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How do we secure the best price for a business with an asset valuation as compared to a cash flow business?

Our business value is based on its assets which are in the software. We have been offering services for free to build membership and would like to sell the company now based on its huge potential and large market.

Jeffrey Calannio

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Answers (2)
Fayaz Karim, MBA, CA
Subway Valuations, Business Searches
Orange County, CA

I have a slightly different take on the answers
Your goodwill and customer list has some Asset Value; the cash flow to be generated also has anticipatory future value. Therefore sell it for Asset value as cash down, and use seller financing for a portion of future earnings flow and collect on the note as the cash flow materialises. No cash flow, No payment on note. If you beleive in it, take the note. If you have doubts about future cash flow, it will show up right then, because you have no faith in the repayment of your note !!

Fayaz Karim, MBA, CA

Apr 3, 2009
Kathryne Pusch
ConsultKAP Inc./Business Brokers Network

Jeffrey-- The valuation of INTANGIBLE assets is generally based on the cash flow these assets create. So, if you are in the early stage where these are not proven assets, it is much like excess or non-productive fixed assets in a manufacturing business. Theoretically, they do not have value to a business if they are not producing a profit. You will need to come up with a compelling case for that "huge potential" to specific buyers who can leverage their own strengths to make money using your software. Keep in mind that it will be their money and other resources that will actually "make it happen," so they will factor that into their valuation. Best of luck with your project! KAP

Apr 2, 2009