Sellers commonly ask us, "How much is my business worth?". The short answer is, "It depends".
Many business owners considering the sale of a business mistakenly believe their businesses are worth far more than they actually are or would ever sell for. Why? The answer is simple: most business owners simply have no idea how business valuations are done.
Many factors go into completing a proper business valuation. It's important to realize that people looking to buy a business are partly looking to buy cash flow. As a consequence, most businesses are valued on that basis. In other words, the more money your business makes, the more money your business is worth to prospective buyer.
Because buyers are really buying cash flow, it's important that you have someone who is qualified to help you determine what the actual cash flow of your business is. Why? Because most small businesses sell as a multiple of cash flow. That multiple is commonly between 1 to 3 times cash flow, the most common being around 2 to 2.5 times cash flow. That means for every dollar that you identify as business 'cash flow', the value of the business will increase by 2 to 2.5 times. In other words, if you identify $10,000 worth of cash flow you didn't realize should be included in the calculation, you could be missing out on $20,000 to $25,000 in additional justifiable business value!
Common Ground Business Brokers completes a full Broker Opinion of Value for any type of small business for only $450. This fee is justified but the several hours of work that goes into preparing the business valuation of your business. Likewise, you will receive a full report in .pdf format which explains in detail how the valuation of the business was completed.