Tim Kinane


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Monday, June 17th, 2019

Seven Steps to Increase Your Company Value at Sale

Apple Orange

By: Patrick Ungashick

Two Mercedes-Benz sedans of the same make, model and manufacturing year are sold, but one goes for a higher price than the other. There are many reasons this commonly occurs. The car which sells for a higher price may have lower mileage, offer more amenities, is in better condition, or has a better service record.

This phenomenon is not unique to Mercedes-Benz or automobiles in general. The same reality happens with practically any asset, including companies. Take two companies from the same industry and similar size, offer them for sale, and one sells for a premium price compared to the other. It happens all the time. However, there is one important difference between cars and companies. The car that sells for a premium price may get its owner a few thousand dollars more at sale compared to the other car. The company that sells for a premium multiple may get its owner a few hundred thousand or a few million more for its owner. Therefore, it pays to know the right steps to take to maximize value at sale.

There are factors or conditions within a business—practically any business—that will increase (or decrease) its value at sale. If you are a business owner contemplating exiting one day in the future by way of sale, it is essential to know what these conditions are, and create them within your company. As you will see from this introductory article, the conditions take time—usually three to five years or longer—to fully achieve, so the sooner you get started, the better. Pursue these seven steps to make your company potentially sell for a higher price and better terms at your exit

Seven Steps to Maximize Business Value



1.Build a strong team. Companies with excellent leaders and managers are highly valuable. Practically every buyer wants top talent. If your organization has a strong leadership team that stays with the company after your exit, your business is likely more valuable.

2.Reduce dependency on you. If without you, the company will likely have lower sales, weaker operations, or make fewer profits, your company is nearly always going to be less valuable to a buyer. The business’s value cannot walk out the door when you do. (Here’s eight ideas on how to do this.)

3.Organize your financial statements and reports consistent with buyer expectations. Buyers want to see at least three and preferably five years of historical financial statements organized and formatted in a manner consistent with their expectations. Learn what the expectations are in your industry. These requirements could mean audited financials, using accrual and not cash accounting, or following GAAP standards. Make sure your EBITDA is normalized too. All of this work usually improves value at sale, assuming the company’s underlying financial results are attractive.

4.Be ready to present a compelling growth strategy and plan. Buyers purchase companies not for their past results, but their expected future results. Make sure your company can tell a credible and compelling story for how it will achieve significant growth over the next three to five years. This written document is commonly called a strategic plan. Ideally, your industry is a growing industry as well. Companies that can tell this story are nearly always more valuable at sale compared to companies that cannot.

5.Diversify your customer base. Buyers do not like risk, and often will either pay less for a riskier company or pass altogether on buying it. Customer concentration creates risk for buyers. When the faces around the table change, customers (even well-served customers) often pause and ask themselves if this wouldn’t be a good time to re-evaluate their options in your market. Ideally, no more than 10% of your sales and profits for the last several years have come from the same customer(s).

6.Create a brand that others want, and that you indisputably own. Your brand does not have to be the next Coca-Cola, Google, or Nike to offer value to a buyer. If your brand or brands are well-known and respected in your industry, that will nearly always add value at sale. Creating brand value takes time and effort. Make sure you own your brand—having a company, and a website or two is not enough in most situations. Work with experienced advisors to create a valuable and defensible intellectual property (IP) strategy and portfolio. (This webinar tells you how to build brand value.)

7.Remove obstacles to scale. Buyers do not want companies that have barriers to growth. They are attracted to businesses that seem to be well poised to achieve a significant increase in scale. Review all of your business’s vital systems and processes: sales, operations, customer service, financial, training, etc., identify potential or existing bottlenecks and devise strategies for removing them. Ask yourself and your team if your company doubled in size nearly overnight, could that increase in volume be supported? If not, address the limiting factors. Companies that can support growth are typically more attractive to buyers.


More Ideas and Resources

These seven steps will maximize your company’s value at sale. For this reason, we call the business conditions described above the Seven Areas of Transferable Value™.  These seven steps might not make your business bigger regarding revenue or profits, but they usually will make it easier and less risky for a buyer—thus increasing your company’s value when it transfers to a buyer or successor.

Certainly, there are other important steps to successfully selling a business. It’s important that you know your company’s critical performance metrics, and make sure that they are all pointing in the desired direction. Also, assemble a competent team to advise and assist you—resist chasing the latest “offer” that arrives in your email inbox.

Maximizing business value takes years of work prior to exit. Owners who wait too long to get started might still be able to sell their company, but they risk missing out on thousands to millions more at exit. If you intend to exit anytime in the next five years (https://www.navixconsultants.com/your-last-five-years-ebook) then it’s time to get started planning your exit.


If you have a quick question coming out of this article or, if you want to discuss your situation in more detail, we can set up a confidential and complimentary phone consultation at your convenience contact Tim 772-221-4499.

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Monday, June 10th, 2019

Five Criteria for Selecting an Investment Banker

Five Criteria for Selecting an Investment Banker Image

By: Patrick Ungashick


A common question we hear from business owners anticipating selling their company is, “How do I select an investment banker?” As exit planners, part of our role includes helping business owner clients field a team of advisors that can achieve a successful exit. If you intend to sell your company to an outside buyer, an investment banker (or M&A advisor, business broker, etc.) likely plays an important role. Because many business owners have never been through a transaction, knowing what to look for in an investment banker may be new and unfamiliar territory. But selecting the right banker is essential because the wrong choice can cost you thousands to perhaps millions of lost dollars, and/or consume up to a year or more of lost time.

In exit planning and our experience, business owners should apply these five criteria to their search for an investment banking relationship that best fits their situation, needs, and goals:

1. The Banker’s Typical Deal Size = Your Company Value

Select an investment banker that routinely works with companies of similar value to your business. A banker who typically works with companies around $10-20 million in value may not be the best choice if your business is worth $200 million, and the reverse. If your business is significantly larger than the banker’s typical deal size, that professional may lack the experience and resources to represent your company effectively during the sale process. If your business is significantly smaller than the banker’s typical deal size, you may not get the attention and effort required to be successful.

To discern if the size is a good match, ask the investment banker to list the five to ten most recent transactions that he or she directly represented, including company size, industry, and other relevant data. If the banker you are considering is part of a larger team or firm, be sure that the list includes transactions that your investment banker directly worked on, and not a list of deals done by that banker’s colleagues.


2. The Investment Banker Has Experience in Your Industry

Choose an investment banker who has relevant and recent experience in your industry or sector. If your banker has experience in your industry, he or she may need less ramp-up time, bring a more nuanced and sophisticated understanding of industry factors determining value, know relevant industry trends, and have existing relationships with potential buyers. An investment banker lacking experience in your industry cannot match these advantages.

To discern the banker’s industry experience, ask for a sample list of transactions in your space, the banker was directly involved with, and then discuss the particulars. Measure the depth of industry knowledge the banker possesses, especially around market-specific factors such as regulatory issues, competition, key strategic players, or technology trends. The banker might not have to be a guru in your industry, but knowing the landscape and key players goes a long way to successfully representing your company through the sale process.

3. You Understand and Like the Way They Get Paid

In the past, most investment bankers were paid the same way: they charged a monthly retainer fee (designed to help cover their costs and give evidence that the business owner was serious about selling) and then received a success fee in the form of a commission tied to the sale of the company. The success fee represented the lion’s share of the banker’s income and motivated the banker to make the deal happen. The fee was most commonly expressed as a percentage of the deal value and decreased as the deal size increased. In this manner, the total fee percentage went down as the deal size went up. The most common version of this approach was developed in the 1960s by Wall Street firm Lehman Brothers and is called the Lehman Scale or Lehman Formula.

Modifications and adaptations of the Lehman Scale are still in use today. But, in recent years, a greater variety of compensation methods and models have entered the marketplace. This development creates a challenge for the business owner because you now have to sift through a wider range of models. But, you gain the opportunity to select a compensation philosophy that is consistent with your situation and preferences. For example, some investment bankers completely inverse the declining percentages found in the Lehman Scale, replacing it with a fee schedule where above certain thresholds the applicable percentage actually increases. The logic is that the increasing percentages incent the investment banker to drive the sale price up as high as possible, generating a greater net amount for the seller. Another approach is to charge a flat fee, with little to no variability tied to the sale price. To further complicate matters, monthly retainers can greatly vary in amount from one banker to the next, and some bankers credit the retainer against the success fee, while others do not.

On this issue, meet with multiple bankers to get a feel for which compensation method you prefer. Ask the bankers you interview to explain their method and its justifications. Model the banker’s compensation method in a spreadsheet that calculates the fees at various potential sale prices. Ask your other advisors to evaluate the proposed fees, to be sure they are consistent with market rates.

4. Your Other Advisors Support Your Choice

Selling a company is a team sport. An investment banker plays the lead role in the sale process but needs help and support from the business owners’ other advisors at numerous steps along the way. You should rely on your other advisors to screen and select which investment banker you intend to use, not just to protect your interests but also to make sure that you end up with a team of advisors who work together effectively.

Perhaps the two most important advisors to lean on as you research investment bankers are your exit planner and your deal attorney. Your exit planner should be able to do all the following for you: recommend candidate bankers, research their backgrounds and qualifications, accompany you during interviews, and review their proposals. The exit planner should help you determine which banker is qualified to represent your company and at a fair price.

Your deal attorney plays a critical role in reviewing the services agreement that will govern the contractual and financial relationship between you and the investment banker. Too many business owners sign a services agreement prior to engaging a lawyer with M&A experience—that is a deal attorney. Picking your investment banker before engaging a deal attorney is backward. Select the attorney first, and have him or her review the banker’s agreement before signing it. An attorney experienced in these transactions will know how to limit your risks, protect your interests, hold down fees, and avoid contractual provisions that are not consistent with market norms.

5. You are Comfortable with and Trust the Investment Banker

This last criterion may be subjective, but it is no less important. You will be working regularly and closely with your investment banker for many months during the sale process. This person (or team) will be your constant companion, potentially through difficult and emotional matters. Achieving a successful sale will be considerably more difficult and stressful if you are not comfortable with your banker, and all but impossible if you cannot trust this professional.

Spend time carefully choosing your banker. Interview multiple choices—even if you already have a preferred banker in mind, to have different options to compare and contrast. Ask for and follow up on references. If the investment banker is part of a firm or team, verify who on the team you will be working with during the process. Get to know the person or team well, as they will be “in your foxhole.” You must have confidence and comfort in working with them.


Choosing an investment banker takes care and time. Expect the process of selecting your banker to take several months, starting from when you conduct your first interviews up to signing their services agreement (after your deal lawyer has reviewed it.) Then, the real work begins. Making the right choice puts you on the path to a successful sale and exit. Selecting a banker that is not a good fit for your situation can set you back immeasurably.


If you have a quick question coming out of this article or, if you want to discuss your situation in more detail, we can set up a confidential and complimentary phone consultation at your convenience contact Tim 772-221-4499.



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Wednesday, June 5th, 2019

Fierce Conversations – Book Review

Fierce Conversations

By: Susan Scott

Readitfor.me Book Review Summary

Fierce Conversations Book

Far too often in business and life things are left unsaid.

We tell ourselves that we do it to preserve the peace in our relationships. But in reality, we are afraid of what might happen when we have those fierce conversations.

The predictable end result of those undiscussibless is the deterioration of the most relationships in our lives.

In Fierce Conversations, Susan Scott gives us 7 principles and 3 tools that we can use to get back into action, and finally have some real talk in the most important areas of our lives.

What Is a “Fierce” Conversation?

Before we get into the principles and tools, let’s define what a fierce conversation actually is.

Scott tells us that a fierce conversation is one in which we come out from behind ourselves into the conversation and make it real. It’s about moral courage, making real requests, and taking action.

There are 4 purposes to having one – to (1) interrogate reality, (2) provoke learning, (3) tackle tough challenges, and (4) enrich relationships.

With that definition and goals in mind, let’s get started.

Principle #1: Master the Courage to Interrogate Reality

There’s no way around it – having fierce conversations takes courage.

But here’s the reality – most people want to hear the truth, even if they don’t like what they hear. We respond deeply to people who level with us.

Know that when you bring up an issue that everybody else has been thinking about but sweeping under the rug, most people will be relieved that somebody is finally dealing with it.

Question to consider: what reality at home or work most needs interrogating?

Principle 2: Come Out from Behind Yourself into the Conversation and Make It Real

As Scott points out, you cannot be the person you want to be, or have the life you want, unless your actions represent an authentic expression of who you really are.

“Being authentic” isn’t a personality trait, it’s a choice. And until you choose to show yourself to the people in your life, you will never have the conversations you want or need in order to get there.

Here’s a question to ask yourself to determine whether or not you are being authentic in your relationships:

Are you sharing your dark days with the people who are closest to you? We all have them.

Question to consider: Where and with who am I failing to show up authentically?

Principle 3: Be Here, Prepared to Be Nowhere Else

There is a basic human need for people to be known.

Joseph Pine articulates this perfectly in his book The Experience Economy:

The experience of being understood, versus interpreted, is so compelling, you can charge admission.

Knowing this, our goal in any conversation needs to be to help the other person feel understood and known.

Even better, you should set time aside specifically for that goal to be met. Not as an add-on to your performance or project review, but with the sole purpose of talking the other person about whatever they deem the most important.

You’ll do that by using a tool called Mineral Rights, which we’ll cover in the tools section of the summary.

Question to consider: Who would benefit from my undivided attention?

Principle 4: Tackle Your Toughest Challenge Today

One of the greatest gifts that fierce conversations will give you is the ability to tackle your toughest challenges. No longer will you punt them down the road to deal with later, when you “have more time.”

There’s a saying that a problem named is a problem solved.

So before you’ll be able to get any use out of the tools we’ll cover in the tools section, you need to have the ability to identify the issues that need to be resolved with them.

If you need to confront someone’s behavior, do not begin by asking that person how things are going or by complimenting him or her.

As Scott says, don’t surround your message with pillows. Come straight at the issue and get right to the point.

We’ll cover exactly how to do this in the tools section.

Question to consider: What conversation am I dodging?

Principle 5: Obey Your Instincts

Scott suggests that the most valuable things any of us can do is to find a way to say the things that can’t be said.

These are the thoughts that go running through our head all day while we are interacting with people.

For instance, your spouse tells you they are thinking one thing, but everything in your being tells you that they are thinking something else.

An easy way to bring this up is to say something like “Would you like to hear something I’m feeling right now?” Then, if they agree, share your thoughts.

It’s an ingenious way to get a real issue on the table without feeling awkward doing it.

Question to consider: What messages have been beckoning me?

Principle 6: Take Responsibility for Your Emotional Wake

As a leader, there are no trivial comments.

There are most certainly things you’ve said in the past that have had a devastating impact on someone who was looking for your approval without you even knowing it.

Sometimes even innocent questions like “how’s that project going” can send your team members scurrying off, reprioritizing work schedules, and starting fires without you knowing it.

The principle here is to take 100% responsibility for the impact your words have on other people, and consider your words thoughtfully before you speak.

Question to consider: To whom do I need to apologize? Who deserves my praise?

Principle 7: Let Silence Do the Heavy Lifting

Scott jokes that CEOs are the most likely people to die with their mouth open.

Leaders are often taught to communicate until their people are sick of hearing the message. And then, communicate more.

But as Scott points out, the best leaders talk with people, not at them. Communication is not just about talking, it’s about listening too.

The best way to get another person to start talking is be silent. Most people are very uncomfortable with silence, and so will speak in order to break it.

Question to consider: What beneficial results might occur if I said less, listened more, and provided silence in which to think about what has (and has not) been said?

The Tools

Now that we’ve covered the principles, it’s time to move on to the tools you can use to put them into action.

Tool #1: Mineral Rights

One of the greatest gifts we can give to the people in our lives – at home and at work – is the purity of our attention.

Scott calls this tool Mineral Rights, which is a metaphor for drilling deep below the surface.

When you first bring this up, you and the person you want to meet with might feel awkward. To help ease the tension, here’s a script you can use to set up the meeting.

Rewrite it in your own words if that makes you feel more comfortable.

“When we meet tomorrow, I want to explore with you whatever you feel most deserves our attention, so I will begin our conversation by asking, “What is the most important thing you and I should be talking about?” I will rely on you to tell me. If the thought of bringing up an issue makes you anxious, that’s a signal you need to bring it up. I am not going to preempt your agenda with my own. If I need to talk with you about something else, I’ll tag it onto the end or plan another conversation with you.”

To get greater clarity on the things that are on the mind of the people who are most important to you (you can do this with yourself, too), ask your partner to take the following steps.

Step 1: Have them identify their most pressing issue.

Step 2: Ask them to clarify the issue. What’s going on? How long has it been an issue?

Step 3: Ask them to determine the current impact. How is it impacting them? What results are being produced (or not) because of it? How is it impacting others? What emotions are they feeling about the issue?

Step 4: Ask them to determine the future implications. If nothing changes, what might happen? What’s at stake here for them? For others? When they consider those possibilities, what emotions come up?

Step 5: Have them examine their personal contribution to this issue.

Step 6: Have them describe the ideal outcome. What difference will having the issue resolved make? What results will they enjoy? What are their emotions when they imagine the ideal outcome?

Step 7: Have them commit to action. What is the most potent step they could take to move this issue toward resolution? What’s getting in their way from doing it? When will they take the first step?

Because having a conversation this deep is new for most people, there are some common mistakes that might show up. Try to avoid them.

Doing most of the talking. Don’t do that.

Taking the problem away from someone. Some people are very skilled at handing back problems. Don’t let that happen.

Not inquiring about feelings. If you don’t check in with their emotions, nothing much will change. People make decisions to change emotionally, not rationally.

Delivering unclear messages, unclear coaching, and unclear instructions. Your goal should be to deliver no coaching or messages because you are trying to get them to solve the problem for themselves. But if you absolutely must, do it clearly and succinctly.

Canceling the meeting. Don’t do it.

Allowing interruptions. Turn off everything that might distract you from the conversation. Close your door, put away your phone, and shut down your computer. Whatever you need to do.

Running out of time. Every Mineral Rights conversation concludes with clarity about the next most important step. If that next step needs to be another conversation, schedule it.

Assuming your one-to-ones are effective.

Tool #2: Preparing an Issue For Discussion

Sometimes there are issues that you’ll want to resolve as a group, or where you need the input of the group to resolve it.

Preparing for these types of meetings in the following way allows you to accurately and clearly state the issue, and makes good use of everybody’s time.

Even better, put this into a document that you can distribute before the meeting so people can come prepared.

Step 1: State the issue.

Get to the heart of the problem in no more than one or two sentences. Is it a concern, challenge, opportunity or recurring problem that is becoming more troublesome?

Step 2: Communicate the significance

You job here is to determine what’s at stake. Is it a gain/loss in revenue? Gaining/losing a new customer? Gaining/losing an employee?

Step 3: Communicate your ideal outcome

What specific results do you want?

Step 4: Give relevant background information

Using bullet points, give the information that you feel will be helpful for the group considering the resolution of the issue. How, when and why the issue began is a good place to start.

Step 5: Tell them what you have done up to this point…

Tell them what you’ve done so far, and what options you are considering.

Step 6: Tell them what help you are looking for

Tell them the result you are looking for. For instance, are you looking for alternative solutions because you don’t like the ones you’ve come up with? Or are you hoping they’ll give you feedback on what you plan on doing?

Tool #3: The Confrontation Model

Finally, we end with the confrontation tool, which will allow you to confront tough issues with courage, compassion, and skill.

The best part about this tool is that you’ll find that you are finally having these conversations because you have a strategy for them.

Part I : The Opening Statement

The first sixty seconds are crucial to a confrontational conversation. That’s why it’s critical that you script it beforehand, and practice saying it out loud.

Here’s what you should include:

Name the issue. If there is more than one, ask yourself what’s at the core of all of them.

Select a specific example that illustrates the behavior or situation you want to change. Be specific and succinct. If you don’t do this, the conversation will have no teeth.

Describe your emotions about this issue. Telling the other person how you are feeling creates intimacy and is disarming.

Clarify what is at stake. It’s critical that the other person understands why this issue is important. Scott suggests that we use the words “at stake”, and that we speak calmly and quietly – even if we are angry.

Identify your contribution to this problem. You may realize, for instance, that your contribution to the problem is not communicating clear expectations from the outset of the relationship or project.

Indicate your wish to resolve the issue. You are not firing or breaking up with anybody – it’s important that they hear you say that.

Invite your partner to respond. You want to be clear that you want to understand the issue from their point of view. This is your invitation for them to join the conversation.

Part II: Interaction:

This is a conversation, so the next step is to get a clear understanding of their side of the story.

  1. Inquire into your partner’s views. When it’s appropriate, paraphrase their words so you are clear on what they are trying to communicate. Make sure your partner knows that you fully understand and acknowledge his or her position and interests.

Part III: Resolution

Finally, the goal of these conversations is to come to a resolution.

Where are we now? Ask whether there is anything that has been left unsaid, and cover what is needed for resolution.

Make a new agreement and determine how you will hold each other responsible for keeping it.


Bad communication leads to misunderstanding, confusion, lost time, talent and profits.

Communication is one of life’s most important skills- better communication make for a better life.

Tim Kinane

Call 772-210-4499  or email to set up a time to talk about tools and strategies that will lead to better results.

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Monday, June 3rd, 2019

Why an Investment Banker is Like a Wedding Coordinator, and an Exit Planner is Like a Minister


By: Patrick Ungashick

There once was a man engaged to be married. He had never married before, but he had seen what a happy marriage could do for people, and unfortunately, he also had seen what an unhappy marriage could do to people.

The man hoped his marriage to his future spouse would be happy and successful. So, he committed to working with a minister experienced in preparing people for marriage. The minister helped people know, anticipate, and address the issues and challenges that often come with marriage. The minister got to know the man, assessed the man’s readiness for marriage, and then gave feedback and advice to help the man enter into a happy and long marriage.

The man also wanted to share the wonderful moment of his marriage with the people closest to him and his future spouse. So, he committed to working with a wedding coordinator. The wedding coordinator designed a wedding event that would share the couple’s joy and happiness with all of the people whom they cared about, and would run smoothly without stress or unwelcome surprises.

Eventually, the man married. He and his spouse had a wonderful wedding, thanks at least in part to the wedding coordinator. And they lived happily married ever after, thanks at least in part to the minister.

This simple parable can help explain the difference between an exit planner and an investment banker, which is a common question we hear from owners who intend to sell their company. It’s an understandable question, for in many ways an exit planner helps prepare the company for sale, a sale that the investment banker is charged with making happen. But there are key differences between exit planning and investment banking, which is why it is important to think about these two roles separately. In some cases, it can make sense to work with the same firm or team to fulfill both roles, but in other cases, it’s beneficial to work with separate teams.

The man (or woman) seeking to marry is like a business owner seeking to exit, in this case, by selling his company one day. Just as the man has never married before, but he has seen good and bad marriages, the business owner has never exited before, but is aware that some exits are happy, but many are not. Exit, like marriage, changes one’s life in many ways. Being unprepared for exit can lead to significant struggles, just as being unready for marriage.

The minister (or priest, rabbi, counselor, etc.) is like an exit planner. Just as the minister is concerned with the individual’s overall best interests and happiness, so too is the exit planner. The exit planner’s mandate is to help the owner achieve his or her overall exit goals, which often includes: reaching personal financial freedom, leaving the company in good hands, exiting on his/her own terms, and having a sound plan for what to do next in life after exit. To be effective, the exit planner must get to know the owner and the company, and then advise the owner on the best plan and course of action, which may include—depending on the owner’s goals—selling the company. However, at all times, the exit planner must remain objective and committed to achieving what is best for the business owner.

The wedding coordinator is like an investment broker (or business broker, M&A advisor, etc.). Just as the wedding coordinator is focused on a singular event and outcome—the wedding day, the investment banker is focused on a singular event and outcome—the sale of the business. To be effective, the investment banker must be dedicated to the difficult and sometimes fragile process of selling the company. Selling a company is never guaranteed, not to mention selling for an attractive price and favorable terms. Just as the wedding coordinator seeks to make sure everything goes off smoothly with no critical detail unaddressed, so too the investment banker must carefully choreograph the process to minimize factors or risks that can hinder or even block the company sale.

When working for the business owner who wants to sell his or her company, a close and synergistic working relationship typically exists between the exit planner and the investment banker. The exit planner, typically engaged three to five years prior to exit, can help the business owner identify and implement tactics that will increase company value at sale and reduce risk. This tees up the company for the investment banker, who typically comes into the picture about a year before the final sale.

However, note that the two professionals, while serving the same client, do not share the same focus. The exit planner, like the minister, is focused on the business owner’s overall goals and best interests. The investment banker, like the wedding coordinator, is focused on the sale process and closing. Ideally, these two elements remain in alignment, meaning that selling the company (what the investment banker wants) is in the best interests of the business owner (what the exit planner wants). However, things can happen that bring into question whether selling the company is in the owner’s best interests at that time. Common examples include:

  • The offer(s) to purchase the company is for a lesser amount that the owner needs or wants
  • The offer(s) to purchase the company include terms and/or conditions the owner finds unfavorable
  • The offer(s) to purchase the company come from a potential buyer(s) that the owner feels is not a good culture fit
  • The business owner comes to realize that he or she is not personally ready to sell the company at that time, often because the owner is unsure about what he or she would do without the business
  • The business owner grows unsure about selling the company to an outside buyer and instead seeks either an inside sale or passing the company to the next family generation

Should any of these occur, the investment banker and exit planner may find themselves working toward different outcomes. This benefits nobody, especially the owner. Experienced exit planning and investment banking advisors know these issues and seek to minimize the likelihood that these situations occur. In all cases, business owners and their advisors need to remain clear through the entire process what role every advisor is playing.

If you have a quick question coming out of this article or, if you want to discuss your situation in more detail, we can set up a confidential and complimentary phone consultation at your convenience contact Tim 772-221-4499.

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Tuesday, May 28th, 2019

Business Valuations: How to Select a Business Valuation Professional


Change money


By: Patrick Ungashick

Business Valuations & Exit Planning: A Business Owner’s Guide

This is part four of a four-part series on business valuations, written for business owners who need to understand how business valuations are used in the process of preparing for your business exit. As this series deals with tax and legal subject matters, readers are advised to consult their tax and legal advisors. This material is for educational use only. 

How to Select a Business Valuation Professional

There is no such thing as a completely objective business valuation. Every business valuation involves some degree of judgment, which means subjectivity. A human being who values a company has countless decisions and judgment calls he or she must make during the valuation process: which valuation methods to use, what data to include or exclude, how to factor in non-quantifiable issues such as risks, opportunities, market conditions, and more. Even if you are using a software program to do a valuation, subjectivity is introduced by the judgment calls made by the person(s) who programmed the application, and again by the person entering the data. Therefore, if you need a business valuation a critically important question becomes who do you use to do the work?

There is an additional reason to carefully consider who should perform your business valuation. Getting a business valuation is like buying an insurance policy—that valuation may be called up to help protect you against claims against your interests from unfriendly parties, such as a disgruntled business partner, a divorcing spouse’s lawyers, or perhaps even the IRS. Not all business valuations are created equal. The quality of the valuation, and the party who performed it determines how durable that “insurance policy” will be if called upon.

Unfortunately, it’s never been more challenging to determine who you should use to get a business valuation. There are no formal college or university degrees in business valuations, and no state or federal licenses exist. Consequently, many professional advisors will say “Sure, we do business valuations” if asked. An online search turns up countless websites, programs, and calculators that offer low-cost or even free valuations. While free online valuation calculators may be fun to play with, they cannot provide the level of accuracy and assurance that comes with a valuation done by a qualified expert. So, when investigating who to turn to, consider the following:

Professional Experience

While no formal education or licensing requirements exist for business valuations, several organizations offer professional certifications in this field. Look to work with valuation professionals who have at least one of these credentials (listed in alphabetical order):

  • Accredited in Business Valuation (ABV). This designation is only to certified public accountants (CPAs) who have passed an exam and have met several thresholds of minimum valuation experience.
  • Accredited Senior Appraiser (ASA). To earn the ASA, an applicant must meet specific educational requirements, pass a comprehensive exam, submit their work product to a peer review process, and possess five years of full-time business valuation experience.
  • Certified Business Appraiser (CBA). Applicants must meet certain educational requirements, pass a comprehensive exam, and achieve either 10,000 hours of business valuation experience or complete 90 hours of advanced course work. As with the ASA, applicants must also undergo a thorough peer review process.
  • Certified Valuation Analyst (CVA). Like the ABV, this credential is only available to CPAs. Applicants must pass a comprehensive exam and complete required course work.

As of the time writing this article, only about 5,000 professionals in the US hold at least one of these credentials. The good news is once you know what to look for, it is not difficult to find them.

How to Find Your Valuation Professional

Should you need a formal business valuation, consider the following steps:

  • Ask your existing trusted advisors to refer you to valuation professionals that they know, and hopefully have worked with in prior situations. As a backup method, research online valuation professionals in your area and/or who have experience in your industry.
  • Meet or speak with several candidate professionals, share your situation, and ask them how they would approach your needs.
  • After initial discussions, ask for a written proposal including a fee schedule and project timeline. Be sure you understand the information and work required of you during the valuation process.
  • Once you have selected the valuation professional whom you prefer to work with, have your lawyer review their service contract or agreement. It should contain clear and favorable language about how this professional will respond if called upon to defend their valuation in court, arbitration, or in front of a regulatory agency.

Be sure to review the previous articles in this series (if you have not already) to learn when you might need a valuation, how the valuation process works, and to understand the more common valuation methods. Valuations play an essential role in many business owner’s exit planning process—it pays to know the basics of how they work.

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If you have a quick question coming out of this article or, if you want to discuss your situation in more detail, we can set up a confidential and complimentary phone consultation at your convenience contact Tim 772-221-4499.

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Monday, May 20th, 2019

Business Valuations: Business Valuation Methods

Valuation chalk board

By: Patrick Ungashick

Business Valuations & Exit Planning: A Business Owner’s Guide

This is part three of a four-part series on business valuations, written for business owners who need to understand how business valuations are used in the process of preparing for your business exit. As this series deals with tax and legal subject matters, readers are advised to consult their tax and legal advisors. This material is for educational use only.

Business Valuation Methods

Determining the value of a privately held company is a combination of science and art. Professional appraisers have a toolbox full of valuation methods available to them to calculate the value a company (or in some cases a partial interest in that company.) Applying these methods and doing the math correctly is science. But selecting which method or methods to use is art, because that is determined by the appraiser based on his or her judgement. For you, it is important to know some of the more common methods so you can intelligently discuss them with your valuation professional, because which valuation methods the appraiser uses can produce a dramatically different result. For example, one method might produce a $50 million valuation for a company, while another method might produce a $25 million valuation for the same company—the differences are often that dramatic. So which valuation method, or methods, your professional applies to your company is a critical issue that many business owners overlook or don’t know enough to ask.

There are many valuation methods available to the appraiser, and many methods have several variations. You do not need to be an expert on this topic, but several methods are essential to recognize. They are:

Business Valuation Method #1 – Market Capitalization

Market capitalization, or “market cap,” is arguably the simplest method of business valuation. It is calculated by multiplying the company’s current share price by its total number of shares outstanding at that point in time. For example, if a company’s current share price is $100 per share, and there are one million shares of the company outstanding, then the market cap is $100 million.

Market cap is simple, but it’s typically only applicable to publicly-traded companies because privately held companies don’t have shares traded in the open market. Despite this, it is still important to know what market cap is because part of the valuation process might involve comparing your privately held company to the market cap of publicly traded companies.

Business Valuation Method #2 – Market Value

The market value method attempts to calculate a company valuation based on comparing your company to similar companies in the same industry that have recently been purchased. Market value is perhaps the most subjective method because the professional appraiser must determine and select which companies are comparable despite that in the real world there are no exact matches. Once comparable companies have been identified, then the appraiser must use his or her judgement and apply weighting factors to companies that are dissimilar in characteristics. For example, if your company is doing $25 million in revenue and the valuation professional is looking at data about an industry competitor which recently sold, but this competitor is a $1 billion company, that’s not an apples-to-apples comparison. In that case, the appraiser likely would discount the multiple used on the $1 billion company sale to some lower number applicable to your $25 million company. All of this requires the valuation professional to apply his or her judgement, which is subjective.

All that said, the market value method focuses on understanding what your business might be worth in the open market.

Business Valuation Method #3 – Multiple of Earnings

This method is one of the most important, particularly when considering selling some or all of the company to an outside buyer. Under this method, the company’s recent earnings are applied to a multiplier, which varies with the industry and the economic environment. For example, if the company did $3 million of EBITDA last year and the current multiple for that industry is six, then the potential valuation is $18 million. Typically, the period of time used is the prior calendar year or the trailing twelve months, although if earnings have been volatile over the last few years a weighted average might be used. It is critically important when working with this method that you have accurately calculated your EBITDA, as there are many factors to consider and considerable room for making judgement calls on how certain expenses are treated.

Business Valuation Method #4 – Multiple of Revenue

Under the multiple of revenue method, a stream of revenues (rather than earnings) generated over a certain period of time is applied to a multiplier, which varies with the industry and economic environment. Like with the multiple of earnings method, the period used is commonly the prior calendar year or trailing twelve months, although if revenue has been volatile over the last few years, a weighted average might be used. This method is less commonly used than the multiple of earnings method. It is typically only used in certain industries, such as professional services firms (accounting, legal, engineering, consulting, etc.) and some tech industries.

Business Valuation Method #5 – Discounted Cash Flow (DCF)

DCF is similar to the multiple of earnings method. Using DCF, the valuation professional computes a valuation by taking a projection of the company’s future cash flows, and then discounting them to a single present value—so that cash earned in later years is discounted more heavily than cash earned in more immediate years. The main difference between DCF and the multiple of earnings method is that DCF takes into account inflation and the time value of money when calculating the present value.

Business Valuation Method #6 – Book Value

Book value is simply the value derived by subtracting the total liabilities of a company from its total assets. Book value, therefore, assumes that the company goodwill is zero. Book value is often synonymous with the company’s liquidation value. Book value is typically used in specific situations, such as, companies that have considerable value tied up in their tangible assets. Even when used, book value as a valuation method is not commonly used by itself but rather is often calculated and then included alongside other valuation methods to produce a weighted overall value. (See below.)

This is by no means an exhaustive list of the business valuation methods available to the valuation professional. Also, if you are trying to learn more about these methods take note that different valuation professionals may use different terms to describe the same method, which can be frustrating. However, being familiar with the six listed here provides a foundation from which you can discuss how your valuation professional will select and apply a particular valuation method to your situation.

Business Valuation – A Weighted Approach

Now that we understand there are different valuation methods available to the appraiser, and each method examines different issues and emphasizes different areas, it becomes clear why different business valuations can produce widely varying results even when appraising the same company. To address this, and to create a more balanced and realistic analysis, valuation professionals will commonly calculate a business valuation using multiple methods and then take a weighted average of those methods to produce a final, bottom-line valuation.

While this step reduces some of the disparity between results produced by different methods, it introduces another round of subjectivity into the process as the appraiser has to determine which methods to use, and then how to weight the results. Generally, certain methods tend to earn a greater weighting depending on the nature of the business, the presence or absence of specific data, and the purpose of the valuation. If you hire a valuation professional to appraise your company, it will be vital to discuss which valuation methods are being used and why, and how and why the professional determined the weighted analysis.

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If you have a quick question coming out of this article or, if you want to discuss your situation in more detail, we can set up a confidential and complimentary phone consultation at your convenience contact Tim 772-221-4499.


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Monday, May 13th, 2019

Business Valuations: How to Value a Business

Valuation binder

By: Patrick Ungashick

Business Valuations & Exit Planning: A Business Owner’s Guide

This is part two of a four-part series on business valuations, written for business owners who need to understand how business valuations are used in the process of preparing for your business exit. As this series deals with tax and legal subject matters, readers are advised to consult their tax and legal advisors. This material is for educational use only.

How to Value a Business

To understand business valuations and how they work, it is helpful to understand the general process most valuation professionals (appraisers) use. The process is more involved and collaborative than many business owners expect. To perform a valuation, appraisers usually do not simply gather financial reports, input numbers into a spreadsheet, and then spit out a figure. You the owner, your company management (especially your CFO and/or controller), and your advisors will work closely with the valuation professional at key steps. The general approach consists of:

Getting a Business Valuation Step 1: Define Your Goals

You and the valuation professional start by discussing the project and defining your objectives and purpose for the valuation. For example, why are you commissioning this valuation? Your purpose will guide the process and, may influence the appraiser’s analysis and conclusions where appropriate. For example, are you seeking the valuation for tax planning purposes? Or are you preparing the valuation pursuant to a pending event such as a marital divorce or business partner buy-out? It is imperative that you and the valuation professional understand your goals. The appraiser’s goal then should be to ultimately, deliver to you a comprehensive and defensible business valuation.

(Note: You may have specific assets such as real estate, equipment, or intellectual property held within your company, or owned in another entity and leased back to your company. Depending on your situation the appraiser may need to review these assets as part of the valuation process, and determine a distinct value for them separate from the company’s value.)

Getting a Business Valuation Step 2: Gather Data

Typically, the valuation professional then provides you and the involved members of your leadership and advisory team with a list of required financial reports and information, usually going back three full years. Commonly the appraiser will want to see income statements and balance sheets, but they may ask for additional detailed financial and tax reports. They likely will also ask for non-financial information such as the company organizational chart, business plan, budget, and any industry data or reports you can provide.

The valuation professional will then study and review the information, using questionnaires and templates they have developed for this purpose. They will subsequently meet with you and the company management to ask additional questions to clarify and deepen their understanding of the company, including its strengths, risks, market, and direction. The better the valuation professional understands the financial and operational aspects of your company, the better prepared they are to achieve your valuation objectives and support their valuation conclusions.

It is critically important that your company’s financial reports and records be current, accurate, and formatted consistent with industry norms and expectations. Otherwise, the valuation exercise could end up becoming a garbage-in-garbage-out exercise. The valuation professional may need to make financial adjustments to account for owner benefits, perks, and non-recurring expenses (commonly called add-backs) as well as understand any intangible assets not fully reflected on the balance sheet. The appraiser must also ask about operational and industry risk factors that can substantiate higher or lower valuations. The valuation professional will also ask for projections of the company’s anticipated future financial performance, commonly called pro-forma financial statements. If you and your management team do not currently prepare projections, the appraiser may assist you in doing so if relevant and advantageous.

As you can see, it’s a collaborative process with a lot of back and forth discussion and exchange of information. This presents the opportunity for you and your management team to give the valuation professional your perspective on the company’s strengths, opportunities, risks, and threats.

Getting a Business Valuation Step 3: Further Research and Analysis

From there, your valuation professional now has plenty of data to analyze from these documents and discussions with you and your leadership team. They may need to recast your historical financial statements, which are often prepared with an eye toward tax minimization and may need to be normalized for business valuation purposes. Additionally, the appraiser may need to research external factors such as economic conditions, industry trends, and comparable transactions within your industry. At each step of the way, if the valuation professional has additional questions, he or she likely will be asking you for further information. In some cases, the valuation professional may need data from your other advisors, such as your accountants.

Getting a Business Valuation Step 4: Preliminary Valuation Findings

While different valuation professionals follow different processes, at this point many will now circle back with you and your team to present preliminary findings. Before issuing a final report, the valuation professional may share their initial thoughts and reasoning, in order to gather your reaction and get additional input from you. What will be significant at this point is not just the preliminary valuation, but just as importantly you need to know how the appraiser got to this preliminary valuation amount. This is the time for you and your team to offer additional input to help the appraiser substantiate a higher or lower valuation, if appropriate.

Getting a Business Valuation Step 5: Final Report

Last, the valuation professional now issues a final report. The reports consist of far more than just the bottom-line number, although understandably that’s what you will initially focus on. Valuation reports should cover an analysis of the company’s risk factors, a detailed description of the company and its market position, and a review and assessment of the prevailing economic conditions and industry trends. Recast financial statements and projections should be included in the report. Then, the valuation professional should clearly state what assessment methods they used to determine their conclusion, and why.

Most appraisers will sit down with you, and relevant members of your management and advisory team, to go through the final report. They should explain all the key points and answer your questions.

Getting a Business Valuation: An Important Tip

There is one important tip to consider if you believe you might need a formal business valuation. Contact your attorney and ask him or her about commissioning the valuation study on your behalf. In other words, you pay your attorney the fee for the valuation and, then your attorney hires the valuation professional for you. The potential advantage this creates is, if done properly, the valuation results will come to your attorney and then may be covered by attorney-client confidentiality. This may be important for protecting your interests. For example, suppose your purpose for getting valuation was tax planning related and you were expecting (or hoping for) a low valuation, but the number came in higher than desired. With the valuation covered by privilege, you and your attorney can safely and confidentially discuss the findings and determine your next steps, including potentially trying another appraiser. Or, the reverse scenario could be true. You could have commissioned the valuation hoping for a high number (perhaps if you are expecting to be bought out by a business partner), but what if the valuation comes in lower than desired? Again, having attorney-client confidentiality may preserve options for you. As with all legal and tax issues, discuss this with your advisors.

Your Next Steps

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If you have a quick question coming out of this article or, if you want to discuss your situation in more detail, we can set up a confidential and complimentary phone consultation at your convenience contact Tim 772-221-4499.

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Monday, May 6th, 2019

Business Valuations: Why and When Do You Need One?

Business valuation needed


By: Patrick Ungashick

Business Valuations & Exit Planning: A Business Owner’s Guide

This is part one of a four-part series on business valuations, written for business owners who need to understand how business valuations are used in the process of preparing for your business exit. As this series deals with tax and legal subject matters, readers are advised to consult their tax and legal advisors. This material is for educational use only.

Why and When Do You Need a Business Valuation?

Business valuations are like police officers—you can go for an extended period without ever needing one, but when you do it sure pays to have a good one on hand. So, why and when does a business owner need to engage a valuation professional to do a formal appraisal of the company? (Note: In some cases, the valuation may also need to appraise specific assets owned by or used by the company, such as real estate, equipment, and intellectual property.) This article summarizes the circumstances why and when a business valuation may be essential and/or prudent. The article then describes the situations when a business valuation may be unnecessary, or even counterproductive and a waste of money.

Subsequent articles in this series will explain how valuations are done, review the most common valuation methods which you need to understand, and discuss who is qualified to do your business valuation should you need one.

Business Valuations: Nine Situations When You May Need One

There are many situations and reasons where getting a formal appraisal of the company’s value is required or exceedingly prudent to do. Listed below are the nine situations where you are most likely to encounter a potential need for a business valuation, especially in your exit planning:

1.Shareholder/Investor Reporting – If you have outside investors/owners, your legal agreements may require you to have an annual valuation for shareholder reporting and meetings.

2.Lender Requirements – In some situations, a bank or other lender may require you to get a business valuation up front or perhaps even regularly such as once per year. (Note: It is more common that a lender will require audited financial statements rather than an appraisal.)

3.Stock Options Plans – If you have a stock options plan for your employees, you may be required to get a third-party valuation each year to comply with 409A regulations.

4.ESOPs – ESOPs (employee stock ownership plans), a tactic to help sell your company to your employees, are required to do an annual valuation to establish the per share value of the company.

5.C-Corp to S-Corp Conversions – If you are converting a C-corporation to an S-corporation, a valuation is required at the time of conversion to determine the potential built-in-capital-gains tax.

6.Gifting Ownership – Another tax-related situation involves gifting company ownership to your children, a charity, or perhaps a trust as part of your estate planning. When making gifts of company ownership, a formal business valuation may not be legally required but usually is highly prudent.

7.Bonusing Ownership to Employees – If you intend to bonus ownership of the company to certain employees, a valuation may be advisable to introduce a third-party estimate of the value of the bonused interest and to help determine the tax impact of the transaction.

8.Co-Owner Transactions or Disputes – In situations involving ownership changes between business partners (co-owners), it may be helpful to secure a third-party valuation to determine the price for any interest to be bought or sold between the co-owners. If the situation has become contentious between the co-owners, perhaps to the point where arbitration or litigation may be considered or involved, a valuation is likely even more beneficial.

9.Marital Divorce – If an owner is contemplating or facing a marital divorce, a business valuation is prudent to aid in the negotiations between the couple, or to be incorporated into any legal proceedings.

There are other reasons that a business valuation may be needed, but this list summarizes some of the more common issues that owners potentially encounter over the course of their career, particularly as you plan for your future business exit.

Business Valuations: Three Situations When You Might Not Need One

There are other situations where a business valuation may come up for consideration. Within our organization, we sometimes see a rush to go get a valuation in some circumstances where the need is less clear. Listed below are three situations where, in our opinion, a valuation may be unnecessary or even counterproductive.

1.You are Getting Ready to Sell the Company – One of the more commonly held views as an owner prepares to sell the company, is that you should pay to have a formal appraisal done prior to sale. Presumably, this is to identify the potential sale price and set realistic expectations. Most of the time, we disagree with this approach as unnecessary and even misleading. First, it is typically unnecessary because if you are working with experienced M&A advisors, they should be able to give you an estimated range they expect the company could sell for in the current environment. This is not the same as a formal appraisal, but usually, it is sufficient to set realistic sale expectations. Second, a formal appraisal before marketing the company can be misleading because what your company is worth to an outside buyer is what that buyer will pay for it. Period. The existence of third-party valuation claiming that your company is worth $X amount will not cause a potential buyer to increase its offer price by $1 more than it is otherwise willing to pay.


2.You are Curious – We frequently speak with business owners who have paid for business valuation at some point in the past simply to help them know what their company was worth at that point in time. It is helpful to have a realistic understanding of your company’s value periodically. However, keep in mind that all valuations ultimately involve somebody’s judgement, and have a subjective element. Paying thousands to tens of thousands of dollars to have a valuation done just to get somebody’s opinion about what the company is worth (even an expert assessment) is often not necessary, because alternative methods are commonly available for no cost. For example, researching sale multiples in your industry (usually tied to EBITDA) can produce an approximate value range for your company based on that data. Clearly, this is not the same depth of analysis nor precision that is provided by a formal appraisal. But a market-based estimate will give you a general understanding of company value on a periodic basis—without the cost of an appraisal.


3.You Want to Track Company Growth – This need is similar to “You are Curious” in that you have no specific event or transaction in mind, but rather you seek the benefit of a realistic understanding of changes in the company value over time. Like with the “curious” example, often paying for a formal appraisal is unnecessary. Rather, carefully research sale multiples for your industry and then apply those multiples to your company performance. In this manner, for little time and no cost, you can approximate company value in most cases, and track its changes over time.


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If you have a quick question coming out of this article, or, if you want to discuss your situation in more detail, contact Tim  772-221-4499 set up a confidential and complimentary phone consultation  at your convenience.




Friday, May 3rd, 2019

Stumbling Upon Happiness- Book Review

Stumbling Upon Happiness

By: Daniel Gilbert


Stumbling Upon Happiness


Book Review by ReadItFor.me

What will truly make you happy? This summary will give you the answers, but be warned, it may no be what you are expecting!


As human beings we spend a lot of time predicting what will make us happy in the future. For some of us it’s the family vacation we’ve always dreamed of, for others it’s the new car we’ve had our eyes on for years, and others it’s finally paying off the mortgage on their home.

Dan Gilbert makes the argument that we are particularly bad at this task, for three main reasons.

First, our imaginations don’t give us and accurate preview of what our emotional futures will be because our brains fill in and leave out important details about the future.

Second, we naturally project our current feelings into a future that will not necessarily exist.

Third, we forget that things will look differently once they happen in the future.

The antidote, Gilbert suggests, is something that most of us will ignore. Join us for the next 12 minutes as we explore why we are not very good at predicting what will make us happy, and uncover the secret to doing it right.

Why we think about the future: Prospection

Here’s a remarkable fact: human beings are the only creatures on earth that think about the future. This is something that Gilbert calls nexting.

The first type of nexting is a survival mechanism and happens immediately and unconsciously. For instance, if you’ve ever been walking on a trail and heard the sound of a rattlesnake, your first instinct will be to move away from the sound as fast as you possibly can. These instincts are built deep into your caveman brain.

The other type of nexting is more about long range planning, like thinking about where you want to retire, or what you’ll eat for lunch next week at that restaurant you’ve always wanted to go to. This type of nexting occurs in our frontal lobes, and allows us to think about the future before it happens. There are a few reasons we do this:

  • It’s pleasurable: by thinking about something you’ll enjoy in the future, you get to experience it twice – first in your imagination, and then in real life.
  • To protect ourselves: we anticipate negative events so that we can minimize their impact or eliminate them entirely.
  • To exercise control: we have a fundamental desire to control our own destiny, and thinking about and planning our future allows us to fill that need.

Which is all fine and dandy, except for the part that we are not very good at it. Which leads us to make choices that work against our ultimate happiness.

Shortcoming #1 – Realism: Filling In and Leaving Out

The first shortcoming of our imagination in predicting what will make us happy is that we fill in the details inaccurately, and leave out details that are relevant to how happy we’ll actually be.

Filling In

There have been plenty of scientific studies that show that our memories are not reliable representations of what actually happened in the past.

Instead of storing perfect records of past events like, say, a video recording, our brains store snippets of past events in different parts of our brain. And then, when we want to recall a memory, our brain finds those fragments and reconstructs them to build the memory.

Whatever isn’t actually there gets filled in by the imagination. And there’s the rub – sometimes the things that our imagination uses to fill in the gaps didn’t actually happen. And then, the brain restores that memory back with the newly fabricated information. Which is why you can get 100 different versions of an event from 100 different people at that event.

This fabrication, Gilbert points out, happens so quickly and effortlessly that we no idea what’s happening – we just believe that whatever we just pulled up in our minds is an accurate representation of the event.

Now, let’s think about our future predictions. How happy will you be next week if your best friend asks you to go to a party with them?

As your imagination gets to work trying to answer this for you, some interesting things happen. If you are like most people, you start to fill in details about the party – where it will be, who will be there, what food and drink there will be, and you’ll use those details to start making predictions about how happy you’ll be.

The problem is that your imagination went through this entire process of filling in details before you even know what they were, and you start to make choices based on your (probably inaccurate) predictions.

The thing to understand here is that your brain does the exact same thing when you are thinking about more important things in your life, like what job you should take and where you should live.

Leaving Out

Just as we fail to consider how much our imagination fills in when we are thinking about the future, we also fail to consider how much it leaves out.

For instance, when most people are asked how they would feel two years after the sudden death of their eldest child, they suggest that they would be totally devastated, wouldn’t be able to get out of bed in the morning, and would perhaps consider committing suicide.

As Gilbert points out, nobody who gets asked this question ever considers the other things that would happen in those following two years – attending another child’s play, making love with their spouse or reading a book while taking in a spectacular sunset.

This is an extreme example, but it illustrates the point that our imagination almost never captures the entire story.

Shortcoming #2 – Presentism: Projecting the Present onto the Future

This shortcoming is a bit easier to explain. Basically, our imaginations are not as imaginative as we believe them to be.

Basically, we tend to fill in holes in the future with data from the present. We anticipate that whatever is going on right now is what will be going on in the future.

For instance, once you’ve stuffed your belly full at a holiday meal, you have a hard time imagining that you’ll ever be hungry again. We fail to see that our future selves will view the world any differently than we view it now.

Or when scientists are asked to make predictions about the future, they almost always err by predicting that the future will be too much like the present. Respected scientists are on record as saying that human beings would never experience space travel, television sets, microwave ovens, heart transplants and nuclear power.

The tendency to project the present into the future ensures that we have a really hard time imaging a future where we will think, want or feel differently than we do now.

One of the more interesting findings from the entire book is that how we think we’ll feel in the future is determined quite heavily by how we feel right now, even if what’s happening right now has nothing to do with what will happen in the future. For instance, when you are having one of those days where everything seems to go wrong, you’ll be much less likely to predict being happy about the get together you have planned with your friends the following week.

Without realizing it, how you are feeling in the moment has a huge bearing on how you’ll be able to predict your future happiness. And, to top it off, you have no idea that it’s happening.

Shortcoming #3 – Rationalization: Things look differently after they happen

Rationalization is defined as “the act of causing something to be or to seem reasonable.”

We all have a psychological immune system that protects us against all sorts of emotional upsets. Like all of the other mechanisms we’ve been describing up until this point, it operates without us realizing it’s there.

The end result is that we, as Gilbert describes, “cook the facts.” Here’s a quick description of a study Gilbert did in order to explain.

A set of experiment subjects were invited to a fake job interview that they thought was real. In the pre-interview, they were (in the middle of a bunch of other questions) asked how they would feel on a scale from 1-10 if they didn’t get the job. When they didn’t get the job (because that was the whole point of the experiment), they didn’t feel quite as bad as they thought they would. In fact, after a short period of time they were just as happy as when the went in to the interview.

Basically, the finding of all of these studies is that our psychological immune system kicks in to protect us from negative experiences, with three caveats.

First, the negative event needs to reach a certain pain threshold. For instance, it will kick in when you are being rejected at a job interview, but not as much if you stub your toe.

Second, it will only kick in once it’s clear that we can’t change the experience. For example, people experience an increase in happiness when genetic tests show that they don’t have a dangerous genetic defect (as expected) or when the tests reveal that they do have one, but not if the results are inconclusive.

Third, we have a much easier time rationalizing actions that we have taken rather than inaction.

The end result is that we fail to realize our ability to generate a positive view of our current circumstances, and thus forget that we’ll do the same in the future. Ultimately leading us to not accurately predict how happy we’ll be in the future.

The Solution: Asking Others Experiencing It Right Now

As Gilbert points out, most of what we know is not based on our own direct experience, but on second hand knowledge. You’ll find this to be true if you make a list of all the things you know and go line by line marking it firsthand or secondhand.

We believe and put our faith in many things that we have learned secondhand, but when it comes to deciding what will make us happy, we stubbornly rely on our “nexting” mechanism in almost every case. As we’ve already learned, that strategy doesn’t lead to good outcomes. We forget how good or bad things were in the past because of our selective and unstable memories, and then we project those memories into the future to make inaccurate predictions on how we’ll feel then.

This is the point in the summary where we discuss the advice that Gilbert suggests we’ll most likely not take.

By far the most accurate way to determine whether or not a certain future state will make you happy is to ask somebody who is experiencing it right now.

Do you want to know what it will be like to move to a foreign country and leave your family and friends behind? Ask somebody who just did it. Want to find out how you’ll feel about it 10 years from now? Ask somebody who moved 10 years ago.

As Gilbert says, the human race is like a living library of information about what it feels like to do just about anything that can be done. All you need to do is ask.


There are studies that show that when people are forced to use surrogates to determine how happy they will be about a specific imagined future, they make very accurate predictions about their future feelings.

So why do we reject the solution? Because we don’t like to think of ourselves like the average person. Maybe other people are bad at predicting their future happiness, but not me. As you might have guessed, that’s what EVERYBODY says. So while you are busy rejecting the solution because you are unique, you are merely confirming that you are exactly like everybody else.

The biggest mistake we make, Gilbert suggests, is that we don’t make very good predictions about how happy accumulating more “stuff” will make us.

There is a mountain of evidence that beyond a certain level of wealth, it makes little to no difference in the level of happiness you experience. Yet we keep striving for more.

The problem is that the entire market economy system depends on people continually buying and producing more and more stuff. As Gilbert points out, if everyone was content with the amount of stuff they had, the economy would grind to a halt.

So, the next time you find yourself about the pull the trigger on that big splurge purchase, consider finding somebody who did the same and ask them how much happiness it added to their life beyond the initial jolt of excitement.

You might be surprised at the results.

Tim Kinane

Call 772-210-4499  or email to set up a time to talk about tools and strategies to lead to better results.

Please share this with a friend/colleague


Friday, April 26th, 2019

101 Questions to Help Business Owners Determine What to Do After Exit

Man and time

By: Patrick Ungashick

Figuring out what you want to do after you exit from your company is a crucial step to exiting successfully and happily.

Many business owners have heard stories or know another owner first-hand who exited only to realize he or she was bored, frustrated, and regretted the decision to leave behind the daily challenges and sense of purpose that comes with owning and leading a company.

It will not matter how much money you have in the bank after you exit if you wake up every day lacking something meaningful and relevant to do with your time and talent.

Yet too many owners do not know what they are going to do after exit. Or, just as dangerously, some owners assume they know but have not tested their assumption by trying the activity in real life for any meaningful period of time.

Have a Clear Vision for Your Exist

Before you exit, you should have a clear vision for what you are going to do next and should verify that plan by actually trying the activity or endeavor. Once you exit, you cannot go back.

The following list of 101 brainstorming questions will help owners research and reflect on what to do with their time and talent after exiting from their business. Go through the questions, either on your own or with your spouse or a trusted advisor. (Spouses may consider answering selected questions as a couple, if helpful.)

Answer only those questions that prove helpful. Write down your answers and keep them for reference. Consider doing this exercise several times as exit draws near because your answers may evolve

1. What did I want to be when growing up?

2. What drives me?

3. Do I live exactly where I want to live?

4. Is there a cause in which I would like to be involved? What about that cause interests me?

5. What would I change most about my community?

6. Do I have dreams that I have not yet accomplished?

7. Do I spend my time and talent doing what I most want to do?

8. What do I want more of in life?

9. What do I want less of in life?

10. Over the next five years, what do I really want to do?

11. Who is the happiest person I know? What makes him or her so happy?

12. What is my personal mission?

13. What would I attempt if I knew that I would not fail?

14. Who are three people in my life who could help me achieve my dreams and goals?

15. What are the things I have most wanted to do during the last five years but have not yet done?

16. What are my greatest talents?

17. What have I always wanted to be great at? If I am not there yet, what has stopped me?

18. What are the important lessons I learned in business?

19. Over the last five years, what have I wanted to change about my business and my role in it?

20. What activities make me lose track of time?

21. What makes me feel great about myself?

22. What are my core values?

23. What do other people often ask me to help them with?

24. If I had to teach something, what would it be?

25. What are some of the biggest challenges I have overcome in life? In my business?

26. If I could share a message with a large group of people, who would they be? What would I say?

27. What are the important lessons I learned in business? List them.

28. What adjectives would people who know me use to describe me?

29. What am I known for?

30. What activities do I enjoy so much that I never tire of them?

31. What would I have done differently in my career?

32. If I could test drive three different jobs, what would they be?

33. What important lessons about myself have I learned from my failures and mistakes?

34. Is there anything in my life that feels unfinished?

35. What sayings, quotes, or mottos do I often turn to for guidance?

36. Who do I most enjoy serving?

37. What do other people see in me that I do not?

38. What is the world calling me to take on?

39. What did I most enjoy doing as a child?

40. What do I dislike about today’s society?

41. How do I introduce myself to other people?

42. If I had to repeat my career as a business owner, what would I absolutely not change?

43. If could swap my business for a different one, which would I swap it for? Why?

44. What dreams have I deferred in order to attend to my business?

45. What personal qualities have I most developed through owning a business?

46. What have been my biggest challenges as a business owner and leader?

47. How do my employees perceive me?

48. How do my peers perceive me?

49. What is the difference to me between living and existing?

50. What are my greatest life accomplishments?

51. What am I most thankful for in my life? In my business?

52. Who am I most thankful for in my life? In my business?

53. What is/are the greatest gift(s) another person(s) has ever given me?

54. What is/are the greatest gift(s) that I have ever given to somebody?

55. When was the last time that I did something for the first time?

56. Do I “go” through life or “grow” through life?

57. What skill do I most want to master?

58. What am I passionate about?

59. What have I always wanted to do but have never done?

60. If I had to donate a half-day per week of my time, to whom or what would I give it to?

61. What do I most enjoy giving to others?

62. What does success look like to me?

63. Over the last five years, what I have most enjoyed doing outside of my business?

64. What skills or attributes do I have that most contributed to my business success?

65. If I had no fear, what would I do after exit?

66. What interest or passion am I afraid to admit that I have?

67. If I could spend my time doing anything at all, what would I do?

68. How would I like to make the world a better place?

69. What would I regret on my deathbed if I had not done it?

70. What bores me?

71. At what time in my recent past have I felt the most passionate and alive?

72. What makes me excited to get out of bed in the morning?

73. What is it that I know deep down inside that I can do as well as anybody?

74. What is it that I do with ease?

75. Who are three people who taught me something worthwhile? What did each of them teach me?

76. What do other people often thank me for?

77. What about me typically earns the most compliments from other people?

78. What types of people do I most like to be around?

79. What have I most enjoyed about owning a business?

80. What have I least enjoyed about owning a business?

81. What topics do I like to read about?

82. What recurring dreams do I have?

83. What would I be doing if I absolutely, 100%, did not care about what other people think?

84. What is on my bucket list?

85. What am I world-class at doing?

86. What drives me?

87. What frustrates me?

88. What do I resent doing?

89. When I need help, how comfortable am I asking for it?

90. What would I do if I had one billion dollars?

91. What makes me feel great about myself?

92. What am I naturally good at?

93. What has been my greatest joy as a business owner and leader?

94. What do people need that I enjoy providing?

95. What would I stand for if I knew nobody would judge me?

96. What does a perfect day for me look like?

97. If I had to go back to school tomorrow, what would I major in?

98. If I could be the most influential person in the world, what would I change?

99. Which of these questions have stayed with me? Why?

100. Who should I share my answers with?

101. What do I need to do next?

Exiting happily requires more than just selling your company for top dollar. It also requires having a solid plan for what you want to do next in life that is engaging, rewarding, and meaningful. Use these questions as a starting point, and let us know if we can be of further assistance.

Schedule a 45-minute consultation to see how you can achieve a financially rewarding exit.

Contact Tim for a complimentary consultation: 772-221-4499 or email.