In the very near future you plan to sell you business and, if you’re smart about it, you will use a business broker to assist you. A business broker can help determine the value of your business. Moreover, he can bring to you potential buyers, people he has vetted to ensure their ability to buy and manage your enterprise.
Assigning a value to your business is important. Indeed, it is critical to helping you determine whether you will make a sizable profit or escape the business with little to show for it. The following Richmond valuation methods may work best for you.
Standard and Premise of Value
Contact your Richmond business broker and he will assess a few things about your business, including the reasons why you are selling and what determines its valuation. Specifically, these methods are the business value standard and the premise of value.
The standard of value is based on certain conditions, hypothetical at that, to determine its value. Regarding premise of value, it is based on certain assumptions, namely that it will perform as it did when you were in control. Certainly, most new owners don’t simply step in and take over a business without a learning curve present. Yet, the assumptions assume that the business will run nearly the same way when you were in charge.
Standards of Value
Your Richmond valuation method is based on three factors.
First, the fair market value or what it would fetch when both a willing buyer and a willing seller are present.
Second, is the investment value. If an investor has put cash in your business, this will be of interest to the buyer and will impact its price.
Third, the intrinsic value cannot be dismissed. This valuation method is based solely on its economic potential and nothing else.
Premises of Value
Another valuation method used is “premises of value” or what takes into consideration the assets, the orderly disposition of the same and liquidation. Chiefly, however, is whether it is an ongoing concern. If the business is on its last legs, its value must be diminished accordingly.
When reviewing the assets, a valuation is determined apart from the business. For instance, if your business tanked, then that lathe still has a value regardless of whether the business is running or not. That same lathe might be sold to prop up the business too. If your business is on shaky ground, a new owner may have an eye on buying it solely for its liquidation value. It may sound harsh, but if the enterprise is going to die anyway, a forced liquidation may give the new owner a profit motive to buy your enterprise.
Your Richmond business valuation will also take into consideration some other factors when assessing its worth.
Chief among them are the local economic conditions. For instance, if your area has high unemployment, then something as “frivolous” as a high-end restaurant may not be all that valuable. On the other hand, if your area is up and coming, and has a lot of young people with deep pockets, your restaurant may fetch a mint.
To be sure, a financial analysis of your enterprise will also be conducted. Your business broker will also scrutinize the books to ensure that they are telling an accurate story. Certain adjustments may need to be made too, what can impact your bottom line.
In all, your valuation should be as accurate as possible to deliver the value your buyers expect. That’s why working with your Richmond business broker is not only wise, but a profitable move for you.
See Also — What is Your Company Worth?