Value a Business

Value a Business 2018-10-01T14:02:58+00:00

The first step in considering the sale of your business is to value it.  Our firm offers simple, limited Opinions of Value free of charge and with no obligation if you would like to explore the sale of your business through our firm. These opinions depend largely on the Market Approach to valuation, which utilizes comparable sales data from thousands of transactions reported nationwide in proprietary databases to which we subscribe.  In some cases where a business is growing or generating more than $500,000 of EBITDA, this report will also include the Income Method to determine valuation. The turn-around for this report is 5 business days after receiving all necessary documentation.  For those seeking an opinion of value but have no intention to sell their business, we offer the same service for a fee of $1,500.

To prepare an opinion of value, our firm needs:

  • Business Tax Returns for the past 5 years
  • Profit & Loss Statements
    • Year-to-Date
    • Trailing 12 Month
  • Balance Sheet (most recent)
  • Approx. Fair Market Value of Company Assets and List of Assets
  • Approx. Value of Inventory (if material to sale)
  • Accounts Receivable Aging Report
  • Summary of Revenue Distribution by Customer
  • Lease information or Real Estate Appraisal (if included in sale)

Request Business Valuation

For a no charge, no obligation business valuation, submit the form below. If you prefer, you can also call us at 203-772-3773.

Market Approach

The market approach determines the value of a business by comparing it to similar businesses that have been sold. Although not as complete or comprehensive as residential comparable sales, there are several very good databases of sold businesses. Businesses are seldom exactly the same, but grouping like businesses by type and or region make comparisons relevant. VR subscribes to these databases and often checks numerous sources to find like businesses. VR also has extensive comparable sales for similar businesses sold throughout their broker network. With the Market Approach, sales prices are defined by a multiple of earnings and/or revenues.

Income Approach

The income approach uses one or more methods to determine the value based upon the anticipated benefits of business ownership. Simply stated, the income approach determines the value of the anticipated stream of business income. Although entire books have been written on the subject, the most relevant discussion revolves around what are the earnings and what is the discount rate or capitalization rate applied to the earnings? Earnings, as discussed elsewhere, are the adjusted profits of the business.

Asset Approach

Simply stated, the asset approach values the assets of the business. The value of the assets of a business are, however, not always easy to ascertain. For example, the value of the assets as stated on the balance sheet – “book value” – is almost always not the true value of the assets in the marketplace. If a business is being liquidated and the assets must be sold by next Friday, then the book value is not of importance. However, if the assets can be sold over a course of several months, then the value of these assets is closer to their fair market value (FMV). Most of the time, assets are valued at FMV, defined as the price that a reasonable buyer would pay a reasonable seller when neither were under pressure to buy or sell. Unless you are buying a business that is very asset intensive, marginally profitable, or losing money, the asset approach usually is not the best indicator of the true value of the business.