Establishing a Value:
Most
business owners and entrepreneurs that contact Cascade Business Brokers
are very interested in the processes employed to arrive at a
proposed sale price. Many seek to know if there are standard formulas
or “rules of thumb” that are followed. While it is true that many
business brokers employ some common and time-tested approaches, it is
also true that there is no single methodology that fits all types of
businesses. As a practical matter, coming up with an Opinion of Value
and proposed sale price usually involves:
(1) the application of two or three different methodologies - establishing a range of possible values,
(2) the results of industry research,
(3) the current condition of the local and national economy,
(4) the input of other special advisors or colleagues of the ownership,
(5) the input of the owners and their chosen business brokers.
Additionally,
there may be various discounts or premiums that should be applied to
any proposed value. Examples could include a dramatic downturn in the
economy, technological changes that will be affecting the industry,
labor shortages, increases in competition, major management changes,
major regulatory changes, etc.
Overall
then, there are many factors to consider in arriving at an Opinion of
Value. Each business -- with its competitive environment, type and
level of assets, and its location -- is unique. Cascade Business
Brokers works closely with each owner to demystify and simplify the
process. We take the time to analyze financial statements, explain each
successive step, theory, or circumstance that may be entailed for any
given business. For each owner, we discuss and document our approach in
detail.
The
end goal of our Opinion of Value is to establish a sale price that is
realistic for the given industry and in the current economy. To have a
successful sale, businesses must be priced accurately and reasonably
for the current marketplace, and any sale transaction must be
structured in such a way that the deal will last over the long haul.
To
do otherwise dramatically increases the probability that the business
will remain on the market for an extended period of time. An accurate
and reasonable price will serve to fairly compensate the seller for his
or her investment and many years of hard work, and at the same time
justify retention of the company on any “short list” of prospective
buyers who are looking at various companies to buy in the current
marketplace.
As a practical matter, the agreed-upon asking price
must support the business needs of both sides of any sale transaction.
Cascade Business Brokers specializes in marrying these two sets of
needs together to form a successful sale transaction.
Special Note –
Cascade Business Brokers is primarily a business marketing firm, and we
do not hold ourselves out as “certified appraisers.” Therefore, we do
not undertake an Opinion of Value where the prospective client seeks an
opinion related to partnership dissolution, marriage dissolution, stock
value determinations, and the preparation of valuation information for
litigation purposes. Many of our colleagues within the accounting and
business consulting professions specialize in these areas, and some
have special certifications related to them (e.g., Certified Valuation
Analyst – CVA – for accountants). We will gladly provide names upon request.
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