Factors to consider when calculating your business’s market value.
Knowing the true value of your business is a vital step before putting it up for sale. Understanding your company’s worth enhances your negotiating leverage with potential buyers and helps you set a realistic expectation for the sale price.
These steps collectively help provide a clear and accurate picture of your business’s worth, laying a solid foundation for a successful sale.
1. Selecting the Level of Valuation
The initial step involves having a valuator come in to prepare a report—of which there are three different types: calculation, estimate, and comprehensive.
Calculation reports are concise and based on minimal review with limited corroboration.
Estimate reports offer moderate detail, involving limited review, analysis, and some corroboration.
Comprehensive reports are extensive, involving thorough review and extensive corroboration, offering the highest assurance of the company’s true worth.
2. Collecting Essential Business Information
To ensure an accurate valuation, the valuator reviews various business records—including financial statements, prior-year tax returns, discretionary and non-recurring expenses, management compensation, and a list of employees. This information forms the foundation of the valuation process.
3. Choosing the Right Valuation Method
Finally, the valuator selects the most suitable valuation method or combination of methods based on your business type and the available data. Earnings-based methods, market-based methods, and asset-based methods are the primary approaches.
Earnings-based methods determine valuation based on past performance and forecasted cash flow or earnings—ideal for businesses with solid profits and values beyond net assets.
Market-based methods use multiples of metrics like EBITDA, with variations based on industry and market conditions.
Asset-based methods assess value by subtracting liabilities from assets—typically used for businesses with significant asset value, such as real estate companies.
Business owners often have strong emotional ties to their businesses, which can lead to an overestimation of value. These emotions can cloud judgment and create unrealistic expectations. Engaging a professional business valuator helps provide an objective, market-based assessment of your company’s worth.
If the initial valuation falls short of your expectations, view it as an opportunity to enhance your business. Implementing strategic improvements can boost your business’s market value, making it more attractive to potential buyers.
A comprehensive valuation report is a powerful tool during the selling process. It provides a clear benchmark for assessing buyers’ offers and strengthens your negotiating position. Being well-informed about your company’s value can shift the negotiating power in your favor, ensuring better terms and pricing. In scenarios like family succession or management buyouts, a valuation report can streamline discussions while also assisting in tax-related matters.
It’s essential to understand that a company’s fair market value might differ from the final selling price. Various factors—including market conditions, buyer interests, due diligence, financing availability, your eagerness to sell, and your involvement post-transaction—can influence the final price.
Engaging professional assistance ensures you are well-prepared for negotiations and positioned for a favorable outcome. An accurate valuation not only sets realistic expectations but also allows you to make informed decisions, ultimately leading to a successful sale.
Our goal at Maverick Global Partners is to safeguard your legacy and provide you with the financial freedom to pursue your next chapter with confidence.
Whether you’re planning for retirement, supporting your family, embarking on new ventures, or seeking a bit more freedom in life, Maverick Global Partners will guide you through a seamless, profitable sale.
Ready to secure your financial future? Our structured process is designed to maximize value and ensure a smooth transition.
Our tailored strategies and comprehensive guides to help ensure a profitable, stress-free sale.
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Essential advisors for guiding you through the business sale.
Three common objectives to be aware of before you complete the transaction.
Steps you should take to optimize your business for a successful sale.
Discover important strategies to create a seamless, effective business handover.
Factors to consider when calculating your business’s market value
Key considerations for achieving a smooth and profitable business sale.
Essential advisors for guiding you through the business sale.
Discover important strategies to create a seamless, effective business handover.
Factors to consider when calculating your business’s market value
Key considerations for achieving a smooth and profitable business sale.
Unlock the full potential of your business with our team of experts today.
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