What is My Business Worth

We won’t kid you. The simple truth is that the market determines the value of your business. We can help you determine that number or range. There are a number of companies that specialize in travelling around, putting on seminars, and filling people’s heads with clever and enticing but wildly unrealistic expectations. Their goal is to sell you their services, which usually include a valuation (which we provide for free for our clients anyway,) after which they “guarantee” to sell your business for the price they came up with.

They know full well that they are grossly inflating your expectations, but they don’t care, because all they really want is the up-front money they charge you.  Almost every day, we talk to people who have paid $35-40,000 to one of those companies. It always amazes us, but they’re good at stroking people’s egos and saying what they want to hear. This is just a word of warning—don’t be deceived. Don’t fall into their trap. We’ve never heard of a company who ever sold for what one of those companies said it was worth, and we’ve never heard of one of those travelling front fee companies that have actually sold a business.

That said, our object and goal is to sell your business for as much as possible. However, today’s buyer is tomorrow’s seller, and we want to do right by both sides of the transaction. To be successful, a seller needs to put himself in the buyer’s shoes. If you (the seller) were considering buying this business, what would you pay? Will the business pay for itself at that price while providing a reasonable living wage for the new owner? And don’t forget that every buyer who has money to invest has options. The more money they have, the more options they have.

There are all kinds of rules of thumb:  multiples of earnings computed in different ways (SDE, SDC, EBIT, EBITDA, etc.), percentages of gross sales, percentages of net sales, with inventory, without inventory—the list goes on. Then different industries have different standards, measures, and rules of thumb. Usually most important is comparable sales. In general, you average several of these methods to get a good feel for what the market will bear. Also, your company’s value is based on a composite of at least three years of income. A buyer has to believe he stands a reasonable probability of being able to come in and do at least as well as you, if not better.

Like we said earlier, we’ll help you navigate this maze. We’ve done it over and over. We’ll help you find that magic number.