 
  • Risks that could be holding the company value down 
  • Actions to take to improve company value 
  • Impact of improved earnings on value  

November: A Feast 

Avoid those stretchy pants! This month we want to discuss all aspects of Fiscal Fitness business owners should have already done and/or should know the answer to: 

  • Formal business checklist 
  • An annual budget 
  • Review variances 
  • Understanding operating vs. non-operating income 
  • Earn a return on assets 
  • Plan for capital expenditures 
  • Chart of accounts 
  • Use accrual accounting 
  • Complete a formal monthly closing process 
  • Timely bank reconciliations  
  • Useful management reports 
  • Build a kick-butt financial advisor team 
  • Check for segregation of duties 
  • Organize your record keeping system 

We want to get more granular on the items above in order to get business owners thinking about their fiscal fitnesswhy they’re so important and how they can play into setting new goals for 2021.  

December: Set the Tone for 2021 

Being a business owner requires wearing a lot of hats on the front and back end of the business. In our experience, this “DIY” theme tends to carry over into how business owners approach valuing their business as well.  

We would strongly advise against this. Even if you have an impressive MBA from an accredited university, chances are that the core curriculum didn’t even come near covering valuation. What’s more – trying to DIY business valuation isn’t necessarily the best use of a business owners time.  

Consider the methodologies behind business valuation: 

  • Asset Approach 
  • Market Approach 
  • Income Approach 

While there is no definitive methodology for any one business, there are many approaches available for consideration in a valuation engagement. Determining which valuation method is appropriate for a given business or situation often requires the experience and expertise of a valuation analyst. 

We’re looking to touch on all the points above and why DIY valuation should be a thing of the past.  

May Deal Announcement

Quantive’s client Marlin Ventures was acquired by Consortium Management Group, Inc.

Marlin Ventures, a government contracts consulting firm, is renowned for its commitment to its clients’ success. Marlin Ventures provides a full range of business development and contract administration support “from capture to closeout”.

Terms of the transaction were not disclosed.

Matt Whitaker lead the transaction for Quantive.

March Deal Announcements

It’s been a big month!  Two deal announcements for closings over the past few weeks.  Big congratulations to Matt Whitaker who advised on both.

Deep Learning Analytics acquired by General Dynamics Mission Systems

Our client Deep Learning Analytics (DLA) was acquired by GDMS.  DLA has extensive expertise in artificial intelligence including data science, research, machine learning, predictive analytics and software engineering. The company specializes in deploying deep learning algorithms on small and power efficient appliances and mobile devices. The company provides understandable data-driven answers to pressing business and research questions in the fields of energy, defense, education, social policy, biology and e-commerce by drawing on better data, better machine learning, and better insights.

Terms of the transaction were not disclosed.

Matt Whitaker lead the transaction for Quantive.

CKA Acquired

Quantive’s client CKA, LLC has been acquired.  CKA is a federal contractor providing a range of IT services, to include cyber security, enterprise data center operations, and cloud computing.

Terms of the transaction were not disclosed.

Matt Whitaker lead the transaction for Quantive.

 

About Quantive

Quantive is a veteran owned and operated financial services firm. We help entrepreneurs in a range of matters related to corporate value: business valuation, value growth, and M&A advisory. We have over 15 years of experience in a wide range of industries with a focus on the lower middle market.

Dan Doran on Long Island Exit Planning Panel

Quantive’s Dan Doran recently sat on a panel of Private Equity and M&A experts hosted at Long Island’s Post University titled “What the Heck is my Long Island Business Worth?”  Sponsored by the Long Island EPI Chapter and AM&AA, the panel featured a range of middle market professionals from Duff and Phelps, MCM Capital, BNY Mellon Wealth Management, KLH Capital, as well as Quantive.

Quantive’s Dan Doran said “BNY’s Dan Shaughnessy did a fantastic job putting together a highly informative event.  I loved the mix of buy-side and sell-side viewpoints from the fellow panelists.  It’s always interesting to see how the ‘other side’ views deals and to understand their key points of consideration in assessing deals.”

Discussion Learning Objectives

Highlights and learning objectives from the panel discussion included:

  • Valuation multiples 
    • What are they and why are they important to business owners? 
    • What macroeconomic factors are driving M&A valuation multiples to current record highs? 
  • What value drivers help boost the business’ valuation? 
  • What red flags in a business could hurt a business’ valuation? 
  • What are some of the most common mistakes that business owners make when selling their business that impact its value (and how can those mistakes be avoided)? 
  • How are business owners are “getting paid” for their business?  Earn outs, rolled equity, seller note, employment agreement with RSU’s, etc. 
  • The most important negotiating points in a deal that impact the sale price? 

Quantive Named Moxie Award Finalist

Quantive is pleased to have been named a finalist in the 2018 Moxie Award, said Dan Doran, Quantive’s Founder.  The Moxie Award honors companies, nonprofits, and associations for their boldness in business, placing them among an elite group of leading organizations.

“I want to congratulate our team for enabling us to be recognized among the boldest and most innovative organizations in the D.C. metro community,” Doran said.

Finalists were recently announced by Sarah Cody, the 2018 Moxie Award executive chairwoman.

“We received an unprecedented number of entries,” Cody said. “We look forward to revealing the winners at the 2018 Moxie Award celebration on Oct. 11 at The Ritz-Carlton in Tysons Corner.”

A complete list of finalists can be found at https://moxieaward.com.

Clear Rock is now part of the Quantive Family

We are pleased to announce that our sister company, Clear Rock Advisors, LLC., has rebranded under the Quantive name. The two companies share common ownership, and this rebranding better aligns with our vision of offering a full range of services related to corporate value.

About Quantive

Quantive is a veteran owned and operated financial services company serving the lower middle market. We assist entrepreneurs, family businesses, and their advisors in Valuation, Value Growth Consulting, and M&A Advisory.

For more information please contact Dan Doran @ 202-734-6490.

FAQ’s

Has there been a change in ownership?
No. This is a simple rebranding – ownership remains the same.

Will this change impact my relationship with my Advisor?
No. There will not be any change whatsoever to your advisor relationship or your direct interaction with Quantive / Clear Rock.

Why the change?
As our financial services practices have continued to grow we find more and more overlap between our M&A, Valuation, and Exit Planning services. We want to cut down on any confusion and improve consistency in the way we go to market. Ultimately we think this change will drive a better client experience.

When is the change effective?
We finalized our rebrand to Quantive in March 2018.

Reminder: Exit Planning Institute Chapter Launch

Quick reminder: the Exit Planning Institute Capital Region chapter is launching next week!

When: Tuesday, December 13, 2016
Where: Ritz-Carlton Tysons
Cost: Complimentary

You are cordially invited to join us for an Exit Planning Awareness Event. Join us and Chris Snider, the 2015 AM&AA Thought Leader of the Year, for a complimentary session on “Breaking Down Professional Silos: The Advisor of the Future.” Read more

WaPo Talks Preparing For Sale (And We Agree)

The Washington Post recently put out an article regarding preparing your small business for sale.  The article emphasized working with an exit in mind in order to secure the right buyer and highest price – and we couldn’t agree more!  Oftentimes a business owner misses the mark on receiving the maximum sale price for a variety of reasons.  The article continues on to include a checklist to get business owners on the right track.  This list includes:

  • Identifying the right potential buyers – Buyers include business partners, key employees, family members, strategic investors (whom will more than likely give you the highest multiple), or venture capitalists.
  • Get your house in order – Make sure your books are clean and compensation structures in place entice key employees to stay with the Company through any transition.
  • Scale back your role – Transition key roles and relationships to developed departments and key employees.  Try to systematize critical operations, develop operations manuals, and create teams.  Ultimately find ways to extract yourself to facilitate a smooth transition down the line.
  • Consider your long-term needs – Understand your retirement needs and define your personal goals.  Consult your financial planners/wealth managers to put in place a clear picture of the income needed to support your current lifestyle as well as the tax implications that will arise with any transaction.

These points are integral considerations for any and every business owner regardless of the stage their company is in and the age of the business owner.  Expanding upon these points, here are a few more we feel that a business owner must also consider:

  • Cultivating recurring revenue streams – An acquirer is going to want some degree of certainty that their investment and purchase is going to guarantee them a certain level of income/profitability.  Companies with recurring revenue streams command a higher multiple and more times than not, will have more interested buyers to choose from.  Maintenance contracts are the best way to instill recurring revenue streams.  Not in a business where maintenance is required?  Get creative.  Incentivize clients to “need” your product/service at different times of the year, offer preferred pricing when buying more than once, suggest complimentary products or services.
  • Broaden your client base – Instill a referral program for previous clients – create and explore ways to quickly and easily expand your network and target audience.  Hire a dedicated sales professional to really pound the pavement and bring in new business.
  • Similarly, lessen any dependency on any one key vendor- Oftentimes, small business owners will develop a relationship with their vendors, become friends, and have an unspoken handshake agreement in place.  While you may not have any reason to seek out an alternative vendor, it is always best to have other options in your back pocket.  It’s also best to formalize any agreement and have it on record.
  • Differentiate yourself – Don’t let your business be another commodity.  Sometimes you may not be able to create barrier to exit, restricting the client base from switching to another service/product provider, but you can give those clients reasons to NOT want to leave.  Whether it be top notch customer service, unprecedented add-on service options, open communication (i.e. no automated operator phone systems), or simply showing your customers that they matter to you by sending out personal holiday card or birthday wishes, do something that solidifies your relationship with your client above and beyond offering the “lowest price”.

We often work with business owners to assess the value of their business, goals for company growth, and exit strategy objectives.  Read more on our Gap Analysis services to discover how you can utilize valuations as a best practice within the management of your company.