Moving towards selling a business is a true undertaking, one that brings up a lot of questions. But the one big question is, "How much is my business worth?" This question can be difficult to answer, especially if you are unfamiliar with the business sale process.
The truth is that there isn?t necessarily one way to place a value on your company. There are many factors that play into the final number, not to mention the affect the overall state of the market has on your business. Transworld has years of experience taking all the factors into consideration and placing a ?Fair Market Value? on each business we perform a valuation for.
Fair Market Value is the price a qualified buyer would pay for the business in an open market. In the current market, most small businesses trade at a multiple of the Seller?s Discretionary Earnings (SDE, i.e. Cash Flow). ?SDE is defined as net income before taxes (operating income), interest, depreciation and amortization, owners compensation and benefits, and non-recurring expenses.
Once the SDE has been calculated by the broker, a multiplier is applied to that number to calculate an estimated sales price. This multiplier is based on the businesses? industry, past sales in the local area, and qualitative factors (management structure, length in business, and competitive advantages). Properly applying the correct multiplier takes high-level expertise and knowledge, which is why business valuations are best left to professionals like Transworld.
Transworld takes the responsibility of calculating a business's worth very seriously. We understand that the right price can mean the difference between a sale or not. The ultimate sale price has a big effect on the seller?s bottom line as well, so we do our best to stay in touch with the pulse of the industry. This ensures we can get our seller?s the best ROI possible by pricing their business right!
To get an idea of what your business is worth we have developed a Business Valuation Workbook, which you can download here.
For more information on our services please visit our website or schedule a free consultation now!
Rachael Holstein joined the Transworld Team in 2016 as Marketing Coordinator. Her working experience has been largely focused on Business Development and Marketing in the finance, architecture, property management, and information technology industries. A long time resident of Cleveland, Ohio, she attained her Undergrad from John Carroll University and a Master?s Degree in Global Interactions from Cleveland State University. She relocated to Denver in 2013 for a change of scenery and a bit of adventure.