Are you thinking about selling your engineering company? If you are, the first thing you must do is assign a value to it. You will not be able to set a competitive selling price if you have no idea how valuable your company is. That is why the first thing you must do is perform a business valuation. While this task is best left to an experienced business broker for engineering companies Orange County trusts, it pays to learn a few things on how it is done. Here are the three key things you must do when assigning a value to your business.
There is no magic bullet for calculating the value of a business. The best you can do is come up with a range of values in which the sale price should fall into. There are three calculations a business broker for engineering companies Orange County trusts does to achieve this.
Calculate the floor
The first thing you have to do is find the bottom end of the value range. This needs to be the liquidation value of your hard assets. Your business broker will calculate the amount of money you would get from the sale of all your tangible assets. This will include your computers, furniture, machinery, cars and any asset that your business owns.
To get an accurate bottom end range, you need to determine the total amount of hard assets then subtract any loans that are connected with them. This will give you a liquation value. No matter what happens, your business cannot be worth less than the liquidation value.
Calculate the ceiling
Focus here is to get the high end of the range. For this, you need to analyze the company’s annual revenues. The goal here is to calculate how much the new owner will be able to bring in every year if all your current clients stayed with the company. The calculation for this is done based on one year’s revenue. If the average annual revenue before expenses is $500,000, that is the top end of what the new owner would pay for it.
Find the middle
Now that you have the bottom and ceiling value range, the final step is to find the middle. For this, you will have to take a look at what other engineering companies in Orange County are being sold for.
While the above calculations seem straightforward, there is more to a business valuation than this. Always make sure you work with a business broker for engineering companies in Orange County throughout the valuation process. Their experience will guarantee that you don’t end up with wrong figures.