Business Valuations

Many variables are used to determine a reasonable expectation of the sales price. Variables include revenue, earnings amounts and availability of qualified buyers. Other variables deal with risk: customer concentration, length of time in business, dependance on the seller, labor market, the industry, earnings consistency, are the earning increasing, flat or increasing? etc. Final litmus test: does the sales price support debt service, debt coverage and owner compensation?

Individual comps are tricky since the terms of the deal and the strengths and weaknesses of those individual businesses are unknown. For example: how long have they been in business? What is the customer concentration? How consistent are the earnings? These are among the key factors that affect the sales price of a business. We use industry standards that are derived from years of results from hundreds of transactions - then we go higher or lower depending on the strengths and weakness of the individual business we are analyzing - we also make sure cash flow supports debt service and is sustainable. Keep in mind most business closing prices are not verifiable (such as BIzBuySell) since they are private and not publicly recorded (actual purchase agreements are not used to verify the price reported). If the “comps” come from the SBA, the sales price is verifiable, but any strengths and weaknesses are not identified.

Note: UBG will not share the sales price of your business with an organization where the listing has been named to potential buyers who will then have access to the final sale price (such as BizBuySell).

It will probably be missing something specific to the business that you did not consider – it's best to go in with complete data and understanding to ensure a smooth process through due diligence and lending.

These types of professionals can and sometimes do offer general pricing for insurance or estate planning, but their profession doesn’t put them in constant practice of putting buyers, sellers and lenders together in a successful deal.

Sometimes, for strategic buyers. But mostly not. If a business does $1M in revenue but not much in earnings, its not worth much to most buyers. Price is mostly a multiple of earnings; higher sustainable earnings = higher sales prices.

No, we do not. The amount of time it takes to provide a reasonable expectation of the sales price is not available at no charge. If we took a shorter amount of time that could be complimentary, we would provide you with a number that would most likely be missing something important, and therefore it could not be relied on.

The problem with this is that the price needs to make sense to buyer, lenders, buyer’s advisors and partners, CPAs, attorneys, etc. A reasonable price sets the right tone for the rest of the process. Plus, the price needs to be justified.

There is no way to verify whether this will result in a higher price since you can’t go down both roads at the same time. In privately held businesses, every business, every buyer and every seller is unique. Also, business without a price makes it invisible to searches using price as a search criterion. However, sometimes it can be the best approach, it depends.

Yes! It is best that we review it and the valuation process in an introductory meeting to see if this is a good fit for you.

Please contact us for a complimentary consultation.