Proper Valuation of Your Business
Steps to consider prior to placing your business on the market:
The most frequently asked questions in the Business Sales and Merger and Acquisitions Industry are:
- How sellable is my business, given my circumstances?
- How can I achieve the maximum selling price?
- What is the true and accurate value of my business?
- What terms will I have to consider and how do they affect my asking price?
I would like to address the subject of valuation so you can be better prepared as your time to sell draws near. Although there are multiple methods to determine worth, there are three popular methods used to determine a selling price.
Let’s look at the three individually and remember that the final asking price will weigh all three of these and factors from several other methods.
- Capitalization of Earnings – Shows a business’s future profitability, accounting for cash flow, annual ROI, and expected value. This method extends calculations for a single period into the future.
- Market Based Comparison – Calculates company’s value based on the purchases and sales of comparable companies within the same industry.
- Asset Valuation – Calculates the net value of a business’s assets, both tangible and intangible, minus the value of its liabilities.
These three methods along with various other tools will be used to set a value that you can be pleased with.
No matter where you are in your business’s life-cycle, it’s helpful for small business owners to know the worth of their company. Enlist help from VR Business Brokers of Dallas to determine your business’s valuation and tackle some of the many challenges of owning a small business.