How Salable and How Valuable Is Your Business

May 03, 2013

Since 93% of a business owner’s retirement income is the return on the invested net proceeds from the sale of the business, the discussion about value comes to mind immediately.  And although the economy, interest rates, and other factors play an important role, ultimately it’s the buyer that determines value.

Business valuation professionals, chiefly identified by their professional designations (including ASA, CPA-ABV, CPA-CVA, CFA) determine value from three separate analyses in their valuations: 1) Asset 2) Income and 3) Market.  However, when valuing a business to sell to an outside third party where the buyer and seller are ready, willing, and able, income will usually be the chief determinant.  What this means is that value is mostly determined by historical and projected revenues  and income of three or more years.  Because the valuation will reflect historical performance, dramatic upward or downward spikes will figure into the valuation preparer’s opinion of value.  The business owner (or management) will need to account for  the facts related to dramatic spikes, up or down, in historical performance, and, will need to support projections with a sound strategy to achieve them... read more



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