How much is your business worth?
How much is your business worth?
Owners without an accurate view of their business value waste time and lose confidence in the process. When you know the real business value, that knowledge is powerful. Spend your time and energy efficiently with serious acquirers.
The Four Traditional Methods of Valuing a Business
First, it’s important to understand what business “value” really is and how it is measured. Acquirers determine a business’s worth through a value analysis using four traditional methods:
- Discounted Cash Flow Model: Value is determined by looking at the business’s trends over time, both backwards and forwards, to see if it reliably produces a level of profit.
- Market-Based Model: Pricing is estimated based on what similar businesses sell for in the current market.
- Asset Assessment: Buyers evaluate the assets of the business.
- Cost and Risk Analysis: Buyers consider how much time, labor, and risk would be involved in building a similar business from scratch.
What’s the real value? What will you really be able to sell for?
At Cathedral, to substantially increase the amount an acquirer is willing to pay, we help you focus on ensuring that the value of the business is both identifiable and transferable.
What do we mean by this? A acquirer needs to have confidence that the value will transfer to them. Having led merger and acquisition deals ranging from $1M to $2B, one of Cathedral Consulting’s Senior Advisors explains that acquirers are not just interested in growth but are also concerned about risk. Therefore, you can’t just have excellent financials.
Acquirers will factor in any weaknesses, such as a lack of understanding of the current market or an overly concentrated customer base. It’s crucial to address these issues in advance to avoid any negative impact on the valuation. Acquirers need to see minimal risk to comfortably pay top dollar.
The smartest entrepreneurs selling today don’t just post a “For Sale” sign when they get the urge to sell. Leading entrepreneurs through that needed preparation pays dividends. At Cathedral Consulting, our senior advisors have helped others build, scale, and sell companies worth hundreds of millions of dollars. We recommend being proactive and making key changes before you go to market. Download our whitepaper that explains the 7 Essential Steps to Maximizing Value When Selling Your Business.
Ready to maximize your business value? Contact us today to schedule a discovery call!
