Value Of Business

Business, Entrepreneurship.

Evaluating your business for sale - value of business. Ask three expert evaluators to come up with a value and there is a good chance they will come up with three numbers that are not close to one another.

What is the value of your business? - what is an owner to do when faced with this dilemma? The reason is simple enough. How did the experts determine the value and why did their final number vary from one another. There are subjective elements to every business evaluation. This will account for their differences in value. Each of these experts put a value on the subjective elements that goes along with their personal experience with the business that is being evaluated.

Most business people if they really did get three appraisals would take the highest one and be done with it. - what do the evaluators need in order to come up with a business evaluation? What is needed to make an evaluation. They need access to all of the financial records of the company. It is usually first in first out prices or last in last out prices. They need an inventory list and value based on whatever method is used to get this number. Both are valid means to value an inventory.

They will also speak to employees, suppliers and competitors to see how they think the company is doing. - projected sales figures and profit can be used to add some value for the future to a present day value. They will look at what similar businesses have sold for in the last couple of years and at the state of the present economy. It is this amalgamation of the old and the possible that causes the range of values from different experts. These evaluations will always be based on old information and with an ingredient of future prospects. Every evaluation needs to be heavily weighted to with future numbers or the price will be set to low.

With all of these numbers, the professional will use different methods to come up with a price After this is done, the numbers are looked at and a judgment is made as to what one seems to be the most correct. - it has to take into consideration the prospects for the company and its future business. Again this is a subjective decision. What have other businesses in the same industry sold for and how do they compare with the business that the evaluation is being done on. Comparisons of prior sales in the industry. This information is very helpful and should make the evaluation a little more realistic.

Where will the company be in three years. - these sales comps will set the tone for how other businesses were rated as to their sales and the selling price it should help in setting an asking price that represents the current value of the company. Looking at the growth curve of the business and assuming a similar rate of growth in the future, one could come up with where the company will be in three years. With this in mind, the price of the business should take this future outlook into account. If the growth has been stable for a number of years, there is every reason to think it will continue at a similar rate if no drastic changes are made and the customer base continues to grow. When this is explained to the buyer, then it must be validated with facts and figures that his advisors can peruse. Intangible factors to be considered.

A well - documented presentation will go along way in alleviating doubts and questions about how you came up with your numbers and the asking price. - there are some factors that enter into the evaluation of a business that cannot be reduced to shear numbers and accounting sheets. If they get a large percentage of the available business that is a plus factor for the business. If the business being evaluated has a significant standing in the industry then this is worth something in the price. If its reputation is impeccable then that is another factor that is difficult to put into accounting terms. This is why it is important to investigate and questions others about the company.

All of these intangibles when added together make the company more valuable than it would seem to be from just the financials. - if the business is the result of one strong individual who will not be there when it is sold, then that could present a problem that could be difficult to overcome. Intangible assets such as these are hard to put a number on unlike the hard assets of the company. Be very careful about this kind of business. Equipment can be valued at a depreciated value, which could then be used to set a foundation for the final price. This one question when answered will help with the question of should you buy the business. Is there going to be an ongoing need for your business.

A plumbing company will always be needed in our civilization. - a drywall company will probably always be able to find work. As will an electrical company. Is the business you are thinking of buying a company like one of these or could its business be done away with without any harm. Are there high tech innovations that are going to change the business and you have the expertise to make the change. If the business will always be in demand that is a very strong reason to consider its purchase. If this were the case, then you would have a leg up on other businesses like yours.

If you are able to bring the business into the modern age and take advantage of the new technology then you could make the business grow far beyond what it is today. - these are considerations with profound affects upon whether you should become the owner of not. This is the kind of opportunity that every buyer is looking for and few find. It is highly suggested that a seller bring in a certified business broker to help with the evaluation, the presentation materials and the finding of prospective buyers for the business. Conclusions. Since this is their business then this is something they usually can do far better than a seller can do it.

They have a vested interest in seeing the business sale go through. - the broker can help a great deal in the negotiations and the final stages of the sale. The most important thing that they can help with is developing the asking price. This creditable price is the basis for all other negotiations. After helping to set the price they can come up with justification that will stand the eagle eye of the buyers financial experts. The expert business broker can smooth things along and keep the ball rolling in the move to make the sale. When negotiations stall, then the sale is in jeopardy.

Their knowledge and experience can stop delays from happening and their damaging effects. - this should be avoided if at all possible. Their value cannot be overstated in a business sale. Bringing in the pro solves so many problems and can lead to a successful sale that is completed quickly and at a decent price.