How Much is My Business Worth?

One of the most important steps in selling a business is pricing it correctly. Knowing the value of your business will help you search for appropriate buyers. 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.

If you want to sell your business, now or in the future, knowing the market value of your company is a vital first step in being able to assign it a defendable price–a price buyers and bankers will accept and that puts you in the best possible situation financially. It’s equally important to partner with professionals who can provide an accurate valuation. At BEACON Business Group, we will provide an honest assessment of the value of your business at no cost or obligation to you.

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?

If you’re serious about exiting your business, t’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 (southeastern Wisconsin/northern Illinois), (608) 828-9990 in Madison (southwestern Wisconsin)  or (715) 352-6600 in Wausau (northern Wisconsin) to schedule a confidential, no-cost conversation with a BEACON broker. We look forward to speaking with you about your Midwest business.