As you get set to sell manufacturing business, it is paramount that you enlist the help of an experienced manufacturing business broker. Our team at So-Cal Business Brokers has the experience, knowledge and resources you need not only to close the deal fast but also for the best price. One way we are able to do this is by offering comprehensive business valuation reports. But how exactly is a business valued?
A business valuation cannot be 100% accurate. The valuation is done to help you explore the worth of your business and get a general idea of where to start when pricing and negotiating with buyers. To give you a more accurate business valuation, our manufacturing business brokers use a combination of valuation methods which are unique to your business. We also combine textbook formulas with market research. Here are the most commonly used valuation methods.
Asset valuation
The assets of a business are the things that your business owns and can be shown on the balance sheet. Assets include equipment, buildings, land, vehicles, supplies, cash and account receivables. It is also paramount to account for intangible assets such as intellectual property. When selling a business based on an asset valuation, you will only have one picture of business valuation. A mystery factor we always remind you about is goodwill. This is an intangible value which attracts premium pay.
Cash flow
Some buyers are mostly interested in how much your business can generate. As a result, this business valuation method focuses on your cash flow statements which show inflows and outflows over a specific period of time. Our manufacturing business broker will then discount the cash flow number for its future value. Cash flow value is ideal for businesses that have shareholders.
Gross sales
Multiples of gross sales are the crudest approximation of a business’ value. While the gross sales for the past 3 years can be used, there is no guarantee that those levels can be supported. Gross sales valuation is thus less useful.
There are many more methods used including multiples of earnings and seller’s discretionary earnings. Our manufacturing business brokers use a combination of valuation methods to get the most accurate report. What is more is that we will perform market research for you. The grand beauty of working with us is that we never charge you for business valuation, market review, packaging and other services other business brokers charge. Our only compensation is the success fee you pay us after closing. Contact us today to take advantage of our free consultation.