What’s my business worth?
This is a question any owner might ask himself when he/she is ready to sell. You close your eyes and think of all those long hours, sleepless nights, times you personally covered payroll (or didn’t take a paycheck), and struggle to put a number on what any of those sacrifices could possibly add up to.
“Well, it better be big!” you think. This is the precise moment you need an independent business valuation.
Why? Simple. You’re not objective. Yes, you can go through the cold hard numbers yourself. You can calculate what we refer to as “Total Owner Benefit” (sometimes called SDE – “Seller’s Discretionary Earnings”) and then attach some multiple you find meaningful.
You might even have relationships with people in your industry who have successfully exited and could give you a number. You could do some internet research. And after all that, you might have a value and stick it on the side of your business and say, “This is the price I want.”
A buyer could shrug his/her shoulders after finding out you were the one who came up with this number, and then proceed to due diligence the heck out of you to find out if this number is accurate. Or you could do it the easy way: slide a professional business valuation across the table. A reputable 3rd party valuation is not just a key component of an SBA loan, but it’s also required by many banks for financing.
Often these valuations will contain useful information as to why a particular multiple has been used, which can include factors like growth, how many years you have been in business, how proprietary what you do is, your particular geographical territory, and what the competitive landscape looks like.
Getting a valuation is a lot like getting peace of mind. Of course, it’s important to remember that your business is ultimately worth whatever someone is willing to pay, but having a valuation means you have an objective opinion grounded in fact, and it’s going to be hard for a buyer to poke holes in a valuation if it’s been done by someone professional.
Need a professional business valuation done? We can recommend some reputable firms for you. Just ask!