The best way to determine how much your St. Louis business is worth is to conduct a business valuation. However, you will often hear the phrase, "A business is worth what a Buyer is willing to offer and what a Seller is willing to accept."
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There is no one, single, sure-fire method to determine the value of a business. All methods are estimates based on a wide range of factors, to include the professional opinion of the person or company performing the valuation.
There are various tools, methods, and software used across the industry to estimate the value of a business. Ultimately, it becomes a discussion between the Seller, their stakeholders, and the consultant or business broker to review the valuation results, understand the market conditions, and determine the best value offering for the business.
Depending on the size of the business, most small business valuations are driven by a measure of cash flow called Seller Discretionary Earnings, or SDE. SDE is determined by normalizing, or re-casting, business finances and then applying industry metrics, accepted financial models, and professional valuation standards in consideration of determining the value of your business.
Mid-sized and larger businesses determine value by calculating a different measure of cash flow called Earnings Before Interest, Taxes, Depreciation and Amortization, or more commonly referred to as "EBITDA."
In either case, it is always best to consult with your local business valuation advisor to understand the different methods available for determining business value and to ensure the value "makes sense" when presented to a potential Buyer. For instance, a business in St. Louis can be valued very differently than a business in another city or state.
Understanding how the strengths and weaknesses apply to a business and how these factors can affect valuation is a key step in the pricing decision process. We offer three different assessment approaches depending on the size of your business to assist in determining the value of your business. The three industry accepted valuation approaches are the Asset Approach, the Income Approach, and the Market Approach. If your business advisor is not using those terms in relation to determining the value of your business, then they may not fully understand how to value your business, or most likely, they are either using the wrong method, applying a method incorrectly, or simply guessing.
The assessment approaches and valuation methodologies are instrumental when seeking to demand the highest possible market value of your business. They also serve as a great management tool for creating, improving, and implementing your exit strategy.
Business assessments provide additional insights to help reveal the focus areas which bring the most value to your business. Depending on the size of your business, or the size which you want your business to be, there are several assessments available.
Start-ups and Micro-Businesses
Developing your killer marketing strategy and implementing competition-crushing marketing tactics can take you from the living room to the board room! The problem is that smaller businesses are in a "learning phase" and it takes months or years to figure out how to claim market share and scale a business. And for those businesses seeking to develop an exit strategy, having a mature in-house marketing plan is a key attraction for potential buyers and investors. They want to know you have invested in training and resources for your company which will allow the business to continue to experience future success.
Starting or growing a business with a tailored marketing program will serve to differentiate your unique selling proposition and get you on a path towards increased cash flow and increased profits. Our industry market reports will give you the insight you need about local demographics, competition, and trends across your industry to help you develop a great, competition-crushing marketing campaign!
Small to Lower-Mid Market Businesses
If you are like a lot of business owners, you assume the value of your company will be determined by your industry and its size. While size matters, there are actually several factors that impact the value of your company more than your industry. In fact, getting these factors right can lead to acquisition offers that are more than twice the industry average. Likewise, there are examples of companies getting less than half the industry average multiple because of a weakness in one or more of these factors.
Industry reports, combined with a current business valuation, provide the best "1-2" punch in knowing your business, inside and out, in order to position yourself for strategic opportunities. Banks like to see that you have done your homework, and in a lot of cases, a well designed plan can lead to more than just a great marketing advantage, but it can also lead to opportunities to expand through acquiring other businesses. Growing your market share through acquisition is one of the oldest business growth models you will find, and banks can be a lot friendlier when you have a solid plan.
Upper-Small to Mid-Market and Larger Businesses
Maximizing results from your external marketing campaigns and optimizing internal performance in management, operations, logistics, and customer service should be the primary focus of any business, regardless of size. For businesses that operate at scale, or want to, and for those businesses desiring to keep peak revenues, there must be a robust business strategy and marketing plan which matches the intensity your business demands to maintain revenue, cash flow, and profits. With the right program and plan in place, your business will be on track to increase customer engagements and conversions, to increase cash flow, and well on its way towards realizing greater profits- all of which combine to bring greater value to your business and becomes the foundation of your exit strategy.
A certified business valuation and a solid understanding of your company's balance sheet (good and bad), will help you leverage your assets for organic market share growth and growth through acquisition. But if your desire is to exit, then the same detailed valuation report can identify gaps and leaks in your business which are suppressing your value and keeping the right investors from reviewing your business. Whether you desire to refinance with an SBA loan, file your annual IRS reports, invest more capital, expand through acquisitions or exit at the top of your game, our reports help you understand where your business sits in the market place, compared to where you want it to be, and helps you understand how to get it positioned the way you want it.
If you would like to learn more about business valuations, there is an excellent source of information on the Wikipedia Business Valuation