Complete the Survey Below to
Receive a FREE Business Valuation!
Business valuation is as much art as Science. We have streamlined the process to help you get a quick, accurate, idea of what your business would be worth on the free market. (See survey below to get started) A real human will review your entries, and utilize a variety of valuation methods to give a good idea of the current fair market value of the business.
Valuation methods include a multiplier of the discretionary earnings, which we calculate based on your entries; as well as utilizing comparable sales, and other metrics dictated by a given industry. We will email or call you (your preferred method) so BE SURE to include your contact information.
Just fill in the blanks below to complete the Valuation Survey
Valuation methods include a multiplier of the discretionary earnings, which we calculate based on your entries; as well as utilizing comparable sales, and other metrics dictated by a given industry. We will email or call you (your preferred method) so BE SURE to include your contact information.
Just fill in the blanks below to complete the Valuation Survey
Don't have 7 minutes to complete the survey?
You can also download the survey below and save to your computer.
Just email it to us when complete for your Free Valuation!
You can also download the survey below and save to your computer.
Just email it to us when complete for your Free Valuation!
| rea_valuation_survey.pdf |
In order to determine the worth of a business, there are multiple factors to consider. It goes beyond how much money is made on an annual basis; in fact, all aspects of its past, present, and future are considered. It can seem daunting to try to calculate this on your own. For this reason, a proper business valuation must be conducted. This is the first step you will need to take when working toward selling your business.
The initial step for a business valuation is considering future performance. This may sound strange, but the truth is, a business’s value is dependent on projection and not past performance. Even if a business has done well in the past, a potential buyer will want to be confident that it will continue to do well in the future. The current status of the company in the market and what a new buyer can do with it can greatly affect how much a business is worth.
The next very important factor is earnings and revenue. Although revenue is important, a business with a greater earnings is considered more valuable. Buyers want a return on investment, therefore earnings rule. However to compare businesses, these earnings must be recasted to reflect the true earnings capability of the business.
Similarly, another important factor is the types of assets owned by the business (i.e., industry-specific machinery or equipment, vehicles, etc.). The type of assets affects the advanced rates of the lender and the depreciation life of the assets, which in turn impacts the value of the business.
Transworld Business Advisors offers free business valuation consultations; contact your local Transworld office to schedule an appointment so that determining your business’s worth is stress and anxiety free. A skilled Transworld advisor can help you review your financials in order discuss valuation and guide you through the steps of preparing the business sale. Our experienced brokers will take the time to get to know your business and help you determine your business’s value so that you can make an informed decision to sell.
More of the Science side, below:
The initial step for a business valuation is considering future performance. This may sound strange, but the truth is, a business’s value is dependent on projection and not past performance. Even if a business has done well in the past, a potential buyer will want to be confident that it will continue to do well in the future. The current status of the company in the market and what a new buyer can do with it can greatly affect how much a business is worth.
The next very important factor is earnings and revenue. Although revenue is important, a business with a greater earnings is considered more valuable. Buyers want a return on investment, therefore earnings rule. However to compare businesses, these earnings must be recasted to reflect the true earnings capability of the business.
Similarly, another important factor is the types of assets owned by the business (i.e., industry-specific machinery or equipment, vehicles, etc.). The type of assets affects the advanced rates of the lender and the depreciation life of the assets, which in turn impacts the value of the business.
Transworld Business Advisors offers free business valuation consultations; contact your local Transworld office to schedule an appointment so that determining your business’s worth is stress and anxiety free. A skilled Transworld advisor can help you review your financials in order discuss valuation and guide you through the steps of preparing the business sale. Our experienced brokers will take the time to get to know your business and help you determine your business’s value so that you can make an informed decision to sell.
More of the Science side, below:
Fair Market Value
For our purposes, let's talk about fair market value. Essentially what a buyer would pay for your company in an open market.
Now, remember, this is a simplification of some very intricate valuation practices. There are valuation experts that specialize in providing very complicated reports as part of their business valuation services. Those reports are often used for IRS inquiries, legal proceedings, intricate financing and other reasons. A full valuation of a company could cost $10,000-$30,000. For small business sales, a valuation is usually not needed, and for the most part our simplified valuation methods are sufficient enough to determine your listing and approximate your eventual sale price.
There are three generally accepted approaches to valuing a company:
1) The asset approach
2) The market approach
3) The income approach
Multiple Of Your Past Earnings - Whew? What does all that mean? Simple. Your business is worth a multiple of your past earnings if a buyer can project those earnings will be maintained after the purchase.
Can all that mean nothing? Yes!
Buyers determine a business' eventual sale price. Not valuation experts. That is why no one can tell you exactly what your business is worth. Not your banker, CPA, lawyer, broker, or mother-in-law. The only individual that will tell you what it is worth is the eventual buyer - and that will be a subjective evaluation. The same business will be valued differently by every buyer.
Lost Yet? Here's A Summary Of Business Valuation.
Your business is worth the following:
How Do You Narrow The Value Down? Complete our Survey Above and let one of our HUMAN advisors give you an accurate idea of what your business is worth today.
For our purposes, let's talk about fair market value. Essentially what a buyer would pay for your company in an open market.
Now, remember, this is a simplification of some very intricate valuation practices. There are valuation experts that specialize in providing very complicated reports as part of their business valuation services. Those reports are often used for IRS inquiries, legal proceedings, intricate financing and other reasons. A full valuation of a company could cost $10,000-$30,000. For small business sales, a valuation is usually not needed, and for the most part our simplified valuation methods are sufficient enough to determine your listing and approximate your eventual sale price.
There are three generally accepted approaches to valuing a company:
1) The asset approach
2) The market approach
3) The income approach
- Asset Approach - Asset Approach values the assets of your business minus the liabilities. Some of the methods in this approach are book value, excess earnings method, asset accumulation method to name a few. However these values usually mean very little to the market value of most operating businesses. For the most part the asset approach does not properly represent the value of an ongoing business that has positive earnings.
- Market Approach - Simply defined, it is much like a real estate comparable method. Like businesses in size and industry sell for similar valuations. There is the guideline publicly traded company method or the merger and acquired company method (private sale databases). There are many databases we can research to find multiples of gross sales and earnings to compare to your business. This method can be very reliable in most cases and is a strong indicator of value.
- Income Approach - Your business is worth the present value of the income stream it will bring to an investor. There are several complicated methods including the discounted future earnings method as well as several capitalization methods. This approach is also a strong indicator of what a business with positive income is worth. These methods rely on future projections and growth rates to decide what the business may be worth. If that is true then why do most people multiply or capitalize historical earnings to arrive at a value? Because the assumption is the buyer will maintain the current income levels and they are a reasonable indication of future earnings.
Multiple Of Your Past Earnings - Whew? What does all that mean? Simple. Your business is worth a multiple of your past earnings if a buyer can project those earnings will be maintained after the purchase.
- What Is The Multiple? Well first we must discuss what you want to multiply? Net income? EBITDA? Owner's benefit? In small business sales (businesses earning less than 1 million dollars), we use owner's benefit. Owner's benefit equals the net income, plus depreciation, interest, and the owner's salary and fringe benefits. In other words, all the income available to ONE owner if the company was debt free. EBITDA is used by larger businesses and includes normalized salary and benefit package for an executive to operate your business.
- Okay, Now The Multiples. Well the multiples of owner benefit can run from less than one to about three. If your company is larger and your EBITDA is near or above one million, the multiples can run from four to six. Is this set in stone? NO! How do you know which multiple would be used for your business? Well, the multiple will rise along with the size, quality, and verifiability of your owners benefit. Bad books, dim future, negative growth and little profits equal a low multiple. Excellent books, bright future, excellent growth you will garner a high multiple.
Can all that mean nothing? Yes!
Buyers determine a business' eventual sale price. Not valuation experts. That is why no one can tell you exactly what your business is worth. Not your banker, CPA, lawyer, broker, or mother-in-law. The only individual that will tell you what it is worth is the eventual buyer - and that will be a subjective evaluation. The same business will be valued differently by every buyer.
Lost Yet? Here's A Summary Of Business Valuation.
Your business is worth the following:
- A multiple of earnings compared to like businesses (gross sales or owners benefit times an industry multiple).
- A capitalization of the net profit (Not Owners Benefit...you cannot capitalize owners benefit!) 20% to 50% or a simple multiple of owner benefit.
- And if your business makes little or no money- Asset value is the only value. (Goodwill + Inventory + Equipment +etc.) Either sold as a whole or liquidated over time.
How Do You Narrow The Value Down? Complete our Survey Above and let one of our HUMAN advisors give you an accurate idea of what your business is worth today.
