Businesses can generate a high income, yet have low value. A business’ value determines the price
for which it can be sold. Infinity Business Brokers offer free business evaluation services. We start
with reviewing financial documentation, owner interviews and then we will study the business plan, industry statistics and company’s marketing and distribution. We end up producing a comprehensive report with results of our analysis; containing sold comparables, review against industry standards and recommendations for improving the value, if any.
The business evaluation should be as precise as possible. If the business is over-priced it may not achieve the intended results which are to sell the business and at the same time you don’t want to leave any money on the table.
When you’re referring to “business value”, you have to be specific about the type of value in question as there are several. A business has its “book value”, “fair market value” and “liquidation value”. Any accountant can easily calculate book and liquidation value. Fair market value of the company is much more difficult to calculate and can be accomplished only by an experienced professional, skilled in business evaluation and knowing the current business market situation as hindrances may include aged equipment, a difficult to operate business, laws to prevent certain business practices, documentation and many other factors.
Infinity Business Brokers will review financial documentation for the last 3-5 years, when available. It indicates trends in revenue, profitability and can be compared with industry average indicators.
Business plan, written or verbal
How close does the business plan reflect actual performance? How aggressive and realistic is it? Are product and services still as desirable as planned?
What would happen if the current owner is no longer with the company? Will it immediately hinder business, slowly lose its business, or continue running without major problems? How easy is it for the buyer to replace the owner? This is a very important aspect for the majority of business buyers and they would pay a premium for a business with a low-risk transition.
The value of a business greatly depends on a buyer. A certain buyer may see only a collection of discounted equipment (liquidation value), while the other may find a strategic connection with their existing business and recognize add-on value in created goodwill.
Sourcing and customers
How diverse are supply and distribution networks? What happens if one of the major players leaves? Does the company have a uniquely targeted distribution network, or hard to repeat distribution concept?