As mentioned in "The Process of Selling A Business" at any given time there are 5 different "values" to your business, depending upon your perspective and motivation. . But what we care about is a) the Capitalization method, and b) the Multiple method. Both will arrive at a number based upon Buyer Value World.
The capitalization method is based upon the return on investment given the net earnings of the business (EBITDA) with emphasis on "risk". This is almost purely a financial model and favored by banks who just want a "number".
These factors include:
The risk-free rate of return
Equity Risk and Size Premiums
Industry and Company Specific Risk Premiums
The calculation of your Multiple, (which is multiplied by your EBITDA in arriving at a valuation) takes into consideration "risk" with emphasis on the 7 key elements of internal, financial, human capital, and operational aspects of running the business. In smaller businesses, these risks are far greater than in larger multi-hundred million dollar companies because they have a broader, deeper management team, and scale.
If what you need is a "number", the capitalization approach may be fine. If what you need is a "number" based upon identifiable factors within your control, so you can improve on the valuation, you need the Multiples route.
We use the results of our survey as the basis of the value as it pertains to the Buyers World. We have developed this Survey where the algorithms allow us to quantify the risk a potential buyer sees in your company. The results give rise to our "7 Pillars of Value Creation".
As important as knowing what your Multiple is, this report also identifies and "scores" your business in each of the 7 key components that comprise the Multiple, By comparing these results with similar business scoring on the higher range of what the market will pay for businesses prepared for sale, you can visually see what you need to do to increase your valuation.
This mathematical expression of the level of risk, along with your EBIDTA are the major tools we use. in creating your Transferable Value.
Recently we partnered with BizEquity, the country's leading valuation software company to help their users identify more than just a "number". They now have a tool they can use to increase their value.
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How It Works
It's time to face the truth. If you don't plan your exit correctly, you could end up working until you die. Your journey to a successful sale and increasing the value of your business by 30-50% starts with taking our Exit Valuation Survey. This tells us exactly where you are now, the exact performance of your business, and what you need to do to improve. You can access your buyer Risk Report and speak to our analyst team on a complimentary call to discuss your results, increasing value and exit options.
TAKE THE SURVEY
Discover how your business scores in
the 7 key drivers of valuation
ACCESS RESULTS & ANALYST
Understand the risks a buyer sees
when valuing your specific business
INCREASE BUSINESS VALUE
Implement the "7 Pillars Of Value Creation" & increase your business value
*The Lower Middle Market is comprised of businesses worth $5-$30 million, typically having EBITDA of $1 million - $4 million.
The 7 Pillars of Value Creation is our name for our work as Business brokerage services and related consulting pertaining to business sales, mergers, acquisitions and business valuation. Exit The Family Business the downloadable guide and any accompanying assets or affiliates are provided for informational and educational purposes only. It is not intended to provide tax, accounting or legal advice, nor is it an offer or solicitation to buy or sell, an endorsement or sponsorship of any company, security or fund. Certain owners, officers or affiliates may be associated with investment firms and may make referrals from time to time for such services, but this does not constitute investment advice, nor should it be construed as Exit The Family Business being in that business. We always suggest you seek professional advice. Past results are not a guarantee of future results.