How to Value a Small Business

saceo007

Ever wondered about how small businesses are valued? One of my clients, Steven Schlagel, CPA, CVA, CFP, JD has just completed a guide that is helpful to entrepreneurs in learning how small businesses are valued. We are interested in gathering some useful feedback on the guide and would like to make it available - via email or download (http://bit.ly/pwGQaQ) - to anyone who might be interested. In exchange for your free copy, we ask that you complete a brief four question survey at the end of the guide. If you have any further questions, please feel free to PM me.

Indah

This is the perfect tread for anyone who wants to know about this topic.

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saceo007

Ed, you make some excellent points here, and I couldn't agree with you more that there are many, many things that can positively or negatively affect the valuation of any particular business. Yet, even with the four examples that you mention above, there are more variables to be taken into consideration. Perhaps the most important one is the buyer's threshold for risk?
In support of your post, I did want to reiterate a few points mentioned in the guide:
1. The guide is not an "end-all, be-all" for the layperson - whether buyer or seller - to determine an exact value for the business. As the guide points out, it is meant to be a general guide that can help the buyer prepare the Letter of Intent WITH his advisory team. Once the process moves forward from there, a more thorough Due Diligence is performed that can better take into account many of the variables that you do (and don't) mention.
2. The guide points out the potential for error if the process of valuation is undertaken by someone who is not trained - it does recommend engaging a professional.
3. With the understanding that such valuations are best saved for professionals, the guide does seek to share some general wisdom that can assist a potential buyer with determining whether or not to pursue any given business opportunity.
Again, Ed - thanks for sharing your thoughts here. Your feedback will assist us with further improvements!

nerijus9

lovely, thank you for the information!

sallya121

starting from small business is a good choice.Small business make up big business.

ewanfisher

Starting is a small business is the best idea. You can afford to make mistakes in small business unlike big business where a single fault is considered as crime.
Regards
Ewan Fisher

baililai_hk

small business is not going well anymore

globalpageindia

Thank you so much for this post.
Small Business is also very important like big one.

taat_pringist

There are several methods. Some of them are quite simple, some may see too esoteric (like DCF). Nevertheless, the main idea is that the value is stemmed from the future, not from the current books. You may want to check the article below.
About How to Value a Business

boybawang

The other factors that you need to take into consideration while evaluating a business is its intangible assets such as goodwill, brand, reputation, the key employees and the quality client/customer base.!

AshleyWhite

Business valuers/appraisers find themselves in a difficult position. They can only value a business based on facts, figures, fundamentals, research and other realistic assumptions that are able to be resolutely defended. A formal business valuation - even when based on facts, figures and fundamentals - can be significantly higher than what a prospective purchaser is willing to pay for the business.

RegalSpri

I recommend you folks read this blog post by Jeremy Altucher as he talks about how his negotiations broke down when doing a valuation for Stockpickr.com. Interesting read.
/CPAYNE

homaskein

I do believe that every business can have its own uniqueness even if they will all go under a specific niche targeted and that aspect comes from the creativity of any author. Have a brilliant business days everyone!

timallen

It is a valuable. If you are starting small business. before trying to sell the business, To attract new customers and grow your business and you need to get it appraised by a good financial team. Similarly, if you are planning to buy an existing small business, you need to get that business appraised as well. Otherwise you would end up paying more than its worth

Apatiniai2

Please don't forget experience, succes and team! --- 
apatinis trikotazas internetu

saravanan

For the best estimate of a small service business’ valuation, add the sum generated from calculating the value of all the business’ assets to three times the business’ yearly revenue, and check to see if that number falls within the values of recently sold businesses of a similar size in the similar industry.