The most common question business sellers ask is: “How much is my business worth?” You might think that your ability to negotiate will enable you to get whatever you want for your business, but the reality is that the market will dictate the final price and terms of the business sale. Further, pricing your business for sale above the market sends a message to prospective buyers that you are either not serious about selling your business, or that you don’t understand the market. In either case the outcome is usually the same – you don’t develop any prospective buyer relationships to the point at which you can apply your considerable negotiating skills – you must first have an offer.
Just as there are standards and principles you follow in successfully running your business, there are standards and principles of business appraisal. Some generally accepted standards are the Uniform Standards of Professional Appraisal Practice (USPAP) of The Appraisal Foundation and the Principles of Appraisal Practice and Code of Ethics of the American Society of Appraisers (ASA). Further, there are standards published by Natinal Association of Certified Valuation Analysts, Institute of Business Appraisers, and the American Institute of Certified Public Accountants.
Many business brokers and software companies have developed alternate business valuation methods which use simple ratios from comparable sales, such as Price to Revenues and Price to Earnings. There are proprietary databases with many thousands of transactions containing varying degrees of details about each business sale.
We can provide the full range of business appraisals for you, ranging from simple ratio calculations to credentialed appraisals that comply with the major industry appraisal standards prepared by a senior ASA Appraiser. The choice depends on your situation and the purpose of the business appraisal, so it is up to you to decide if you just want a simple range of value for management use only or a compliant appraisal for litigation or estate tax purposes.