The question: “I am selling my business in Santa Clara County CA. How much is it worth? May not be a simple one. It can result in a debate among many individuals. For a business broker, however, the answer is less complex. His or her response is this “Find out by doing a valuation.”
What Is a Business Valuation?
The term “business valuation” refers to a method employed to determine the worth of your business. It utilizes your current business sheet to extract figures and documentation to provide a business broker with a fairly accurate financial portrait of your business. However, it also looks at other aspects to determining monetary worth. These include:
* The state of the current local economy
* The condition of the regional economy and its impact upon your business and its perspectives for a buyer
* The situation of the national and/or international economy as it is reflected in or works in conjunction with differ.
The methods to discover how much your company is worth vary, although the economic principles are the same.
Three Basic Methods of Business Valuation
Three basic types of business valuation exist. They are:
1. The Asset or Cost-Based Approach: Two different approaches are the “going-concern asset-based approach” and a “liquidation asset-based approach.” When employing this method, a broker or evaluator will only look at your Santa Clara County CA business under two terms: assets and liabilities.
2. Earning Values Approach Income Approach: Relying on economic expectation, this type of valuation determines the worth of your business by determining future expectations of cash flow. It is a form of future casting for an existing business.
3. The Market Approach: This is a straightforward comparison method. It looks at various similar or identical businesses currently on or previously on the market. It considers such factors as their asking and final selling price when comparing them to your business.
Many business brokers do not restrict themselves to one specific method when determining the valuation. When asked “What is the valuation method they will use when selling my business, they will discuss the various means they combine to arrive at their definitive answer.
Business Valuation: Answering “Selling My Business at the Right Price”
When you state you want “the right price before selling my business,” you need to talk business valuation. While not an exact science, it does provide you and your broker with the basic selling price guidelines for a property in Santa Clara County CA – to set a price amenable and equitable that is for all parties – buyer, seller and broker.
