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ST. PETERSBURG, FL
9500 Koger Blvd. N., Ste 114
St. Petersburg, FL 33702
Phone: (727) 705-5000
Fax: (727) 362-5109
Email This Office
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VR Business Sales|Mergers and Acquisitions
ST. PETERSBURG, FL
What is My Business Worth
Determining the value of a business is often a complex task and it is your best interest to have your business valued by one of our highly skilled and trained Professional Business Intermediaries at VR in St. Petersburg or through our strategic network of qualified business valuation analysts for a Third Party Valuation. Click here for Professional Valuation Services. Before the market value of a business can be determined, the financials (profit & loss statement or P&Ls, and tax returns) must be recast to reflect the true earning power of the business.
Identify the “Right Buyer”.
Identifying the “Right Buyer” is one of the most important steps in placing value on your business. The range of values that different Buyers may be willing to pay may be staggering. Buyers pay for opportunity. The Buyer who perceives the greatest opportunity is the Buyer willing to pay the most for your business. Identifying the “Right Buyer” requires understanding the four main classifications of buyers. Click here to view the four main classifications of buyers
What is a fair price for a business? Like any other product, a business is worth whatever a willing buyer will pay a seller in a free market. However, the value of most businesses is determined by what someone can afford to pay for it. Typically this price will be 2 to 3 times the annual cash flow of the business after recasting, with a 25 to 50 percent down payment and a note paid off over 5 to 10 years. If the business can earn the income and cover debt service, then it is worth the price.
Recast Financial Statements
Recast financial statements provide buyers with a common baseline, Discretionary Earnings (SDE), to compare earnings from different businesses to each other as well as a way to calculate future earnings. Once the financials are recast your VR Intermediary will prepare a market valuation to determine the market value of your business.
What is Discretionary Earnings (DE)?
DE (Discretionary Earnings) is a measure of the total financial benefit accruing to the owner of a business. We analyze the cash flow of each business to place it on an even footing with every business, no matter how the owner takes the profits out of the business. We usually define cash flow as profit before income tax, depreciation, amortization, interest and owner's compensation and other owner benefits. This is the amount of money the owner has available to pay himself, to invest in additional equipment, to make the note payments on the business and pay taxes.
DE is calculated as follows (simplified):
+ Pre Tax Net income
+ Owner’s salary
+ “Discretionary expenses” or perks
+ Non-cash expenses (e.g. amortization & depreciation)
+ Interest expense
+ Non-operating expenses
+ Non-recurring or one time expenses
= DE (Discretionary Earnings)
What is Goodwill?
Goodwill is the difference between the total value of a business and the value of inventory, equipment and other "hard" assets. Every business has goodwill unless it is closed down or failing badly. The amount to pay for goodwill depends on the cash flow of the business and its general attractiveness. If buyers did not pay for goodwill, sellers might as well sell off their equipment and close down rather than sell as an on-going business.
Call VR Business Sales in St. Petersburg (727) 705-5000 to find out how; with Valued Representation through one of our Experienced Professional Business Intermediaries you can receive a free Market Valuation for your business or Click here to contact us
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