How to Price a Business - a Practical Guide to Business Valuation

Having worked hard at building your business you are naturally interested in its value when the time comes to sell. Particularly if it's been well-managed with a good trading history and a loyal, profitable customer base.
So how do you value your business?

A number of business valuation methods are in common usage. Here are just a few:

Asset-based, or "book value” assessment. This method draws information from the balance sheet, so it's highly factual, looking at the here and now. But if yours is an ongoing business, assets in the balance sheet can be expected to generate profits into the foreseeable future and beyond. Therefore used on its own this method is likely to be detrimental to your interests as it ignores future cash flows. Indeed the book value method is often associated with a business that has failed, in a "fire sale" break-up valuation.

Stock market. Great, if your business happens to be listed in a competitive, openly-traded stock market where a share price reflects demand and supply at a moment in time. It's unlikely to apply to you.
Multiplies. There are a number of subjective "rules of thumb" based on multiples of, for example, profit, earnings before interest and tax (EBIT), earnings before interest, tax, depreciation and amortisation (EBITDA), even sales revenue. However these can be seen as wild guesses and are difficult to defend objectively in front of a serious buyer.

So how to value a business objectively in a way that can be defended?"

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How to Price a Business - a Practical Guide to Business Valuation:

For additional information regarding Florida business sales, acquisitions and valuations, please contact Eric J. Gall at info@buysellflbiz.com or 239.738.6227. Also, visit our Florida Business Exchange website at www.fbxbrokers.com and my personal website at www.buysellflbiz.com.