During the past year, COVID-19 has caused a massive disruption in business sales. Many business owners are waiting to see what outcome the pandemic will ultimately have on their revenue. As on this basis, they decide whether to keep their business for sale on the market or not. However, many companies are still selling well for similar valuations to last year.
You must have spent much time, effort, and equity growing your business. And now, if you have decided to sell your business to get the maximum value for it, you should imperatively work with a broker. An experienced broker like Julie Brigman can help you follow a process that ensures smooth and organized current ways to fulfill your business’s ultimate sales potential and find the right buyer for your business.
3 Ways that Make Selling your Business Easy
The most common way to value a business is Multiple analysis. If you’re looking forward to selling your business, start with a rule-of-thumb valuation of 5x cash flow or 2x revenue. A good broker like Julie Brigman can guide you about this information.
The multiple analysis for your business should make intuitive sense based on the key focus of your business metrics. Capital-intensive businesses will often be multiple assets, whereas non-capital-intensive businesses will be multiple cash flow or revenue.
To have the correct market value for your business, you need to figure out what multiple to use and apply it to your business finances.
Discounted cash flow
Discounted cash flow or DCFs are an excellent way to get a good idea of valuing a business for sale. In a DCF model, projected financials are used to figure out what a business will earn in the future and then discount those values back to the present. Present cash is worth more than future cash because people can now invest to earn a return.
Although, DCFs aren’t widely used as it is very easy to manipulate; you can make just about any value work in a DCF if you can argue it. It is dangerous ground for any business owner. It would be best if you were optimistic about the future of your business to keep moving forward and sell everyone on your prospects. There is a place for optimism, but you can miss out on good deals if it’s applied to a valuation.
Asset / Liquidation
Multiple analysis and DCF analyses are in the writeup, but they’re useless for credit purposes. What you need to value a business for sale are assets.
There are two ways to approach asset valuation:
A purchase perspective
For purchase value, we care about replacement cost or the cost of replacing the assets now.
A liquidation perspective
If a business has failed and will liquidate, the inventory will probably only sell for pennies. For liquidation value, you only care about what we could get for the asset now in a fire sale.
When buying or selling a business, giving at least full credit to most assets makes sense. You will receive all accounts receivable and sell all inventory.
The asset value is substantially less than the other two valuations even when using the more aggressive purchase methodology because of the intangible value of the business goodwill. In accounting, you may regain your goodwill by subtracting the asset value from the purchase price.
In a small business, it’s a lot rarer to sell a buyer on intangible value. A Business reflects its owner. If a random person came in and took over your business tomorrow and kept the brand name, would it be worth the same? Of course, not as they wouldn’t have years of experience in your business.
This is the reason why business sales often come in at around the adjusted asset value and why multiples for businesses are far lower than they are for massive billion-dollar corporations.
Hire Julie Brigman to get the Best Deal for Selling Your Business
Although hiring a broker can be expensive, there are certain advantages to doing so. One of the main advantages is that an experienced broker like Julie Brigman will audit the business’s financials to ensure they are correct. In this way, you’ll get a much more personalized and accurate valuation for your business.
Hire Julie Brigman, the best broker In Jacksonville, FL, to professionally value your business. She can help you to give indisputable evidence of what your business is worth. So, contact her now.