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How Much Can I Sell My Business For? |
We provide Free Market Valuations for your business. Click here to contact us or call (813)739-8722
Valuing a business is one of the most important aspects when it comes to the sale of your business. You want to ensure that you will get the best price for your business that will meet or exceed your goals and expectations, while at the same time maintain marketability.
What is a fair price for my 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 after servicing the debt. Typically this price will be 2 to 3 times the annual cash flow of the business after recasting, (known as DE “Discretionary Earnings”) 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 a buyer wants and make the note payments, then it is worth the price.
What is Seller Discretionary Earnings (DE)?
We analyze the cash flow of each business to put it on an even footing with every business, no matter how the owner takes the profits out of the business. We add back all of the owners benefits plus any non-operating or onetime expenses, and non cash entries such as taxes, depreciation and amortization. Cash flow is typically defined as profit before income tax, depreciation, 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.
Our expertise allows us to perform a comparative analysis of what your particular business is worth according to the size, area, type of industry and market trends ie. current economic conditions. All of the above factors play a role in determining the best price for your business. Generally a large manufacturing company will command a higher multiple on the open market than a small retail type business. We will work with you to structure and organize your business to get you the most for your business and work towards obtaining your specific goals for after the sale of your business.
Finding the right qualified buyer for your business is just as important as pricing the business. VR Business Brokers maintains the highest standards of confidentiality during this important phase of the process. 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. Through our marketing and resources we excel at attracting the right buyer for your business.
Cash Flow Buyers: By far the largest group of Buyers. Cash Flow Buyers are the most common Buyer for small to mid-sized businesses. These Buyers tend to focus solely on present and past earnings for sustainability and lifestyle purposes. The Financial Buyer is buying a job and will consider a price fair if the transaction meets the following criteria:
- A living wage typically commensurate with the initial investment
- A modest return on the cash investment
- P/E ratios of 1 to 4 times DE
- Seller financing
- A good fit with their skills and the opportunity to make the business grow.
Many small businesses are purchased by Cash Flow Buyers. VR Business Brokers maximizes the amount the Financial Buyer is willing to pay finding the right Cash Flow Buyer for your business.
All buyers will take into consideration “Goodwill”
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.
VR Business Brokers has access to other types of buyers for large businesses and for Mergers and Acquisitions, including High Net Worth Individuals, Private Investment Groups and others. VR is a full service highly integrated team of professionals who work towards the optimum outcome for your particular situation. After structuring hundreds of transactions ranging from the very small to the highly complex Mergers and Acquisitions deals we know what it takes to successfully price and complete the sale of your business.
Click here to contact us or call (813) 739-8722