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Business Valuations – FAQ

Q: What is a business appraisal?

Simply put, a business appraisal is an opinion of the fair market value of a business (or portion of a business)

Fair market value is the price at which  a willing and able buyer would purchase a business from a willing and able seller, when both parties are acting at arm’s length in an open and unrestricted market, neither of whom are under any compulsion to buy or sell, with both have reasonable knowledge of the relevant facts

Q: What is my Business Worth?

Every business owner would like to know the true current market value of his or her business. Unfortunately, no single quick ‘rule of thumb’ will help determine the true value of a business. In fact, business valuations are performed in order to take this sort of guesswork out of valuing businesses.

Q: What is a Broker Opinion of Value?

A valuation determines of the value of a business interest based on an analysis of the financial records of the organization, industry competition, the environment in which it operates, and the risk associated with an investment in the organization.

Q: Why are business valuations important?

Studies estimate that businesses sell 35 percent faster when a valuation has been completed using 3rd party assessments of value.  Valuations help ensure that accurate values are placed on businesses by using industry standard models with proven results and confirmed references to market conditions, industry statistics, as well as databases listing sold transactions using comparable transactions.

Q: Can my accountant value my business?

Accountants can value businesses, but most accountants do not focus on providing valuations as part of their practice. Additionally, we find buyers often believe that the company accountant is too involved in the operation of the business to provide an objective opinion. 

Without question, they are an integral part of the transaction by provide the required financial information and reports.  In addition, many accountants and CPA’s assist business owner in finding lawful ways to reduce and/or defer tax liabilities.   Therefore, they expose themselves to legal liability if they are the ones pointing out questionable Seller add-backs to accurately determine an “Adjusted Net Profit/Cash Flow” or also known as “Seller’s Discretionary Earnings”

Why is this important, when calculating a Valuation Multiple to determine the market price, The “Adjusted Net Profit/Cash Flow” is typically the starting point for Buyers using this valuation method.

Q: I am selling my business – Do Buyers really accept independent valuations?

Put yourself in the position of a qualified buyer, and ask yourself which value you would be more acceptable to you: one provided by the seller or one from an independent, unbiased party that specializes in business valuations. The advantages of using an independent party can be summarized as follows:

  • Using our Business Valuation software, uses a number of methods and techniques to develop the finished product
  • An independent and professional business valuation assessment provides additional credibility to a Buyer and their Advisors.
  • Generally speaking, accountants and lawyers are not trained to produce accurate assessments of value.
  • Our Valuation software pulls from large historical databases that are used to compare a business to other sold businesses. 

Q: Is this a good time to Sell?

The honest answer is….  If you’re business is ready to Sell. 

Did you know, according to BizBuySell and others almost 80% of all businesses listed for sale – NEVER SELL.

It’s true businesses don’t sell for a variety of reasons, but there are 8 key drivers that will make your business more attractive to qualified buyers, and Maximize the Value of your business.  Surprising, only a handful will take the time to strategically plan their exit and get their business ready for sale.

To see what your business is worth in today’s market and tips on how to increase the value of your company prior to selling go to:  www.sellyourcompanyforfmore.net.

Q: What are your qualifications?

The professionals at New Horizon Business Brokers have been involved in over 100 successful transactions and the founder of the firm has own and sold three of his own companies, with the largest one being sold to a private equity firm.  See more about us here.

Q: My business recently went through difficult times and lost money last year. Does this mean it does not have any value?

No. Every business goes through difficult periods, some caused because of growth, other due to realignment within the market.   That is why, comparing different valuation methods helps in normalize the overall financial position of the company to reflect an average year’s adjusted net profit/cash flow thus providing a better overall assessment of the current value of the business.

Q: How many valuation methods are used in an appraisal?

The number of valuation methods used in a formal business appraisal and many factors are determined by individual situations. Sometimes one method is appropriate, yet in other instances, there or four methods may be appropriate to gain a better understanding of your business, and areas that could be fixed to help improve the marketability of the business as well as the value.

Q: How do you produce reports so quickly?

We use a patented valuation software program that takes your key performance indicators, past financial results, and other factors into consideration, and then compares this information to what other companies in your industry have sold for and how well your company results compares to industry metrics.     

In summary, we use technology and proven financial models to do two things.  First to provide you with an understanding of what your business is worth at this time, and second, what your business could be worth based on improving your Salability Score.

Take our 13 minute assessment to get your Business Salability Score.

Q: What do I need to get started with the valuation?

Contact us today to schedule your FREE Confidential Consultation.

Q: Do you use market comparable when you value businesses?

We use several different databases that contain information about your industry sector, recently sold businesses, market conditions, etc. This provides a better baseline valuation that is more in line with current market conditions.

\Q: How long will it take for you to send my completed valuation report back to me?

Once we receive the necessary information regarding your business, we will complete the valuation and return it to you in 2 to 3 business days.