Transworld Business Advisors Cleveland, Akron & Northeast Ohio – What is the Value of My Business?
What is My Business Worth?
For most Main Street and Lower Middle Market businesses, a business broker can provide you an opinion of value for your business. There are a couple of different approaches to valuation.
Valuation Methods for Main Street and Lower Middle Market Businesses
The first approach is using a rule of thumb method in which, depending on the industry, the market has applied average values to those businesses. The formulas used are by applying a percentage of sales, or a multiple of EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) or SDE (Seller's Discretionary Earnings).
Percentage of Sales
This is the least accurate of the three, so we will spend more time discussing the other two.
Multiple of EBITDA and SDE
EBITDA and SDE are the cash flow of the business. You can find your EBITDA right on your tax return, you take the net income, and you add back in interest, taxes, depreciation, and amortization.
To calculate the seller's discretionary earnings, we use a worksheet and your tax return or financial statement and list all of the business expenses. We then go through this worksheet with the business owners and determine which expenses are non-recurring, discretionary, and for the owner's benefit. These expenses can be added back in order to show the true cash flow of the business.
Then with the cash flow or the EBIDTA, we can apply a multiple. A multiple is generally a range that we apply, and then where the business falls in that range depends on other intangibles in the business.
Contact Us
If you are considering selling your business we make the process easy. Simply call Mike Snider at 440-628-4440 or email Mike at msnider@tworld.com Mike will conduct a confidential preliminary discussion with you to ask some of the following basic questions:
- How long have you been in business?
- What industry? What does your business do?
- What size is your business? Estimated Annual Revenue?
- What is the profitability? Estimated Annual Net Income?
- What is the reason for selling?
- What type of entity, and who are the owners?
After the brief exchange of information and if there is mutual interest, a free no-obligation consultation will be offered. We prefer to do this face to face at a confidential location, but during social distancing, we offer confidential online meetings as well.
That's all, at the Free consultation meeting we will be able to provide additional information on the Transworld selling process and free information on the opinion of business value.
Call or email Mike Now: 440-628-4440 msnider@tworld.com
