When it comes to commercial business sales Warner Springs, the first and the most important thing you must do is know how much your business is worth. That way you will be able to have realistic expectations as well as set a fair selling price. For this, what you need is a business valuation. While it is possible to do it on your own, you will have more accurate results when you leave the valuation work to a professional. An experienced business broker in San Diego will be able to help with this.
An important point you need to bear in mind about business valuation is that there is no ‘magic formula’. This is mainly because valuations differ from one industry to the next and from one geographic region to the next. The size and type of your business will further influence the valuation method that is used. Your business broker will further let you know that the buyer’s perception of both or either Opportunity or Risk will also influence the valuation method that is used.
There are so many books on the topic of business valuation. However, in commercial business sales Warner Springs, getting an accurate valuation requires more than textbook calculations. That is why the work has to be left to an experienced business broker.
Most people think the company’s revenues determine value. That cannot be far from the truth. This is because if a business makes $10 million annually and loses money, does that mean it is worth more than a business that does $5 million and makes $1 million annually? A great starting point is usually Return on Investment (ROI). However, before you get started, you must understand Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA). You also need to understand after management expenses after removing the Owner Perks.
Needless to say, buyers have varying expectations and requirements when it comes to ROI. With that in mind, ROI will clarify valuation but will only be one of many considerations made in a business valuation. Other factors considered include:
- Stability of margins
- Vendor or customer concentrations
- Trend of revenues
- Expiring contracts or patents
- Technology changes in the industry
- Environmental risks
With all these factors needing to be considered in a business valuation, the only people suited to accurately offer a Fair Market value of a business are the ones involved in the sale of businesses on a regular basis. Working with a business broker gives you the best chance of getting an accurate valuation. Most business brokers in San Diego offer business valuation for free.