Value Your Business
How Much is My Business Worth?
One of the most important steps in selling a business is pricing it correctly. If you take it to market asking too much, you alienate your best prospects. Price it too low, and you risk leaving money on the table. Problem is, many business owners simply do not know the actual value of their companies. In fact, a recent survey conducted by the International Business Brokers Association found that more than 70 percent of business owners do not have a recent market value of their businesses.
Taking the First Step
If you’re looking to sell your business, knowing the market value of your company is a vital first step. And It’s important to partner with the right professionals who can provide an accurate valuation.
At BEACON Business Group, we are certified advisors in the Value Builder System, a powerful methodology and program that are proven to help businesses owners dramatically increase the value of their companies. Learn more about Value Builder and take the 13-minute BEACON Value Builder survey to discover the “sellability” of your business.
The Value Builder assessment results identify red flags that can decrease the value of your business while providing practical insights on how to grow that value. BEACON’s advisors help business owners to interpret their Value Builder results and take the steps necessary to make their businesses more attractive to buyers and command the greatest possible value.
How Is Market Value Determined?
Formally valuing a business properly is a complex process during which many questions must be answered and multiple factors taken into account. Fundamentally, a buyer purchases a business for income or cash flow. Cash flow can be expressed in many ways, typically either as Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) or Seller’s Discretionary Earnings (SDE). In small business transactions, we start with SDE or EBITDA, as this is the most common basis for establishing a price to take your business to market.
As you would imagine, the more cash flow there is, the more likely that a buyer will want to pay for it. But it’s just not that simple. Cash flow comes with risk, and determining the risk in cash flow is just as important. Some of these potential risk factors include market competitiveness, customer concentration, key employees, owner’s role in the business, vendor concentration and legal exposure. Getting a proper valuation includes determining true cash flow (SDE or EBITDA) and analyzing key risk factors.
Determining a business’s value also requires effectively evaluating intangibles, such as customer good will, the company’s reputation in the greater community and the relationships that exist within the business. This is especially true in family-owned companies where multiple family members are involved in the business.
What’s the Next Step?
Now that you’ve got your Value Builder Score, it’s time to have a discussion with the professionals at BEACON who will value your business accurately and in a way that protects your interests as the owner.
Please complete the form below or call (414) 988-6022 in Milwaukee or (608) 828-9990 (Madison and southwestern Wisconsin) to schedule a confidential, no-cost conversation with a BEACON broker. We look forward to speaking with you about your Wisconsin or Illinois business.