Find Out What Your Business is Worth
The first thing that pops into most business owner’s head when they think about selling often is, “how much can I get out of it?” If you’re in this situation and are wondering what your business is worth, take a few minutes to read this article. If you still have questions at the end, feel free to contact me.
How to Value a Business
There are many flawed ways to valuate a business:
1) Avoid the Armchair Valuations
If a business broker spends sixty minutes with you, takes some notes and tells you they will apply a multiple and then throws out a number, this practice is called an armchair valuation. Avoid this. Here’s why, every industry has difference multiples and there’s more work that needs to go into a complete valuation than a fast conversation and some quick math. Think of it this way, if it were really that quick and easy to put together an accurate business valuation, banks would do it that way – but they don’t. They spend weeks going into a lot more detail.
2) Pick a Number Out of the Sky
If your business broker asks you, “How much do you want to sell your business for?” and then sets that as the asking price – this is a poor way to valuate a business. While you want to be sure you get the maximum return on your investment, in order for a buyer to see the value too, a complete and accurate valuation, one that reflects the actual value of your business, must be performed.
3) Looking at the Numbers Wrong
For tax purposes, Accountants take deductions and work numbers so that business owners get the benefit of paying lower taxes. When a business broker recasts the numbers, the adjusted net income reflects a more accurate picture for a business valuation.
4) Letting the Buyer Set the Price
Having a Certified Business Intermediary invest a few weeks, digging deep into the details of your business, will result in the most complete, accurate business valuation. Some brokers will tell you the market is what the buyers are willing to pay. The problem with that perspective is that buyers will want to spend as little as they can. To maximize your return on your investment and get the most out of your business you can actually set the price of your business by having a business broker run the numbers, do his research into multiples for your industry and have the calculations and comps to back up the figure.
If this article has piqued your interest in selling your business or if you have additional questions about your businesses valuation, please feel free to contact me.
Cress V. Diglio, Florida Business Broker
Cress V. Diglio is a Certified Business Intermediary (CBI), a Merger & Acquisition Master Intermediary (M&AMI) and the past chairman of the International Business Brokers Association (IBBA). Whether you are looking to buy a business, sell your business or merge with another business, Florida Business Broker Cress V. Diglio has the experience to assist you in all facets of the transaction. Call Cress today for complete transaction support and expertise, 888-984-4208, or visit https://floridacertifiedbusinessbroker.com.