Seller Resources

WHAT IS YOUR BUSINESS WORTH?

Are you deciding to sell your business or grow your business by acquiring another company?

It is important that a buyer or seller know the value of a business. If the SBA, a conventional bank, or seller is financing, both buyer & seller should have a clear idea as to the function of cash flow. It is advised for both buyer & seller have an accountant to verify information.

1. Cash Flow / Net Profit Pre-Tax

   Gross Revenues
-  Cost of Sales
= Gross Profit
-  Operating Expenses
-  Debt Service
= Cash Flow/Net Profit Pre-Tax

2. Total Owner Benefit

   Owner Salary
+ Interest Expenses
+ Depreciation
+ Fringe Benefits (car, trips, credit cards, not related to the business)
= Total Owner Benefit

3. Annual Lease Expense, Pre-Tax

   Triple Net Lease Payment (Annual Outflows)
+ Annual Lease Expenses
= Annual Lease Expense, Pre-Tax

4. Lease Expense per Year After-Tax

   Annual Lease Expense, Pre-Tax
x (1 - Tax Bracket)
= Lease Expense per Year After-Tax

5. Taxable Loss/Income

   Cash Flow/Net Profit Pre-Tax
-  Interest Payments
-  Depreciation
= Taxable Income
x Tax Bracket
= Taxable Loss/Income

6. After-Tax Cash Flow

   Cash Flow Pre-Tax
-  Taxable Loss
= After-Tax Cash Flow

EBITDA: represents income before Income Taxes, Interest Expense, Interest and other income and depreciation and amortization. EBITDA is presented as additional financial data but may not be representative of operating results or cash flows for the periods presented.

As every business is unique, determining the value of a business is one of the most critical aspects of any transaction. The terms of the deal is another determining aspect: the more you know, the better prepared you are to consummate a deal! We are here to make that education transparent to both buyers and sellers.

Assets, liabilities, historical earnings, cash flow, projected earnings, future cash flow, current market conditions, industry popularity, and, most important, the objectives of the seller or buyer as well as the value of intangibles (patents, know-how, the quality of management, leases) are all taken into consideration to determine a company's fair market value.

The final selling price can be either higher or lower than the estimated range of values for the company, depending on the eagerness of the buyer to buy and the seller to sell, the demand for the type of company, the form of consideration paid, the negotiating skills of the parties, and most importantly, the terms of the deal.

Valuing A Business

Below is one method of valuation which can be used in purchasing a business and determining its market value. Not included but to be considered is "Good Will" the value attached to the business's Name and Reputation. This is what creates the revenues of the business. There are many other factors that must be considered when placing a price on a business. Consult with us, your professional business brokerage, for further information. Our services create added value to the transaction.

Business valuations and appraisals are other services offered by International Business Brokerage & Realty, Inc. The key to having a credible and viable valuation performed on the business is to have it performed by an independent third-party. Without this service the seller should be prepared for heavy negotiations due to the conflicting opinions of the seller's opinion of value versus the buyer's valuation. International Business Brokerage & Realty, Inc. uses the services of various independent agencies to prepare its business valuations. Also to be taken into consideration is the owner's terms that he is prepared to offer such as consulting agreements, holding a note, etc.

Buying a business is an intensive and emotional process even though it is considered "numbers." Also to be considered is the owner's personality if you are going to have him hold a note (or the buyer's personality if the seller is going to hold a note...and a note is almost inevitable uneven with SBA financing). Also important is the transition of the business...are the employees going to stay, is the business going to be re-located, the value of any inventory at seller's cost, ...so many other factors are important other than the PRICE. Let us help you.