• Login
    • Join
  • Subscribe Free
    • Magazine
    • eNewsletter
    Checkout
    • Magazine
    • News
    • Exclusives
    • Labels & Packaging
    • Markets
    • Technology
    • Equipment
    • Supplies
    • Buyers' Guide
    • Events
    • Jobs
    • More
  • Magazine
  • News
  • Exclusives
  • Labels & Packaging
  • Markets
  • Technology
  • Equipment
  • Supplies
  • Buyers' Guide
  • Events
  • Jobs
  • Current / Back Issues
    Features
    Editorial
    Columns
    Digital Edition
    eNewsletter Archive
    Our Team
    Subscribe Now
    Advertise Now
    Top Features
    Dscoop Post-Show Coverage

    Slitter-Rewinders

    Craft Beer Labels

    Pharmaceutical Labels

    Luminer Converting Group: Narrow Web Profile
    Breaking News
    Converter News
    European Label News
    Industry News
    Industry People
    M&A News
    New Products
    Expert's Opinion
    Live From Shows
    Top News
    In-Mold Decorating Association announces 2022 IMDA Awards Competition

    Essentra Packaging invests in Landa Nanographic press

    Nazdar to manufacture VFP electronic ink for US Market

    SunDance moves into flexible packaging with HP Indigo

    Schreiner ProTech introduces new PCS solution for electric vehicle charging
    Blog
    Video Bites
    Beauty & Personal Care Labels
    Beer Labels
    Beverage Labels
    Flexible Packaging
    Folding Carton
    Food Labels
    Glue-Applied
    In-Mold
    Industrial Labels
    Medical Labels
    Pharmaceutical Labels
    Pressure Sensitive
    Prime Labels
    Promotional Labels
    Security Labels
    Shrink
    Smart Labels
    Specialty Labels
    Spirits Labels
    Wine Labels

    In-Mold Decorating Association announces 2022 IMDA Awards Competition

    Five approaches for more sustainable beauty packaging

    Essentra Packaging invests in Landa Nanographic press

    In 2040 a fifth of all food packaging could still be landfilled or incinerated

    Nazdar to manufacture VFP electronic ink for US Market
    Africa
    Asia
    Australia
    China
    Europe
    India
    Latin America
    Middle East
    North America

    Nazdar to manufacture VFP electronic ink for US Market

    Bar Graphic and J&J Converting open US demo center

    LemuGroup prepares for Open House in Spain

    Appvion invests in new coating equipment

    Phoenix Challenge Foundation announces High School winners
    Flexography
    Digital Printing
    Prepress
    Finishing
    Sustainability

    Five approaches for more sustainable beauty packaging

    Essentra Packaging invests in Landa Nanographic press

    In 2040 a fifth of all food packaging could still be landfilled or incinerated

    SunDance moves into flexible packaging with HP Indigo

    FTA and FFTA announce 2022-2023 board updates
    Digital Printers & Presses
    Flexo Presses
    Label Converting Equipment
    Label Finishing Equipment
    Prepress Equipment

    Essentra Packaging invests in Landa Nanographic press

    SunDance moves into flexible packaging with HP Indigo

    Why inkjet and toner systems will be market redefining to 2032

    Bar Graphic and J&J Converting open US demo center

    Asda implements latest ColorCert ScoreCard Server
    Dies And Tooling
    Flexo Supplies
    Ink & Coatings
    Prepress Supplies
    Pressrooom Supplies
    Substrates

    In 2040 a fifth of all food packaging could still be landfilled or incinerated

    Nazdar to manufacture VFP electronic ink for US Market

    Asda implements latest ColorCert ScoreCard Server

    Zeller+Gmelin introduces UV-curable and water-based inkjet inks

    Flexo Wash introduces FW 850 Laser Anilox Cleaner
    All Companies
    Categories
    Company Profiles
    Label Converters
    Trade Associations
    Add New Company
    International Buyers Guide Companies
    Epson America, Inc.

    NarrowWebExchange.com, LLC

    SCENTISPHERE, LLC

    Meech International

    Spinnaker Coating, LLC
    Industry Events
    Webinars
    Live from Show Events
    • Magazine
      • Current & Past Issues
      • Features
      • Editorial
      • Columns
      • Digital Edition
      • eNewsletter Archive
      • Subscribe Now
      • Advertise Now
    • Breaking News
    • Buyers' Guide
      • All Companies
      • Categories
      • Company Profiles
      • Label Converters
      • Trade Associations
      • Add Your Company
    • Labels & Packaging
      • Beauty & Personal Care Labels
      • Beer Labels
      • Beverage Labels
      • Flexible Packaging
      • Folding Carton
      • Food Labels
      • Glue-Applied
      • In-Mold
      • Industrial Labels
      • Medical Labels
      • Pharmaceuticals Labels
      • Pressure Sensitive
      • Prime Labels
      • Promotional Labels
      • Security Labels
      • Shrink
      • Smart Labels
      • Speciality Labels
      • Spirits Labels
      • Wine Tables
    • Markets
      • Africa
      • Asia
      • Australia
      • China
      • Europe
      • India
      • Latin America
      • Middle East
      • North America
    • Equipment
      • Digital Printers & Presses
      • Flexo Presses
      • Label Converting Equipment
      • Label Fishing Equipment
    • Supplies
      • Dies And Tooling
      • Flexo Supplies
      • Ink & Coatings
      • Prepress Supplies
      • Substrates
      • Pressrooom Supplies
    • Online Exclusives
    • Slideshows
    • Experts Opinions
    • Videos
    • Podcasts
    • Infographics
    • Blog
    • Whitepapers
    • Events
      • Industry Events
      • Live from Show Events
      • Webinars
    • Jobs
    • Resources
      • Supplier Gallery
      • Literature Showcase
      • Homepage Showcase
    • About Us
      • About Us
      • Contact Us
      • Advertise With Us
      • Privacy Policy
      • Terms of Use
    The Bottom Line

    How important are projections when selling your business?

    ...

    How important are projections when selling your business?
    John Emory Jr. of investment banking boutique Emory & Co.
    Related CONTENT
    • New video shows SheetLabels.com's digital success with Domino
    • Implementing your strategic plan for 2018
    • Hungary's Norma adds 9-color Edale FL3 flexo press
    • Siegwerk looks to the future with new partnerships
    • ‘It’s the people, stupid’
    Rock LaManna01.26.18
    When you’re selling your business, it’s natural to want to promote your past successes. But investors aren’t as interested in where you’ve been as much as where you’re going. That’s why projections of future performance are so critical. 

    If there was ever a transaction that included an infinite amount of variables, it’s the sale of a business. There are multiple details to consider, including financial performance, management team, company culture – the list goes on and on.

    But the one detail that rises above the rest are the company’s financial projections. An investor is interested in your past, sure, but they’re buying your company for the future. Your projections need to be both realistic and optimistic, and will contribute heavily to your company’s price tag.

    You’re expected to be optimistic with your Pro Forma
    A Pro Forma financial statement typically includes projections for the future, including net revenue, cash flow, expenses and anticipated profits. It uses your current financial statements to build a picture of the future.

    If created for internal use, these projections should be as accurate as possible. Your numbers should be a true expectation. For external use, you’ll need to be more optimistic, including a stretch goal for your company. Obviously, you’ll be using your Pro Forma for external use when selling your business.

    According to John Emory Jr. of the investment banking boutique Emory & Co., an investor will expect to see a multi-year projection as part of the Pro Forma. They will scrutinize income statements and budgets from the past (and some will only consider past performance), but the real focus for many will be on anticipated cash flows for the next 3-5 years.

    I mentioned that these projections should be optimistic; investors will expect it. In fact, they’ll always discount your projections, assuming that your numbers will be slightly rosier than reality. “You’d be doing yourself a disservice if you put out a projection that wasn’t optimistic,” Emory cautions.

    Don’t confuse “optimism” with random numbers. Growth projections pulled out of the air won’t do much to convince a skeptical investor. Let’s take a closer look at how to be both optimistic and realistic in creating a Pro Forma.

    The More Detailed, The Better
    Emory notes that the more detail and logic you provide in your Pro Forma, the more likely you and an investor will accept your projections. Here are some tips to ensure your projections are solid:

    Base projections on a customer-by-customer basis
    Some companies simply set growth projections based on a percentage – random as it may be. They’ll project an increase of 4%, for example, with little or no explanation as to why. 

    A more accurate method for estimating sales, for example, is to conduct a customer-by-customer audit of all your customers. Project what their individual sales will be for the future and then aggregate that number. You’ll be far more accurate than a straight percentage prediction, and the logic will stick with an investor. Of course, this may only be practical for your larger customers.

    Be accurate out of the gates
    Your predictions should be accurate for the first six months, considering your budget for next year is typically set. However, future predictions can curve up like a hockey stick. Predictions that rise straight up are unrealistic, but a curved growth line is more readily acceptable.

    Remember that five years is the standard
    You’ll want to create a Pro Forma that includes projections of typically 1-, 3- and 5-year outlooks. While a 5-year projection doesn’t seem realistic in today’s rapidly changing world, it will be expected on the part of many buyers.

    “Investors will make their own projections,” Emory says. “And they may throw yours out. But it helps them anchor to a stronger price.”

    Don’t Forget the Valuation
    If you’re considering selling your business, I always recommend conducting a valuation (also called an appraisal). Getting a clear understanding of how much your company is worth will help you set realistic expectations for yourself and may even reveal that the time is not right to sell.

    The type of valuation you conduct will vary based on the size of your company and purpose of the appraisal. A larger company, for example, may be requesting a formal appraisal for a legal purpose such as buying out a partner or granting stock options. In this case, you’ll need a complete summary appraisal. A less formal valuation summary is a calculation of value. This report includes your basic company information, a brief financial summary and a summary of the valuation methods used to create the report.

    Either type of valuation gives you a view of the past, and for some companies, that’s all they need. Berkshire Hathaway, Emory notes, just asks for financials from the previous years. They don’t base their price on your projections. However, a valuation can serve as a great starting point for negotiations. If you can agree upon the current value, then your Pro Forma projections carry much more weight.

    The ultimate value: A quantitative match to your qualitative strategy
    I’ve written extensively how the quantitative world and the qualitative world need to work in tandem to deliver results. If you achieve a quantitative goal, it will confirm that your qualitative strategy was correct.

    Most Pro Formas are created by a chief financial officer and then tweaked by the senior management team. That’s a great combination of quantitative and qualitative visionaries who can collaborate on a rosy, yet realistic, sales tool that will be the strongest piece of your pitch. When you’re selling your business, a Pro Forma serves as the quantitative actualization of your vision. It explains the financial impact of your business, showing that your vision of the future can translate into cold, hard cash. 

    This serves as the final challenge for you as a business owner. If you can demonstrate how your company will grow and generate strong cash flows, a big price tag for your business can be your reward.


    Rock LaManna, President and CEO of LaManna Alliance, helps printing owners and CEOs use their company financials to prioritize and choose the proper strategic path. Rock can be reached by email at rock@rocklamanna.com.
    Related Searches
    • line
    • rock lamanna
    • printing
    • management
    Suggested For You
    New video shows SheetLabels.com New video shows SheetLabels.com's digital success with Domino
    Implementing your strategic plan for 2018 Implementing your strategic plan for 2018
    Hungary Hungary's Norma adds 9-color Edale FL3 flexo press
    Siegwerk looks to the future with new partnerships Siegwerk looks to the future with new partnerships
    ‘It’s the people, stupid’ ‘It’s the people, stupid’
    FFEI celebrates 70th anniversary FFEI celebrates 70th anniversary
    Companies To Watch:  New Creation Labels & Packaging Companies To Watch: New Creation Labels & Packaging
    Companies To Watch:  Labels, Tags & Inserts (LTI) Companies To Watch: Labels, Tags & Inserts (LTI)
    Companies To Watch:  Control Group USA Companies To Watch: Control Group USA
    Hey Rock, What’s The Multiple for the Label Industry? Hey Rock, What’s The Multiple for the Label Industry?
    Xeikon appoints Vlad Sljapic as vice president of global sales Xeikon appoints Vlad Sljapic as vice president of global sales
    mprint mprint
    Channeled Resources: Same Family, Not the Same Company Channeled Resources: Same Family, Not the Same Company
    Mondi extends partnership with WWF Mondi extends partnership with WWF

    Related Content

    • Digital Printers & Presses | Digital Printing
      New video shows SheetLabels.com

      New video shows SheetLabels.com's digital success with Domino

      The video highlights the company's unique history and business model, as well as its success with the N610i UV inkjet press.
      01.22.18

    • Implementing your strategic plan for 2018

      It's game time.
      Rock LaManna

    • Europe | Flexo Presses | Flexography
      Hungary

      Hungary's Norma adds 9-color Edale FL3 flexo press

      The new FL3 has a special 41" maximum print width for extra large in-mold labels.
      11.21.17


    • Ink and Coatings
      Siegwerk looks to the future with new partnerships

      Siegwerk looks to the future with new partnerships

      The strategic collaboration with relevant start-ups is key for the company to gain insights in new ideas and developments.
      11.20.17

    • ‘It’s the people, stupid’

      ...
      Rock LaManna 11.17.17


      Trending
      • Brook + Whittle Acquires Diamond Flexible Packaging | Label and Narrow Web
      • Argent Tape & Label's Lynn Perenic An 'Entrepreneur Of The Year' Finalist | Label and Narrow Web
      • Five Approaches For More Sustainable Beauty Packaging | Label and Narrow Web
      • SunDance Moves Into Flexible Packaging With HP Indigo | Label and Narrow Web
      • Appvion Invests In New Coating Equipment | Label and Narrow Web
      Breaking News
      • In-Mold Decorating Association announces 2022 IMDA Awards Competition
      • Essentra Packaging invests in Landa Nanographic press
      • Nazdar to manufacture VFP electronic ink for US Market
      • SunDance moves into flexible packaging with HP Indigo
      • Schreiner ProTech introduces new PCS solution for electric vehicle charging
      View Breaking News >
      CURRENT ISSUE

      April 2022

      • Dscoop Post-Show Coverage
      • Slitter-Rewinders
      • Craft Beer Labels
      • Pharmaceutical Labels
      • Luminer Converting Group

      Cookies help us to provide you with an excellent service. By using our website, you declare yourself in agreement with our use of cookies.
      You can obtain detailed information about the use of cookies on our website by clicking on "More information”.

      • About Us
      • Privacy Policy
      • Terms And Conditions
      • Contact Us

      follow us

      Subscribe
      Nutraceuticals World

      Latest Breaking News From Nutraceuticals World

      Bilberon Bilberry Extract Receives U.S. Patent For Eye Strain, Neck/Shoulder Pain
      Jordan Process Receives Nutrasource ICAP Certification for CBD
      FDA Warns About Steroids or Steroid-Like Substances in Bodybuilding Supplements
      Coatings World

      Latest Breaking News From Coatings World

      AGM Secures Exclusive Distribution Agreement with Indian Partner Imkemex
      Microban Announced as Lead Sponsor of BCF Annual Conference and Dinner 2022
      DIC’s Indian Subsidiary Begins Construction of Coating Resins Production Facility
      Medical Product Outsourcing

      Latest Breaking News From Medical Product Outsourcing

      Robocath Presents Results from R-Evolution Clinical Study
      Medtronic's Resolute Onyx Drug-Eluting Stent Shows Success for Left Main PCI
      Medtronic Shares 3-Year Renal Denervation Blood Pressure Trial Data
      Contract Pharma

      Latest Breaking News From Contract Pharma

      Emergent CDMO Case Studies: Project Design & Implementation of Fill/Finish Technologies
      Aptar Pharma Launches HeroTracker Sense
      MasterControl Features Quality Management and Manufacturing Execution Systems
      Beauty Packaging

      Latest Breaking News From Beauty Packaging

      Mielle Organics Welcomes Steve Pamon to Advisory Board
      Makeup Revolution Expands into Walgreens
      Nu Skin Joins EcoBeautyScore Consortium
      Happi

      Latest Breaking News From Happi

      Revolution Beauty Expands Makeup Revolution Into Walgreens
      Barentz Develops Electronic Personal Care Product Guide
      P&G Temporarily Closes Downtown Cincinnati Office Due to Potential Security Concerns
      Ink World

      Latest Breaking News From Ink World

      Nazdar Ink Technologies to Showcase Latest Ink Innovations at FESPA Global Print Expo 2022
      Epson Introduces First Direct-to-Fabric Printer for North America
      ProAmpac Facilities Secure Safety Awards 2022
      Label & Narrow Web

      Latest Breaking News From Label & Narrow Web

      In-Mold Decorating Association announces 2022 IMDA Awards Competition
      Essentra Packaging invests in Landa Nanographic press
      Nazdar to manufacture VFP electronic ink for US Market
      Nonwovens Industry

      Latest Breaking News From Nonwovens Industry

      'Right' Hygiene Conference to be Held in June
      Freudenberg to Present Battery Pack and Liquid Absorbers at Battery Show
      H&V Appoints Vice President and General Counsel
      Orthopedic Design & Technology

      Latest Breaking News From Orthopedic Design & Technology

      Envista To Acquire Osteogenics
      Exactech Earns Breakthrough Status for JointMedica's Polymotion Hip Resurfacing
      Orthotic Brace Suppliers Convicted in $6.5M Fraud Scheme
      Printed Electronics Now

      Latest Breaking News From Printed Electronics Now

      Emerson Earns Third Consecutive 2022 ENERGY STAR Partner of the Year Award
      First Solar to Sell Japan Project Development, O&M Platforms to PAG Real Assets
      Jabil Strengthens Additive Manufacturing Offerings

      Copyright © 2022 Rodman Media. All rights reserved. Use of this constitutes acceptance of our privacy policy The material on this site may not be reproduced, distributed, transmitted, or otherwise used, except with the prior written permission of Rodman Media.

      AD BLOCKER DETECTED

      Our website is made possible by displaying online advertisements to our visitors.
      Please consider supporting us by disabling your ad blocker.


      FREE SUBSCRIPTION Already a subscriber? Login