When getting ready for commercial business sales Lake San Marcos, one of the first things you should do is perform a business valuation. The purpose of a valuation is to help you know how much your business is really worth. It also helps you set a realistic and competitive selling price. In doing this, you have to objectively analyze your business, study the current market as well as work with experienced professionals. The right business broker in San Diego will help with the valuation.
While there are many acceptable business valuation methods available, the method used will depend on the size of the business, industry it is in and circumstances of the sale. Here are some important things you will have to do when getting ready for a valuation.
Prepare financial statements
When getting set for commercial business sales Lake San Marcos, it is your job as the owner to gather all the financial records for the last three years. This should include cash flow statements, income statements as well as balance sheets. If you have not been in business for more than three years, you may want to consider using the projection model. You then need to work with an expert to transform the income statements into seller’s discretionary earnings statement. This takes into account non-recurring purchases as well as discretionary expenses to give an accurate reflection of the business’ value.
Establish asset value
You now need to establish an asset value of your business. To do this, start by estimating the value of the tangible assets that your business has. This should include every physical asset including equipment, inventory and fixtures. Next you have to estimate the intangible assets. This includes contracts, brand recognition, and intellectual property.
Asset valuation will provide you with a clear picture of your company’s current value. It does not, however, reflect the value of the company’s earning potential. It is thus lacking since buyers are interested in the future earnings of your business.
Use price multiple
Price multiples offer buyers a tool to estimate return on investment. Your business broker in San Diego will help you determine the multiple that applies to the geographical region as well as your type of industry. When combined, these numbers offer a fair estimate of the business’ sale price.
There are many more considerations you have to make in a business valuation. While the process may seem complicated, working with a business broker helps smooth everything out. The best thing about involving a broker in commercial business sales Lake San Marcos is that the broker doesn’t just rely on textbook calculations to value and price your business. They rely on their own experience to set the most competitive price.
Commercial Business Sales Lake San Marcos