Business Broker for Engineering Companies Orange County – Discounted Free Cash Flow Method of Business Valuation

As you prepare to sell your engineering company, one of the most important things to do is get an accurate business valuation. A valuation helps you know how much to sell your company and brings light to its strengths and weaknesses. However, you have to be thorough for the valuation report to be accurate. Every aspect of your company has to be looked at. That is why it is always best to work with a business broker for engineering companies Orange County.

A business broker is able to distinguish the value of a company from its price. Price is the specific value of a company at the time of sale. It varies depending on supply and demand in the market. The value of a company, on the other hand, is what potential buyers will give depending on their profile and interests. Value is basically a measure of how useful the business will be for the buyer.

There are many methods a business broker for engineering companies Orange County can use in a business valuation. The selected method will depend on the objective of the assessment. This post focuses on the Discounted Free Cash Flow method of business valuation.

The focus of this business valuation method is to determine the ability of a company to generate wealth. It estimates the amount of money the owner can take home during the company’s lifespan. The method converts future cash flows into today’s currency using a ‘discount rate’ in order to reflect future money’s value discounted to today’s value. The analyst will include the potential risk associated with the generation of wealth. The method basically looks at the future performances of a company and its ability to generate cash flow through the available resources.

With the Discounted Free Cash Flow method, the analyst will review the company’s historical data. This gives insight into the factors that led to the incurred costs and generated revenue. The analyst also looks at the factors that can affect future financial projections

Market analysis and competitive positioning analysis will also be considered. To anticipate an increase in demand, the effects of Porter’s five forces (threat of substitutes, barriers to entry, negotiation power of suppliers, rivalry among competitors and negotiation power of buyers) will help anticipate an increase in demand, understand the company’s vulnerability and measure the negotiation power of suppliers and clients. Moreover, the analysis of your competitive positioning in the market will either increase or decrease the final value.

Cash flows are estimated after doing these preliminary analyses. This is the estimated future cash that shareholders can take home without damaging the growth of the engineering company for a period of 4 to 5 years.

As you can see, estimating the value of a business can be very complicated. You need to enlist the help of a business broker for engineering companies in Orange County.

Business Broker for Engineering Companies Orange County

What Client’s Say

We Couldn’t Be Happier

"When we thought about selling we had no idea what our business was worth or how to go about selling. What you were able to do was to cut through the fog so that we understood the valuation issue and had a comfort level with the process. As you know we ended up selling for somewhat more than the original valuation and we got all cash and our CPA loved the way our tax liability was minimized. We couldn’t be happier!"

Over $250,000 More

"Our first contact with you shocked us when you suggested that we wait 18 months before selling because you believed that if we hit our projections that the value would be significantly greater. As it turned out we not only followed your advice but also got slightly over $250,000 more than we originally had hoped for. It is seldom that we have had the opportunity to deal with a firm that doesn’t want both money and a commitment NOW. It was clear and obvious that you had our best interests at heart."

You Got the Valuation We Agreed On

"You did a great job on the sale of our business in really beating the bushes for buyers, including a UK company that was an active suitor. You managed to get the valuation that we had all agreed upon and got it substantially all in cash and got the transaction closed with little to no problems or expensive lawyers involved."

Thank You for Handling Our Business

"Our business was smaller than what your firm normally handles but it was a BIG part of our net worth and savings. Thank you for handling our business and we were very pleased and delighted with the results."

More Than Anticipated

"Our transaction was involved as we had different corporate entities located in different states. Our only regret is that we didn’t retain your services before 2012 when we paid $25,000 to a firm in Texas that did a valuation and market analysis for us before then failing to do anything in the way of trying to sell our business. You got it sold for more than anticipated."

The Sales Process