Estimates of Value



recasting-financialsIf you're looking for an estimate of value regarding your business, or if you just want to make sure your business sells for the highest possible price, we can help.

Before you pay hundreds or even thousands of dollars for a formal business appraisal or valuation contact us to receive a no-cost, professional estimate of value for your business. 

Contact Us and we can discuss what information we'll need.  All information you provide is secure and your confidentiality is guaranteed.

Once we have an opportunity to review the information & visit your business, we will then contact you to discuss the estimate of value and explain how we came up with our estimate.  We'll also advise you as to what you will need to do to prepare your business for sale in the future.

VALUING A BUSINESS
Although every business has it's own unique set of circumstances, buyers typically evaluate potential acquisitions in a similar manner.  Based upon our experience in the market place, the following are the primary factors considered by prospective buyers when determining a company's value:

Recast Earnings.  With rare exception, a company's recast pre-tax earnings influence valuation more than any other factor.  Buyers are looking to purchase a stream of income that will provide a desired return on investment.  The most commonly accepted valuation methods primarily rely on multiple of earnings to calculate value.  Generally speaking, the stronger the earnings the greater the value.  Most business owners & accounting professionals have the same goal in mind when producing financial statements, to minimize the owner(s) tax liability.  Minimizing your tax liability is great, until you decide to sell your business. This is one of the areas where an experienced business broker brings tremendous value to both the buyer & seller, by simply recasting the financials to show the true earnings of the business, commonly referred to as the  "Owner's Discretionary Earnings". Many privately held businesses have expenses that are considered "discretionary expenses". Those discretionary expenses often include; the owner(s) personal health insurance, the owner(s) salary, depreciation, interest from the mortgage note on the business, amortization, meals & entertainment expenses, personal travel expenses, non-recurring expenses, personal auto expenses and any other expenses that are not true operating expenses. This helps the buyer see a more detailed account of the true business earnings as well as a detailed account of what the buyer will realize for himself/herself as the new owner, assuming there's no increase or decrease in sales. 

Hard Assets.  Tangible assets often have a positive influence on value.  Generally speaking, the greater the asset value included as part of a transaction, the greater the overall company value.  However, since earnings typically have a greater impact on valuation than assets, increases and decreases in asset values seldom have a dollar-for-dollar impact on company valuations.

Terms.  Price and terms tend to have a negative correlation.  For example, an all cash transaction will generally yield a lower price when compared to a transaction that includes owner financing. Also, the greater the amount of seller financing being offered, usually equates to a higher purchase price.

Transaction Structure.  Will the transaction be an asset sale or a stock sale?  Will the seller retain certain assets (i.e. receivables, cash, deposits, etc.) rather than include them as part of the transaction?  Will the seller be willing to structure an earn-out for a portion of the transaction?  These and many other alternative transaction allocations and structures will have a direct impact on tax implications and total yield to the seller.

Presentation and Packaging.  When buyers evaluate a business opportunity, they expect the records and facts to be properly organized and accurate.  A professionally packaged business profile will greatly increase a buyer's confidence and comfort level thereby increasing the likelihood of a successful sale.  Most buyers enlist their CPA, lawyer or business partners to review business opportunities.  Business owners spend years establishing name recognition, market niche, vendor relationships, operation and production systems, management, personnel, distribution channels, customer loyalty, expansion opportunities, synergies and numerous other intangible assets.  This story needs to be properly presented to potential buyers.  A professional Business Broker will present the best possible picture of the entire business thus maximizing the attractiveness and perceived value of the opportunity in the eyes of potential buyers.

OWNER'S DISCRETIONARY INCOME CHECKLIST

The following is a checklist of possible items that make-up "Owners Discretionary Earnings".  Some or all of these items may pertain to your business.  Most small to medium sized businesses are sold at the multiple of this compilation.  Other factors (as listed above) are also taken into consideration, but everything begins here.


     1.  OWNER'S SALARY INCLUDING PAYROLL TAXES (FOR ONE OWNER OPERATOR)

     2.  CORPORATE PROFITS

     3.  AMORTIZATION

     4.  DEPRECIATION

     5.  PERSONAL HEALTH INSURANCE

     6.  PERSONAL AUTO INSURANCE

     7.  ANY OTHER PERSONAL INSURANCE, SUCH AS OWNER'S LIFE INSURANCE

     8.  ANY PERSONAL VEHICLE CHARGES AND REPAIRS

     9.  PERSONAL TRAVEL & ENTERTAINMENT CHARGED TO THE BUSINESS

   10.  ANY OTHER PERSONAL SERVICES AND EXPENSES CHARGED TO THE BUSINESS

   11.  PERSONAL LOAN PAYMENT AND INTEREST (MORTGAGE NOTE & INTEREST)

   12.  PERSONAL CELL PHONES CHARGED TO THE BUSINESS

Information Disclaimer


The information in this listing has been provided to us by the business seller or their representative. Advantage Business Acquisitions, Inc. (ABA) has no monetary interest in the sale of this business. As an organization we try to provide quality information but we make no claims, warrants, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to this website and its associated sites.  ABA has not verified the accuracy of the information, and assumes no responsibility for its accuracy or completeness.


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