|
Business Valuation (BV) or Broker's Price
Opinion (BPO)?
The time has come to sell your business or buy a
business. One wishes estimate how much it is worth. It is
understandably difficult to know what one can be the value of a business on
the open market, without having a CPA value for a large sum.
Who Values My Business?
"Can you estimate the value my business?” The
answer can be, yes. We offer business valuation in the form of a
Broker's Price Opinion (BPO) to owners who are
considering selling their business. Our BPO estimate is
objective. We do not list or sell your
business. We can assist. One need not pay a CPA thousands of
dollars to value one finds it is required.
Significance of Correct Value
When listing a business for sale, it’s important
to get the business’s value correct and the proper asking price
range. The average business sale requires approximately 270 days
to sell, and businesses that are priced correctly could sell
much faster. Many Florida businesses for sale will seldom sell due to the fact that they are over-priced
without substantiation of price.
How Does An Estimated Business Valuation Work?
Estimating the value a business can be a complicated and
time-consuming process, because every individual business and
industry is so different. Depending on the situation, small
businesses are typically priced for sale in several ways:
multiple of owner benefit/seller’s earnings, asset value or
stock value so an experienced broker's price opinion (BPO) could
be your preference.
Multiple of Owner Benefit
Ideally, the last five years of business tax returns
(or Profit & Loss Statements if the you can’t provide tax
returns for some reason) are recast, to add back in owner
salary, personal expenses, depreciation, and amortization. Once
the recast is calculated, then we can see the true owner
benefit. Owner benefit is multiplied by its respective standard
industry multiplier. Looking at comparable sales to find the
multiple is the most accurate way to value a particular
business, because they represent actual comparable sales in
Florida. This multiple is a ratio of sales price to owner
benefit.
Asset Value
The value of the business is based on the fair
market value of the tangible assets that the business owns. If
the business’s tangible assets are worth more than the multiple
of the owner benefit, then the business should be sold based
upon the market value of the tangible assets. The buyer is not
paying for goodwill or any other intangible assets; however, in
these cases, they are often included in the sale.
Stock Value
When one knows the true asset value, has a
balance sheet and income records one can estimate the stock
valuation of a corporation. Consistent profit increase can
indicate future stock value. Some stock is eligible for gain tax
exclusion or exchange in to another corporation.
Business's Value To A Buyer
A buyer will question whether or not a list price
is fair, so one should to be able to defend your asking price.
At the end of the day, a business is only worth what a buyer is
willing to pay, so the asking price needs to be justifiable and
easy for a buyer to see the value in it. A common saying among
business brokers is that buyers pay for the past, but they buy
it for the future. Meaning that the value the buyer is paying
for is based on the past performance of the business, but they
are buying this particular business because they believe it has
a future.
Curious about your business’s estimated value? Would be happy to offer a confidential
BPO estimated valuation.
Return
to page top
|
A broker's
price opinion is
a report that is performed by a licensed real estate
agent, broker or appraiser. It is similar to doing a
CMA (Comparative Market Analysis) but most times the
real estate professional gets paid to do a BPO. A
BPO can be either an Exterior Drive-By or a Full
Interior report. When doing a BPO, the real estate
pro researches the ‘subject property,’ they take
pictures of it, they also scope out the neighborhood
as well as comparable properties (Active Comps and
Sold Comps) in their MLS (Multiple Listing Service).
They then take all of this information, the pictures
they took of the subject and their knowledge of the
local real estate market and they input it into a
BPO form. The final BPO is used to support their
professional opinion that will help determine the
potential selling price
or estimated value
of a real estate property |
We do not market
annuities, insurance or list real estate or businesses. We may, with client
permission, refer to those who
do.
Preparation tips selling a
business before you retire:
Obtain
an appropriate valuation.
One
determines what a
business is worth (valuation). This requires time
to gather documents, records and numbers.
One should inventory the assets and
liabilities. Profit and loss equals income
before tax. A price comparison of similar
businesses is considered.
It can be helpful to consult with an
experienced professional
experienced broker's price opinion (BPO) or
valuation
well before you as one prepares to sell or
buy. A mergers & acquisitions intermediary
or some business brokers may be able to
opinion the market value based on details
provided. They will also be able to
assist with the complete purchase or sale of
a
business.
Create a succession plan.
To continue a
business operation for your employees and customers, tone
will wish to carefully prepare
your business for the transition to new
ownership. A plan of succession
is in order.
Many
time with a new owner of the business,
one could plan to stay on for transition so
that you can introduce the new ownership to employees, business processes,
clients and customers. Having a rock-solid
succession plan can maximize the potential
for a successful sale, while also giving one peace of mind.
If a new owner prefers to transition without
assistance is fine.
Train employees.
Having well-trained employees, especially at
the management levels, will allow a
business easier transfer ensuring continued
smooth operation and transition. If one been
self managing, prepare and train employees
for more responsibility.
Having a competent assistant manager or
manager will assist your business to be attractive
to buyers. A new owner will have a point person. This is
helpful to have if one steps away
from the business for any reason. One wishes
to a business to run smoothly without one's
supervision. Automate as many processes as
you can as billing and customer
communication, assuring employees are
coordinated and communicative
Prepare
to let go.
Some people find that retiring is more
emotionally difficult challenging than
others. This is true of
most business owners. One is emotionally invested
as well as financially. Perhaps the business
was born of an excellent product idea that
one wishes continuation. this case,
finding a great buyer may result a product
will flourish.
When one sells a business, one is moving
away from something that is part of one's
life as with buying, o\ne's life has another
partner.
Plan for your future freedom.
Once you retire and sell your business, what
do you want to do with your time? Will you
travel? Visit friends and family? Spend more
time with grandkids? Imagine spending your
afternoons on the golf course or on the
beach, rather than in the office. Planning
for this freedom should be fun and exciting.
After all, it’s what you’ve worked so hard
all of your life for. Explore all of the
different ways that you could fill your
days. It will make the daunting thought of
selling your business much more exciting.
If one is planning for a change in life or
retirement now or in future, we can help with
the tax reduction or elimination of taxation
of your
business proceeds. Let us know how we can
help! Contact
us today.
Return
to page top
|
