Your Business’ Value
What Makes My Business Different And Therefore More Valuable? ➝
Here are the some of the kinds of things that make a business unique, therefore increasing business value:
Business reputation—Do you have a way to support this?
Loyal, well-trained employees expected to stay with the buyer.
Diversified customer base expected to remain with the business.
Contractual relationships with key customers and suppliers.
Government permits others may not be able to duplicate.
Location.
Formulas, unique processes, or technology which cannot reasonably be duplicated.
Patents and other types of intellectual property.
For a buyer to value these attributes they must be transferable to the buyer with the sale of the business.
How Much Do I Want for My Business? ➝
Do you have a specific need for the cash coming as a result of a business sale? Will the sales proceeds be needed for retirement? Will you need 100% of the selling price in cash?
A seller may not receive 100% of the sales proceeds up front because a buyer, their bank and the Small Business Administration (the SBA may provide a loan to the buyer) asks that you help finance a buyer’s purchase. As a seller, you should anticipate participating in the financing with as much as 20% of the business price. ABBG can discuss financing options available to you and your buyer.
Cash is King. Businesses are valued mostly by their cash flow (which is driven partially by your good will). Yes, the balance sheet assets and/or some unique market situation may be used to adjust the value in one way or another, but the seller should expect a business’s basic value to be cash flow. So manage your cash profits like it is king!
STEP I
Creating the Valuation Cash Flow ➝
(commonly called the Seller’s Discretionary Earnings Analysis)
The calculation of a Seller’s Discretionary Earnings (SDE) starts with a traditional profit and loss statement and then considers add-backs for owner’s salary and benefits, depreciation, interest expenses and non-recurring expenses. This analysis creates the expected cash a buyer would have as the new owner of your business. Your business’ SDE is important input to ABBG in determining your business’ value. ABBG identifies these factors with you, as seller and we use our experience, and research to understand how each factor will impact the value.
STEP II
Creating The Business Valuation ➝
ABBG uses various proprietary valuation tools to assist with creating the value we believe your business should be sold for. Together, we will decide on a range of values for your business and sales terms acceptable for presenting to prospective buyers.