Why Value and Appraise Your Business?
To know its worth, of course... but for what reasons?
- To assist a seller in establishing a selling price.
- To aid a buyer in knowing the real worth of a business.
- To be fair in establishing value in buying out a partner or spouse.
- To establish a value for insurance purposes in insuring against risks and perils.
- When businesses increase in sales, assets, and net profit, it too, should have higher insurance values to protect your major business asset.
- In establishing an estate value in preparation of retirement.
When you engage the services of an intermediary to assist you in buying or selling a business, you need a good knowledgeable: business broker, business consultant, financial advisor, business accountant, or business attorney upon whom you can rely to help you establish a fair selling price. Your chosen INTERMEDIARY knows, should know, or could know its value. Allowing a buyer or seller to set an arbitrary or emotionally based selling price is a big misstate.
Perhaps the biggest mistake of all is using "rotten" methods. R.O.T. stands for "rule of (dumb) thumb. Their major fault is over simplification. If your business is structured to have a low, or even negative reported net income, three times net profit could be far less money in the seller's pocket than one or two times net profit of a business with accurate records that are not understated. If you're not running your business by understating or minimizing your tax consequences, then to say the least, you are ... well, a bit unusual. Most owners have recorded figures which understate the volume and profitability of their businesses in ways which are unique to them. This makes multipliers, ratios and rules of thumb highly unreliable for valuing businesses. Use them as guides only, and use them with a great deal of caution.
When BUSINESS BROKERS HAWAII, INC. represents a buyer or seller in the sale of a business, it always does an evaluation of the business worth, even if in an abbreviated form.
When our services are engaged to value a business, separate from the buying or selling function, we will use several approaches performed both manually, and by way of one or more computerized programs. These methods or approaches may include but not be limited to:
- Asset valuation
- Market value
- Cash flow approach
- Comparative value method
- Liquidation approach
- Assemblage and market share
We will quote you a price to do your business valuation if you will send us the completed Owner/Seller's Valuation Check List. You may download this seller's check list, complete and email or fax it to us for determining a value for your business.
Within 48 hours of the receipt of such information, we will quote you our modest price and terms to compete your business valuation.