How to Value a Business

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So you want to know what your business is worth?
The answer might not be as simple as you think.

Quick Valuation Process

The business valuation methodology often used by other business brokers

  • Recast financials to get EBITDA or Discretionary Earnings (DE)
  • Look up Multiple of Earnings (MoE) in reference book
  • Value = MoE x EBITDA
 

Shortcomings of the Quick Valuation Process

  • Historical numbers might not be a good indicator of future performance.
  • The subject business might be larger or smaller than the typical size used by the MoE
  • It does not take into consideration specific qualities of the subject business.
 

 

The Value Equation


V = B/R = (1/R) x EBITDA = MoE x EBITDA

If you can reduce the risk factors in your business, your value goes higher

Calculating Cash Flow

Historical cash flow is the best indicator of future success
There are multiple dimensions of risk that influence the valuation of a company

Components of Risk

 

Company Specific Elements

Final Analysis

 

Free Business Valuation Calculator

Valuation Calculator
 
Logos Member of the California Association of Business Brokers Member of the International Business Brokers Association Member of the M&A Source Holder of the Merger & Acquisition Master Intermediary designation, M&A Source's highest qualification Holder of the Certified Business Intermediary designation, IBBA's highest qualification Holder of the Certified M&A Professional designation from Coles College Trained by the National Association of Certified Valuators and Analysts to conduct business valuations