The start of 2018 brings with it a certain amount of introspection into the status quo. It is also the time of year many small business owners review their business plans and develop ideas for the new year. All of this thinking and review may bring about the question, "How much is my business worth?" This is a great question to ask whether you are looking to grow your business or sell in 2018.
There are a few variables that come into play that will have a bearing on the value of your business. Transworld Business Advisors of Colorado has years of experience taking these variables into consideration and placing a Fair Market Value on each business we perform a valuation for.
The Fair Market Value of a business is the price a well-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). SDE or Cash Flow is defined as the net income of a business before taxes (operating income), interest, depreciation and amortization, the owners compensation and benefits, and non-recurring expenses.
Once your Business Broker has developed the SDE of your business, a multiplier is applied to that number to calculate the estimated sales price. Your Business Broker will use their experience to identify the ideal multiplier for your business. This multiplier is based on industry, past local sales, and other qualitative factors such as management structure and competitive advantages. Identifying the correct multiplier takes developed expertise and industry knowledge, which is why we always suggest leaving business valuations to a professional!
Transworld understands that effectively valuing your company can mean the difference between selling it for a great return on investment or not selling it at all! This is why we are always working to stay on top of the industry and participating in continuing education opportunities. To get an idea of what your business is worth we have developed a free tool, which you can download for your reference here.
For more information on our business sales and consulting 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.