Why Have a Business Valuation?

Remember that every successful deal requires a satisfied seller and a satisfied buyer. A “win-win” deal is the best situation for everyone. A favorable sale is achieved when the seller obtains a fair price for the business and the viability of the business is preserved such that the business can continue to prosper after the sale.

Business owners sell their businesses for a variety of reasons, including a reduced tolerance for risk, lack of challenges, health reasons or plain old fatigue. Other owners are motivated to sell by a changing marketplace, technological advances, spousal pressure or a desire to start a new chapter in life. Often, owners, if they are to take the company to the next level, opt to sell rather than incur this added burden.

Even though the business is the greatest asset in the owner’s portfolio, he or she tends to undervalue it. Before making their decision, business owners know little about the sale process itself. They only know that they want a “quality” buyer, one with whom they are comfortable with and who will treat their employees and customers well.

The key to reaching the selling or buying decision is knowing what the fair market price for a business is in this era of corporate downsizing and entrepreneurial growth. Here’s an important fact: You’ll sell or buy a business just once. If you do it right, you’ll get or give a fair price and enjoy the financial rewards. If you make a mistake, you could lose more than money you leave at the negotiating table.

There is no simple formula or rule-of-thumb for computing the value of a business. Even if two businesses have roughly equivalent cash flow, their capacity, the markets in which they operate, the competition, and numerous other factors can make all the difference in the world when it comes to value. Each enterprise must be valued as a unique entity.

The fair market value of your business is the value it would have to a prospective buyer – someone whose primary concern is its profit potential.  By investing in an evaluation, you can save yourself a great deal of time, money, and grief

If you are serious about selling or buying a business, ABC provides a sophisticated evaluation service to help pinpoint the right selling price for a business. Using years of experience (since 1980) with all types of businesses, ABC has developed a unique evaluation approach that combines many factors and techniques.

Without it, you run the risk of either underestimating your business worth, accepting too low a price for it and leaving money on the closing table that should be yours or overestimating its worth and wasting valuable time trying to reach an unrealistic goal.

In valuing your business, we recast past financials to determine the business’s maximum earning capacity. Owners of privately held businesses often utilize a wide range of operating styles, from aggressive to conservative, producing wide ranges in earnings. In recasting these numbers we show more accurately what a prospective buyer could expect the business to generate as profits. Recasting provides an economic view of the company and allows meaningful comparison with other businesses for sale. When a buyer has this information on your business it can mean the difference between buying your business or someone else’s.

Numbers will ultimately be analyzed according to well-established disciplines, but determining those numbers – formulating the assumptions for the calculations – is a matter of professional judgment. That includes judgment about the past performance, current capacity and competitive situation of your business, as well as the demographic and market trends that will affect its performance.

An accurate valuation puts you in an excellent position to negotiate the sale of your business on the most advantageous terms. It will also be critical if you intend to execute a buy/sell agreement, or develop a plan for your estate.

The decision to exit your business is one of the most difficult decisions of your life. Your business is an extension of your personal life, and in most cases, your personal net worth is tied to the business value. We understand the importance of this decision and know the stakes are high.

Good business decisions can only be made based on accurate information.

When it comes time to sell your business or plan your exit strategy, there are many offering to help you. Teaming with Affiliated Business Consultants provides you the advantage of years of experience working with all sizes and types of businesses, nationwide, while maintaining your confidentiality.

17 other reasons why you need to have your business evaluated.

1. Estate Planning
2. Employee Stock Ownership Plans (ESOPs)
3. SBA Financing
4. Purchase or Sale
5. Mergers and Acquisitions
6. Economic Damages
7. Intangible Assets
8. Purchase Price Allocation
9. Goodwill Impairment
10. Buy/Sell Agreements
11. Private Placements
12. Venture Capital Funding
13. Restricted Stock Discount Studies
14. Stock Options
15. Fairness Opinions
16. Divorce Proceedings
17. Insurance planning