From Owner of Transworld Cleveland West, Michael Snider
This is a question I get asked often from business owners, more specifically in the service business industry, and the short answer is yes. Of course, that is a conditional yes and we will dive into that later in the article. I think one of the reasons business owners are sometimes skeptical regarding the value of their business is because many businesses do not have a lot of hard assets, or the hard assets have been depreciated significantly to an extremely low book value on their balance sheet. So, they ask themselves, what I am ACTUALLY selling?
The fact is 80-90% or more of a business’s value is in the intangible value, often referred to as goodwill. In fact, I recently sold a business in which 94% of the business was intangible assets. This was a mobile testing service business that used laptop equipment to perform diagnostic testing. The Furniture, Fixtures and Equipment (FF&E) was only worth a small 6% of the total value of the business. The other 94% of the value encompassed the intangible assets, Human Capital (Employees), Structural Capital (Standard Operating Procedures), Social Capital (Branding & Name Recognition) and Customer Capital (Consistent and Diverse customer base). See the chart below for more intangible assets All the assets working together produced a 40% net income margin. Now this is a very desirable business, and we got the owner full asking price.
If you put all the tangible and intangible assets aside for a second, the real value of a business is in the net earnings. Think about all the equipment, building, employees, marketing, management, operations, procedures, vendors, suppliers, customers, licensing, are all needed to produce revenue and profits. The profits and earnings are the bottom line that determines value in a business. To take it a step further the more consistent, repeatable, and predictable that these earnings will continue and grow in the future, the greater the value.
Currently there are more buyers of businesses than sellers. I receive calls and emails every day from very qualified buyers and investors looking for strong and profitable businesses to acquire. Our firm has a database of over 150,000 buyers at any given time searching for businesses. Do not be the business owner that simply shuts down and walks away without knowing the value of your business. You can be leaving hundreds of thousands of dollars behind.
Our business brokerage in Cleveland, Ohio represents profitable businesses in the range of $500,000 - $15,000,000 million in Gross Sales. We would like to offer you a confidential no cost analysis to receive a High-Level opinion of value based on earnings using current comparative statistical data of similar business sales in your industry. So, I am happy to tell you “YES” you can sell your business. Every business has a price, so the better question is what is my business worth?
To receive an opinion of value at no-cost contact Mike Snider at msnider@tworld.com or call 440-628-4440.
