A business valuation helps determine what the market price for your business is, and shows a qualified buyer the value of owning it. At VR, we will assist you in determining the value of your business when you are considering selling.
When you consult with a VR business intermediary, we will examine a variety of different areas, starting with your business’ financial information. This will include profit/loss statements, balance sheet and tax returns for the past three years, which we will recast to reflect the true earning power of a privately-held business. We will also take into consideration your company operations, customer base, goodwill and intellectual property and how your results compare to past transactions of other businesses in your industry.
Analyzing and Recasting Financial Statements
Recasting your business’ financial statement is an important tool to present the real earnings history to prospective buyers. Since most small businesses will report net income as low as possible to minimize the taxes, it’s critical to ensure we are able to arrive at an accurate value for your business. It will also provide a qualified buyer with a common baseline in Discretionary Earnings (DE) to compare earnings from different businesses to yours as well as a way to calculate potential earnings after they purchase the business.
If you own a mid-market business, we will utilize the Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA). This is a good earnings measure for large corporations where the professional management team is operating the business with no owner benefits being expensed through it.
Examining a Business’ Strengths and Weaknesses
A strong advantage to having a valuation is that it forces the owner to re-evaluate the direction that they are going; not only with the business but with themselves. If you’re putting a lot of time and energy into the valuation process, leaving no stone unturned, you will be able to see how the business is doing financially and operationally compared to other competitors in the market.
What many people don’t understand about business valuations is that they are not only for generating a fair market price, but can indicate areas of improvement. You can look at it as an annual checkup from a physician. The worst thing to happen is to have a qualified buyer approach your business, and you don’t have an accurate analysis of its worth.
Each VR office worldwide assists businesses in performing extensive and thorough valuations, which will not only situate them better in the long-term but achieve the maximum fair market price.