Business Valuation for Small Businesses (Less than $1M EBITDA) | Edison Avenue

Business Valuation

The value of a business is primarily a function of (in order of importance):

•    Seller’s Discretionary Earnings = Net Income plus Non-Cash Expenses, Non-Operating Expenses, Owner’s Salary, Benefits and Perks

•    Revenue

•    Inventory and Asset adjustments

•    Industry (barriers to entry)

Major Defects (Risk)

Result in major reductions in value; reduce probability of sale:

•    Under $60K in SDE (Asset Sale)

•    Unclean bokkeeping

•    Declining SDE and/or Revenue

•    Low customer diversity

•    Years in business (if less than 3)

Risk Reduction Factors

Always improve value:

1.   Clean financial records

2.   Positive growth; $125K+ SDE

3.   Strong industry outlook

4.   Fast receivables turnover

5.   Business plan/forecast

6.   High customer diversity

7.   Low owner involvement

8.   High product diversity

9.   High transaction rate

10. Strong management team

11. Low employee turnover

12. Active assets

13. Willingness to accept financing

14. Documented processes

Over $60K SDE:

•   Maximum equals 3 times SDE

•   Minimum equals 1 times SDE with adjustments for assets and inventory

Under $60K SDE:

•   Distressed sale

•   Maximum equals the value of the assets

For additional information regarding Florida business sales, acquisitions and valuations, please contact Eric J. Gall at Eric@EdisonAvenue.com or 239.738.6227. Also, visit our Edison Avenue website at www.EdisonAvenue.com. To search for Florida Businesses for Sale: CLICK HERE