Did you have any luck valuing and selling your business yet?

Get a professional Business Valuation and let the expert handle the details without EMOTION

I do it every week, not just for franchises. You can get an opinion of value or a full blown appraisal

Fayaz Karim, MBA, CA

Web reference: www.mrfranchiseman.com

Al, there are so many factors and variables that it is next to impossible to come up with what a business is actually worth. Unlike most Real Estate, there are usually very very few comparables since each business is so unique. In addition your business is worth different values to different buyers.

Most businesses sell based on a multiple of their cashflow. Of course, that multiple can be as low as .5 and as high as 6. The difference is principally based on the "risk factor" of future earnings, and why a buyer is buying your business.

The only way to truly know, is to market your business and have buyers make offers.

I hope this helps,

Ken
www.princetoncapitalllc.com

Web reference: www.princetoncapitalllc.com

Many factors must be considered in valuing a business: the income, asset value, longevity, sustainability of income, defensability of market position, industry trends. The value is based more on the income that a buyer can earn and the likelihood of sustaining it over a period of time. An experienced and educated business broker can give you a better opinion of value than any other source.

The single best investment you can make is in a professional business valuation or a brokers opinion of value. Sales data from private business sales are just that--private. Sure there are comparable databases and some are quite good. Any valuation should include these "market data comparables" in the value conclusion. However, you need to make sure the source of the data, how relevant is the comparable transaction, what was included in the transaction, what were the terms, etc. As with all data, garbage in means garbage out.

But comparables aside, you need to remember that most businesses are purchased to provide income to the buyer. Therefore, most businesses are sold for a multiple of earnings. These comparable databases will include multiples of earnings that can be applied to your specific type of business. But beware! You or a professional business broker needs to recast your income statements so that earnings that you are using for the multiple accurately reflect the true cash flow of the business.