Uncovering the True Worth: The Methods Behind Business Brokers' Valuations
Ready to Sell Your Business?
Selling your business can be a daunting task, and determining its value is perhaps the most crucial step in the process.
There are several ways to determine the value of your business, but it is not an exact science. For this reason, it is essential to seek out a trained broker to help you determine how much your business is worth.
At 10x Business Broker, we understand that selling your business is a significant decision, and we are here to help you every step of the way. Our team of experienced brokers will provide you with honest and straightforward advice to help you achieve the most profitable outcome. We understand that sometimes hearing hard truths is necessary, and we will work with you to find ways to improve your business to expedite its sale.
One of the most common ways that brokers determine the value of your business is by:
Comparing similar businesses in your category and focusing on the business’s specific industry and how it values companies. This is known as a market approach.
Another approach is projecting the future earnings of your business and calculating the present value of those earnings or applying a capitalization rate, which is known as an income approach.
Finally, calculating the business’s net asset value is known as an asset approach.
Not everyone is well-versed in the language of business evaluation, and understanding some of the basic terminology can help you when you start the process of determining your business’s value.
Valuing your business is a complex process that requires a deep understanding of the language of business evaluation. To help you get started, here are some basic terms that you should know:
Tangible assets are assets that have physical substance such as inventory, a building, rolling stock, manufacturing equipment or machinery, and office furniture.
Intangible assets include patents, copyright, franchises, goodwill, trademarks, and trade names, as well as any form of digital asset such as software, i.e., things that lack physical substance.
Liabilities are the things your company owes like payments to suppliers, salaries and wages, payroll taxes and loans.
Financial metrics are the measures of a business’s health and performance such as profits, revenue, expenses or other financial outcomes.
It’s important to note that not all trends are specific to profit. From inflation to recession to the availability of capital, the larger macroeconomics can play a role in what your business will be valued. Even something like the current state of supply and demand plays a part.
Even if you aren’t ready to sell, there are many benefits to knowing the true value of your company. It can help you plan for retirement and your exit strategy of how to leave your business. It can also offer insight into how to improve your company and guide you to the best options if you are seeking additional funding.
At 10x Business Broker, we have years of experience selling businesses just like yours, and we can provide insight into how to accurately value your business. We offer a free business valuation to help you understand your options and what your business is worth.
With over 30 years of entrepreneur, marketing, advertising, and sales experience, our CEO and founder, Kat Ramirez, is a sought-after business consultant and respected community leader. Contact us today for a free business valuation.