How to determine the value of a business

If you are curious about the value of your business there are a couple of good ways to determine the value.

The first is an independent third party evaluation. The advantages of this solution is that it is a solid number. There are, however, a number of disadvantages. 1. There is a cost. 2. It has a very limited lifespan. As your revenues and expenses vary so may the value of your business. 3. It will take a little time in accumulating all the data necessary for the computer to crunch the numbers.

The second way is for a business broker to provide an opinion of value. This doesn't mean he or she will simply take a look at your P&L or tax return and say, "Um...looks like $125,000 to me." In Florida members of the Business Brokers of Florida have the benefit of having data on thousands of business sales. So we can work with you to determine the true benefits of owning your business. We can then compare your results to those of similar businesses that have sold. In the end I can tell you that no business similar to yours has ever sold for less than X dollars or more than Y dollars.

If the value range isn't where you want it to be I may also be able to pinpoint areas in which your expenses are out of the norm. Is your Cost of Goods sold too high? Perhaps it's the rent as a percentage of revenue?

There is one big advantage to this system. There is no cost or obligation. I provide this as a service to clients and potential clients. All it takes is a phone call or email to get the process started.

The disadvantage of this process it is that is only an opinion of value, but it is based on facts. The more accurate your numbers and the larger the sample of similar businesses the higher the likelihood that the opinion is on target.

Give me a call and let's talk about your business.

Jon Hunt
Senior Associate
Florida Business Exchange