There are different theories or opinions when it comes to Business Valuation. Houston has several business advisory and brokerage companies that can help you determine a realistic price for your business, and consulting a reputable firm prior to putting your company on the market is an essential part of the sale process.
The thing to remember is that business valuation is not an exact science. At the end of the day, your business is only worth what someone is prepared to pay for it. And of course, a buyer’s perception of what it’s worth will many times differ greatly from that of the seller.
Sellers are often emotionally attached to their business and know first-hand the amount of blood, sweat and tears that have gone into building it up to what it is today. Unfortunately, none of that has any bearing on the perceived value of the company.
In all honesty, the only true way to find out what your business is worth is to put it up for sale on the open market and see what offers you receive. However, knowing whether or not any of those offers is actually worth considering means having an idea of the business’s value, even if it’s only on paper.
There are several generally accepted ways of arriving at an accurate business valuation:
* Asset Valuations – not really suitable for small business purchases. If a business has a lot of assets but doesn’t make much money, how valuable is it? And if it has limited assets – no buildings or vehicles for example, just computers and office equipment – but makes a lot of money, isn’t it worth more?
* Liquidation Value: This calculates the value of the company’s assets if it had to sell off everything in a shorts space of time.
* Income Capitalization: This calculates future income based on historical data and educated assumptions.
* Income Multiple: The business’s net income is subject to a certain multiple in order to ascertain a selling price.
* Rules Of Thumb: The selling price of other similar businesses is used as a guide to determine the value of your business.
Sunbelt Business Sales and Acquisitions can give you an accurate and realistic valuation of your business. Visit us.
