What is My Business Worth

This is, of course, one of the most common questions we receive.  Part of the answer is that it depends on the buyer and, more specifically, the type of buyer.  For example, Strategic Acquirers typically pay cash and pay a premium for a business.  They are typically seeking acquisitions that have characteristics such as a proprietary product or process, a unique market presence or market share, new technologies and a synergistic fit. Generally, a Strategic Buyer will pay a higher price than a Financial Buyer.

The fact is, however, that determining the value of a business is often a complex task and is best done by a professional intermediary or a certified valuation analyst.  You would be wise not to base the value of your business on a rule of thumb because the rule of thumb is based on industry averages, and does not take into account the unique characteristic of an individual business.

Before determining the value of a business, a valuation professional will gather information to understand the value drivers of the business, market position, profitability, revenues, historical financials, future prospects, risks of the business and more. 

In the case of businesses requesting a valuation opinion for the purposes of a future sale, our professionals take the additional step of doing a financing test on the valuation.  In other words, based on the valuation range, is an acquisition able to financed and how could it be financed. 

Why is It Important to Know What Your Company is Worth?

Prospective buyers want to understand what the benefits of owning the business will be to them and the future potential of the business.  Establishing a value for the business gives the seller and the intermediary a clear picture of the underlying value of the business to a prospective buyer and their financing source.