From a Business Brokers Perspective
The number 1 question asked to Business Brokers is “How much is my business worth?
The answer as a business broker is the business is worth what a buyer is willing to pay for it given the following constraints:
The speed at which the owner wants to sell the business
The longer the time frame the more qualified sellers can bid on the business and generally the higher the price the owner will receive.
The amount of money the owner wants to spend on marketing and showing the business
The more money that is spent on marketing the greater the number of potential buyers the higher the price the owner will receive.
There is, however a general market value that an experienced broker knows from his past experience that a business will ‘sell for”.
The business broker looks for value in many places in the business. The places of value that the broker finds then becomes the selling points that are used to demonstrate the value of the business and justify the selling price to the buyers.
Place to look for value
Under value lease: Many times the rents in the area have increased with inflation and due to an increasingly population, therefore it is important to compare rent and terms of the lease against comparable properties in the area. Then perform a net present value calculation for difference between current leases that are being offered and the lease to the premises being sold to derive a dollar amount of this asset.
Renovation Value (including the cost and owners time for architectural drawings, building permits, renovations, builders risk insurance rent during the renovation period)
Value of current customer base (Even if the business is losing money)
Mailing List/ email list value
Exterior sign value
Employees Trained and in place value
Liquor license/ lotto – It is quicker to buy a licensed business and transfer the licenses than to apply for a new business.
Net present value of the companies earnings less an the owners salary (which mat vary from one buyer to another)
For further discussion or questions you may have about business valuations, to discuss a specific business or to request a valuation engagement, please contact me Thomas McGovern, MBA, CVA at 929 366-0211
Thomas McGovern,MBA, CVA is certified a business appraiser. by the National Association of Certified Valuation Analysts. NACVA