There are many reasons a business owner may want to determine the value or likely-selling range of their business. Knowing what your business’ likely selling range is, is necessary when you are looking to buy, sell, or sell a share in a business. Or even when obtaining a business loan, looking to attract investors, or estimating the value of your own net worth.
Business appraisals provide selling ranges and are usually based on a combination of methods – some more complex than others. Each valuation method has its advantages and disadvantages, which is why working with a professional business broker to assess your business properly can really help you in gaining a true understanding of the likely selling range of your business in the current market. It’s vital that each different valuation method is taken into account when calculating this, to produce a robust report. Each one of these methods individually does not always represent the market value of a business. That’s why at Verified Businesses we use a check method that includes past sales evidence.
A business appraisal that provides a reliable likely-selling range should be well-prepared, balanced and independent, offering a complete picture of the business picture in the market. Your business broker will need at least three years (if possible) of financial statements when assessing your business. We also need to visit your premises, to conduct a thorough business assessment to consider both tangible and intangible assets (i.e. intellectual property, goodwill, industry forecasts, etc.), and evaluate the position of your business, competitors, growth prospects and the likely future maintainable earnings, to create a holistic picture of the market.
A complete business assessment will answer the following questions:
- The history of the business. How many years has it been operating? How was the business started? Does the business have a positive reputation? What is the condition of the business’ facilities?
- Employees. What is the job description of all staff? Are specialist skills required in the business? What are the employee’s pay rates? How is staff morale? And how much work do the current owners carry out in the business?
- Legal and commercial information. Is the business currently involved in any legal proceedings? Does the business comply with environmental and workplace health and safety laws? Does the business have any long-term commercial contracts? Does the business hold all necessary and current licenses, permits, registration, etc.? What lease arrangements does the business have? What is the extent of employee entitlements should the business sell?
- Financial information. Is the business making a profit? Is there working capital or sufficient cash flow within the business? Is the current Profit and Loss statement for the business positive, or negative? How has turnover been performing in recent years? What tangible assets does the business own, and what is their market value? What liabilities (i.e. unpaid accounts, mortgages, etc.) does the business have? What value of inventory is being stored by the business? What is the overall trajectory of the business?
- Goodwill and intangible assets. Is there goodwill attached to the business? If so, can it be transferred to a new owner? Are other intangible assets, like intellectual property for sale? What is the client base made up of? What is the repeat buy rate? Are there supplier and/or client contracts in place? Other exclusive arrangements?
- Market information and industry conditions. How is the industry outlook performing (long-term and short-term)? What economic factors may impact the business? Is the industry growing, steady, or shrinking? Where is the business sitting within its lifecycle? Who are the business’ key competitors? What are the barriers to entry? What market share does the business currently hold? What are the competitive advantages of the business? Will the owners/managers departing the business have a great impact on the operation of the business?
Assessing your business for sale doesn’t need to be a long and confusing process. With Verified Businesses, your success in business sales is verified! Business assessments and brokerage are two of our core service offerings to business owners. And as registered business valuers, we can help you navigate this new territory in preparation for your own business sale or purchase. Please, reach out to us today and we can provide you with a customised business assessment with a likely selling range for your business in today’s market, you may be totally surprised!