How Much Is The Business Worth?

There is no simple answer or formula for evaluating the value of a business. The price that the business can command in the market will actually change for the same business depending upon the terms of the sale. There are appraisers that specialize in valuing a business. Professional business brokers can give a range of prices that will be fairly accurate for many small businesses, based on experience with the market, rules of thumb, and an analysis of financial statements and cash flow.

Some brokers believe that cash flow is the most important factor to consider in a small business sale, as the business must be purchased with that available cash flow for an owner-operator buyer to be able to survive after the sale.

Other important factors to consider include: competition, industry trends, and like-size comparison with other companies in the industry, balance sheet ratios, income statement analysis and trends, gross and net margins, type and condition of equipment, and future capital requirements, customer base: target, size, quality, diversification, location, avenues of growth for the company under new ownership, owner's role, now and after the sale financial needs and goals of the buyer and the seller, difficulty of someone else learning the business, and potential for growth in this business and in the industry as a whole.

A professional Business Broker can assist you with this.