At Transworld, we have Raleigh business valuation experts on staff to help you value your business. We can meet with you confidentially and discuss your business valuation or we can be engaged to perform valuation reports.
There are several reasons to want to know the value of your company. Call us at 919.379.5776 and ask for our Raleigh business valuation department.
For our purposes, let's talk about fair market value. Essentially what a buyer would pay for your company in an open market.
Now, remember, this is a simplification of some very intricate valuation practices. There are valuation experts that specialize in providing very complicated reports as part of their business valuation services. Those reports are often used for IRS inquiries, legal proceedings, intricate financing, and other reasons. A full business valuation for a company could cost $10,000-$30,000. For small business sales, a business valuation is usually not needed, and for the most part, our simplified valuation methods are sufficient enough to determine your listing and approximate your eventual sale price.
There are three generally accepted approaches business valuations:
Asset Approach values the assets of your business minus the liabilities. Some of the methods in this approach are book value, excess earnings method, asset accumulation method to name a few. However, these values usually mean very little to the market value of most operating businesses. For the most part, the asset approach does not properly represent the value of an ongoing business that has positive earnings.
Simply defined, it is much like a real estate comparable method. Like businesses in size and industry sell for similar valuations. There is the guideline publicly traded company method or the merger and acquired company method (private sale databases). There are many databases we can research to find multiples of gross sales and earnings to compare to your business. This method can be very reliable in most cases and is a strong indicator of business valuation.
Your business is worth the present value of the income stream it will bring to an investor. There are several complicated methods including the discounted future earnings method as well as several capitalization methods. This approach is also a strong indicator of what a business with positive income is worth. These methods rely on future projections and growth rates to decide what the business may be worth. If that is true then why do most people multiply or capitalize historical earnings to arrive at a value? Because the assumption is the buyer will maintain the current income levels and they are a reasonable indication of future earnings.