Average Print Shop Valuations

A column that I have written for the August issue of Quick Printing magazine contains a discussion of recent print shop valuations I have conducted in the industry. I have prepared approximately 34 valuations in the past 18 months, the vast majority of which were done with the intention of listing the business for sale.

To date, only two of those firms have actually sold, clearly indicating how soft the market really is. An additional two firms have received "letters of intent" through either brokers or franchisors but it could be months before we find out what if anything has transpired.

Note the shocking range in valuations. This data speaks for itself. If you would like more information on valuing printing firms, you might consider visiting: http://www.printshopsforsale.net/.

Divorce Expert!

This is simply a follow-up on my earlier posts about appearing as an expert witness in a recent divorce proceeding.

When you've been married to ONE woman for 44 years it is a stretch to call yourself a "divorce expert" but in a sense I am, or at least I play one on TV.

I recently returned from a divorce proceeding that lasted three grueling days and involved 15witnesses, including four "expert" witnesses. I was one of those "experts" and I was one of three testifying as to the value of one of the largest assets (the printing company) owned by the couple. This asset, like all others, had to be valued and ultimately divided between the husband and wife. based upon the findings of the judge called to hear the cae.

I estimated that the three "business valuation" expert witnesses alone were costing the two plaintiffs in the case almost $5,000 per day, and these experts were required to be on hand throughout the three days of testimony, just so they could refute, if necessary, something said by the other expert.

That's about $15,000 in direct, out-of-pocket expenses for the witnesses alone... that doesn't include, as in my case, travel and lodging expenses, and it certainly doesn't begin to cover the costs of the three lawyers involved in the case.... or the judge's fees, or the court reporter's fees, etc. To the best of my knowledge, every single witness, expert or not, was being paid by one side or the other to appear at the trial.

My God, the binders used by the lawyers containing depositions, expert reports, real estate valuations and a myriad of other legal documents measured a minimum of 6" thick... they were the largest 3-ring binders I have ever seen!

I estimated that this divorce proceeding will easily end up costing at least $125,000 between the two parties. The sad thing is that the difference in the valuations of the business prepared by the two opposing sides was less than $150,000!

So here we found ourselves in a situation where, as usual, the only ones who are really winning anything are the lawyers..... this couple will easily end up spending $125,000 when had they just agreed to split the difference in the two valuations they could have saved at least $50,000 in legal fees. I guess that is just to simply a solution.

Oh well, I could write pages and pages about this stuff, but suffice it to say, you can't start early enough in a marriage before you agree in a method for valuing your printing business. Agreeing on a method now, even if for no other reason than for estate planning purposes, could easily save you tens of thousands of dollars down the road.

Valuation Experts - Hogwash!

I just spent three days last week as a witness in a murder trial.

No, actually it wasn't a murder trial but rather a divorce hearing but it had all the elements of murder trial - lots of lawyers, lots of Realtors, business appraisers, accountants and CPA's.

The trial involved 15 witnesses and centered on the disposition of personal and business property owned by the couple.

I was the expert witness called by one party to value the business. I looked at all the numbers, used the approach we suggest in Print Shop for Sale, and offered a specific recommended fair market valuation.

As I noted in my testimony, there is a big difference, sometimes huge, between an estimated "fair market value" and what I thought the business would or should sell for. This is indeed a buyer's market and buyers are looking for bargains and are not about to pay premium prices or even fair market prices when they have so many businesses to choose from.

In any event, one of the expert business appraisers on the other side was nicknamed by me the German Professor. He went on a on with his testimony, offering up valuation theories only he could explain, and finally proffered a valuation range which left everyone gasping! The range was so huge that it was meaningless.

Prompted by a question I provided to my client's attorney, the witness was asked, "Exactly how many printing businesses have you appraised or sold in the past 15 years?"

"One," that he could recall valuing, but he wasn't sure that it ever sold.

When asked the same question about one day later when I was on the stand my response was that I had valued 34 firms in the past 18 months. The bad news is that despite the fact that I believe my valuations were very realistic, I only know of two of those businesses that have actually sold, while another two have in hand "letters of intent."

Remember, most business appraisers are hoping to get the listing, and thus are quite likely to offer you an unrealistically high initial estimate just to get you to list your business with them.

Caution is in order!

Before the Divorce

No one that I know plans in advance getting a divorce, and yet we all know that approximately 50% of all marriages end up in a divorce. The statistics are even worse for second marriages!

From my considerable experience in both consulting and conducting business valuations, about the worst time in your life will be when you and your spouse start talking about separating and getting a divorce.

The only worse thing will be when you realize that a judge may force you to sell your business or at the very least buy-out the interests of your spouse to avoid that sale.

Suddenly, you find yourself wishing that you and your spouse had settled on some type of approach or formula very early on in your marriage.... NOT of course, one spouse or partner thinks the business is worth $1.5 million while the other person (the likely buyer) thinks or hopes it is worth 1/3rd that amount!

Every couple, every partnership needs to agree far in advance as to what methods they will use to value their business, and they need to establish at least a base-line value as a starting point.

Based upon some recent experiences as an expert witness, I can't begin to tell you the tens of thousands of $$$ that you will save yourself as a result of following this advice.

Shocked at Sarah Palin's Stupidity

I just have to get it off my chest. This is my blog and I guess I have the write to say what I want. While my intention is to stick with what I know best (printing), I just can't help but offer my two cents worth of opinion about Sarah Palin.


I am utterly shocked at her apparent lack of intelligence. Sarah Palin is simply too stupid to be president of this country. You certainly don't have to have a doctorate degree or be above average intelligence to be president (Reagan and Bush proved that), but you do have to have at least average intelligence and/or the ability to gather about you folks who know and advise you about things you don't know. Sarah Palin lacks both.

I honestly don't believe Sarah Palin could point to a map and find Iraq, Iran, Pakistan or Afghanistan, not at least without some coaching.... she might hit the right continent, but she would never, never find all four! If geography was her only failing I would overlook it, but she is so lacking in other areas as well... business knowledge and history come to mind. I couldn't imagine she and her husband Todd running the country. I am glad I have a plane and could leave quickly.

The shocking thing is that while even a majority of Republicans say they are opposed to Sarah Palin, there is at least a decent, probably 50-50, chance that she could get the nomination as a result of gathering enough votes in the early primary states.

Who votes in primaries? In the case of the Republican primaries, they tend to be dominated by the most ardent, and most conservative within the party, and the latter love the likes of Palin a Bachmann.

The mere thought of Sarah Palin giving a State of the Union Message and yelling out with her shrill voice "I told ya so," and her stupid cliches about "putting the country back on the right path," just sends shivers up my spine.

Franchise Owners Shocked

I just completed a valuation for a couple in the northeast. They own and operate a franchise they purchased 10 years ago. There sales reached $940,000 in 2010 and seem to be holding steady for this year.

The problem? The couple has used up $118,000 in credit card debt to finance the day to day operations of the business. They are in over their head. The husband decided to turn the business over to his wife while he went out and got a "real job" to earn some real money.

The wife is frustrated and ready to throw in the towel and/or divorce her husband. She hates the business and the daily pressure of having to pay bills when there is no money in the bank. She hates it!

The valuation I completed for the business ended up concluding that the business truly had little value other than the fair market value of the assets to be sold. The owners had over-valued the assets to a tune of $100,000. After making that adjustment and attempting to calculate their owner's compensation, the business value is approximately $205,000....

UNFORTUNATELY, they will still have to settle up their balance sheet debt. After keeping the cash, collecting the accounts receivable, they will also be responsible for all the current notes and loans payable. The net result will be a -$64,000. That does not include a $23,000 liability listed on the balance sheet as a "note payable to stockholders."

To say the least, the owner's are in a state of shock and still don't know what they are going to do!

My job was to conduct a valuation of this company, not to provide consulting advice.

Had I been involved in a consulting relationship with this company 12-18 months ago I would have been jumping up and down and scaring the life out of the owners with the stuff I found on their P&Ls. Many of the corrective steps that needed to be taken were quite obvious, others were not so obvious.

I must admit that while I put most of the blame on the shoulders of the owners themselves, I think the franchisor has some responsibility for this situation as well.... where was the monitoring, where was the mentoring, where were the warnings that needed to be raised.

Didn't someone tell these folks that you can't broker out 42% of sales and still have the ordinary ratios of a typical printing firm? You can't broker that much, even if you are marking up costs by 100% or more.

You can't run a $900,000 company 10.5 employees (including the owner)... you will never survive with a sales per employee ratio that poor -- that's $85,714 and that number is off the end of my survival charts!

It's Been a long time....

I apologize to readers for the fact that it has been so long since my last post.

There are many reasons for not posting more frequently, but not worth getting into. I am hoping to improve the frequency of posts henceforth.