Have you been thinking about selling your business? The first step is to get an accurate business valuation. Without one, you might end up selling yourself short — or setting a price so high that your business proves impossible to sell.
Fortunately, getting an accurate valuation is pretty simple. But what factors go into that valuation? Let’s take a look.
Use Our Five-Minute Business Valuation Calculator
If you want a quick estimate, try using our free calculator. Before you begin, it’s a good idea to have your tax returns or profit and loss statements handy. Then, you’ll just need a bit of information for each year you want to use for your valuation:
- Your total sales
- The total cost of sales or goods
- Operating expenses
- Total depreciation
- Total amortization
- Interest expenses
- Owner’s salary
- Owner perks and one-time expenses
The calculator will give you your adjusted cash flow, your seller’s discretionary earnings, and your company’s estimated value. After you get your valuation, you have the option to ask one of our brokers to review it.
How Does the Valuation Calculator Work?
The calculator may look simple, but behind its interface are complex, industry-specific calculations that determine your company’s estimated value.
The most important of these is something called an industry multiplier. An industry multiplier is a specific value based on averages in your industry. To get your business value, you would multiply your earnings before interest, taxes, depreciation, and amortization (EBITDA) by the given multiplier.
For example, car wash businesses usually have an industry multiplier of 1.73. If your car wash’s EBITDA is $200,000, your business valuation would be about $346,000. Laundromats and coin laundry businesses usually have a business multiplier of 1.20. So if your average EBITDA is $350,000, your business value would be about $420,000.
The Importance of a Broker Overview
If you’re selling your business, you want to make sure your valuation is as accurate as possible. An experienced broker will look at your estimate and adjust it using details about your business and current industry variables.
For example, certain factors might make your online business more successful than your competitors. If you’re thinking about selling, ask yourself the following questions:
- Are your web assets organized?
- Do you safely maintain your customer records?
- Does your business have a good online reputation?
- Do you have a strong customer focus?
- Is your business website attractive, responsive, and mobile-friendly?
If your answer to any of these is “no,” consider some adjustments to make your business more appealing to potential buyers.
A broker will also take a closer look at some of the other variables that may impact your sale price:
- A large, diverse customer base, which may increase your business value
- An especially high profit margin, which elevates your business value
- Increased competition in your specific sector, which may drive down the sales price
- Recent introduction of strict regulations or disruptive technology, which might give buyers pause
Before you begin the process of selling your business, you and your broker should carefully and thoroughly assess each factor affecting your company and your industry. An accurate valuation results in a quicker sales process and a fair price for you.
Thinking About Selling Your Business?
Determining your business’s value can be a complex process. But Sunbelt Business Brokers is here to help! We work exclusively with small and medium businesses, so we know the unique challenges you face during the sales process.
With our extensive database of potential buyers, we’ll do the legwork of finding a buyer and developing a deal structure that benefits you. That way, you can focus your time on planning your next steps. If you’re ready to sell now or just have questions about the process, contact us today for a free custom valuation and consultation!