Free Valuation & Consultation
Do you know what your business is worth?
One of the most important steps in selling a business is pricing it correctly.
There are several ways to determine what another party would be willing to pay for your business; a formal business valuation is one option.
Alternatively, many businesses can be properly priced with a Broker Opinion of Value. A BOV is a broker’s opinion of what a business may sell for, based upon his/her personal analysis, industry expertise, knowledge of local markets and lending, and comparable past sales.
While it is not a formal business valuation, an experienced business broker should be able to deliver a BOV and articulate a realistic Most Probable Sales Price (MPSP) range. Ultimately, the right approach will depend on the size and complexity of the business, the type of business, and the intended buyers of the business.
While there are many areas that a business appraiser will evaluate, cash flow and risk are two important factors in appraising a business.
A buyer typically purchases a business for future income. Cash flow can be expressed in many ways, typically either as Free Cash Flow, EBIT, EBITDA, or Seller’s Discretionary Earnings (SDE). In small business transactions, SDE or EBITDA is the most common basis for establishing a selling price.
Bottom line, the more cash flow there is, the more a buyer will be likely to pay.
All cash flow comes with a degree of risk. Risk may be present in customer concentration, reliance on vendor relationships, macroeconomic trends, competitive forces, key employees, legal exposures, and more. A formal business valuation will include an analysis of the company’s risk and quantify that risk into a percentage known as a Discount Rate or Capitalization Rate.
For a free consultation and business valuation, contact us at Sunbelt of Florida. Please call us at (855) 969-3534 or fill out the form below.