If you are contemplating a sale of your business in the next few years, you should have a business valuation completed by an outside industry expert. Most owners do not know the value of their business as it relates to a merger or sale. They may have an idea, or can guess at it, but more specifically they know what they want for the sale of the business. Unfortunately, most often what is wanted does not relate to what the business is worth.
By having a professional valuation done, you can get a feel for how much you can realistically expect to receive in the sale of the business. Valuations take into account current market conditions, industry specific methodologies, and industry trends, among other items. These items are dynamic and usually in a state of flux, but the valuation can give you a sense of the range that can be expected from a sale.
Typical valuations address either the value of the business if it was sold or merged as a going entity, also known as the “EBITDA Approach;” or the value of the business based on underlying assets such as general intangibles and equipment.
Steps can be taken to help increase the value if the valuation is less than what you want or need. The outside professional can guide you to the areas that need improvement, so that the value can realize your expectations. The owner needs to be a realistic seller.
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