In today's advantageous market, many business owners do not receive the best value when they sell a business - most often because they do not truly know their company's value. For that reason, the valuation process is a true asset to the business owner and a thorough, professionally prepared valuation will assist him or her in:
Helping identify the key value drivers, major strengths, and more importantly, the major weaknesses of a company allowing the owner to solve both obvious and hidden problems prior to selling a business.
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Determining a reasonable selling price. Many owners rely on general rules of thumb, casual advice from friends or other similarly unreliable sources. Values determined by general multiples or rules of thumb may be too high or too low. If the owner's expectation of value is too high, it will prolong the selling process until a price concession is made. If the price is too low, money is left on the table. Unless the business owner goes through the valuation process, he or she just will not know if the business is priced at market value.
Fully understanding the value of the business will assist during negotiations. In this market, one can expect buyers to be sophisticated and experienced. They will conduct a rigorous analysis of the company, even if the seller has not. They will look at those factors and value drivers that the owner and his advisors should consider in valuing the company, and they will use that information against the seller in negotiations.
- Why get a Business Valuation
- Uses for a Business Valuation
- Business Valuations Can Help Sell Your Business
The actual financial structure of a business transaction is customized to the requirements of the seller, the buyer and any third-party lenders or investors. In general, the typical business transaction involves the following elements:
Unbiased and Defendable
An independent third-party business valuation by certified appraisers, who review businesses everyday on a national level, is unbiased and defendable.
Credible
All valuations are supported by U.S. Court Review, include detailed comparable transactions, conform to ASA Standards and the Uniform Standards of Professional Appraisal Practices, IRS and Bank Certified, and are approved by all SBA lenders.
Affordable
Third-party valuation service fees range anywhere from $400 to $5,000 depending on type of valuation required. Contact your Sunbelt business broker for details on the various types of business valuation services offered.
- Provide fair market value of a business as of a specific date.
- Annual "business check-up" for business owners to determine financial strengths and weaknesses.
- Benchmark comparison for business owners to determine how the business is operating compared to other similar businesses in the same industry (regionally and nationally).
- Acquiring expansion capital through lending institutions and venture capitalists.
- Business planning and value enhancement - determining the present value of a business and setting goals over a period of time to increase that value.
- Valuing company stock for the development or annual review of an employee stock option program (or bonus stock option plan).
- Retirement planning.
- Merger or acquisition (buying or selling a business).
- Planning for an initial public offering of stock.
- Conducting a major strategic-planning initiative.
- Seeking outside investors.
- Disputing conclusions of a CRA audit.
- Estate or gift planning that involves company stock.
- Creating a company stock-option plan or other benefit plans that involve company stock.
- Breaking up a partnership (Partner Buyout).
- Getting a divorce.
- Entering bankruptcy.
If you are planning to sell your business, having a third-party business valuation can help you in a number of ways:
- Establish a listing price that maximizes value to the business owner.
- Present the true economic value of the company.
- Assemble and package all the information necessary to support the established value of the business.
- Prevent "lost deals" caused by delays in researching the information required by the prospective buyer.
- Portray the business in the best light and a more professional manner.
- Provide the back-up documentation required for the seller or buyer to obtain financing.
- Allow the buyer to substantiate the value to his legal, accounting and professional advisors.
- Enable professional advisors to do a better job of structuring the transaction.
- Identify issues that need to be addressed in order to better position the business for future sale.
- Facilitate the tax and estate planning by the business owner.
- Sell the business faster – The International Business Brokers Association (IBBA) has indicated that businesses sell 35% faster when an investment is made in a business valuation.
