Three Valuation Methods for the Sale of Your Business

For the business owner with revenue or sales of $350k to $10 million.

How much is my business worth in divorce? How can I prepare a business for sale when the owner is approaching retirement age? I just got an offer to sell my business, should I sell now? 

Selling a business, the big moment as arrived for business owner -- what do I need to do to establish a value for the business? Business valuation can follow a large number of steps, depending on the complexity of the case and experience of the valuation professional.

At Summit Business Valuation Associates, LLC, three basic valuation methods are considered for the purpose of selling a company:

1. Market-Based Approach

This approach looks to other businesses in the same or similar industry, which provides the basis for the consideration of economic factors, such as business location, business sales date, gross-sales and seller's discretionary income. One advantage of the method is that it can provide similar business sale category statistics, with some availability to comparable economic data, for valuation calculations.

2. Asset-Based Approach

This approach considers only the schedule of business assets and bases the price of the business on the fair value of the assets. This method is often used in the liquidation of company tangible (real) assets where future economic earnings are not forecasted, and often does not account for the company (intangible) assets, such as the business goodwill.

3. Income-Based Approach

This approach is often used because it focuses on the amount of money a business generates for its owners. This method often includes adjustments to normalize expenses, operating the company as if another individual owned this business, thus owner "perks" such as expensive cars, office apartments, and other non-core operating expenses are removed, in addition to adjustments associated with the non-cash charge of depreciation.

Ideal client: business owners with annual company revenues of between $350k and $10 million count on our accurate business value considerations, affordably produced: starting at just $3,500.

Seeking to understand the economic value of a business? Contact Cliff Benjamin today.


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