How Much is my Business Worth?
Thursday, October 22, 2009 at 10:43AM 
The California Association of Business Brokers (CABB- a non profit trade organization) says if a small business owner is looking to sell their business but is waiting for the economy to turn around, use this time to start preparing. One of the most vital steps in this process is to understand what the business is worth.
Ron Hottes, president of CABB and of several Business Team Business Brokerages says that a business broker’s opinion of value can provide small business owners with an objective view of what a business is worth and is an important piece in determining the asking price. “A business broker’s opinion of value gives you a realistic starting point to work from and can give small business owners direction when determining the right time to sell.”
Take an objective approach: Having a business broker’s opinion of value from a CABB Certified Business Broker automatically gives a business owner the results and creditability they need. Having this neutral party take a comprehensive look at financial records and the current market is the best way to get an honest picture of the worth of the business.
Know what is needed financially: Business owners should have an idea of what they need to make off the sale of the business so they can be as prepared as possible. If a business owner is selling because of retirement, knowing what they can expect to make from the sale is an important component of their exit plan.
This is the starting point: A business broker’s opinion of value is only a starting point in selling a business. If the opinion of value comes back less than what was anticipated, there is time to do things like improve sales and review operation processes to make a business as streamlined and profitable as possible.
What is important for business owners to know is that a down economy is just one part of the cycle we are in and an upswing will occur,” Hottes stated. “Those small business owners who take the time now to improve and prepare their businesses for sale will be the ones who will see their business sold at the best price possible.”
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Reader Comments (3)
it's easy to see who takes the time to optimize their business and those who have given up.
An informative article. Thanks for sharing this post.
i have a company i can buy, it has lost $450,000 over the last four years ($87,000 this year) and still have that outstanding debt($450,000 total debt). Assets are at about $175,000. Sales volume is about 1.2 mil, no cash flow. The hope is to skim some expenses from the new business from over paid employees, health care, life insurance expenses the current owner spends which i would not.About $7,000-$10,000 per month in saving. Combine that with my current company. If i buy this company, i can skim about $7,000 a month in my current companies expenses(new company can handle my business load so i will be able to let go of my current employees, get rid of my rent, electricity, etc...). Total monthly saving lets say $14,000 and a short tem goal of paying off half of the $450,000 in 4 years, the other half in 7 years. Can you see a way to make this worth while? Can you see a way to pay of the debt and also pay the current owner an amount over the next 5 years for the value(if it is really valued at anything) of the business?
Sky