How Do Small Business Valuations & Business Brokers Work?

If you’ve ever wondered what your business might sell for, or how to go about selling your business - this article and video interview is for you. Clint Fiore from Dealonomy and Patrick Dichter from Appletree Business Services chat about the entire process.

Understanding Business Valuation: The journey of valuing a business begins long before it hits the marketplace. As Clint explains, "We have to qualify them. We have to value them. We have to get them ready to go to market before we go to market." This involves assessing the motivation of the seller, the size of the business, and its financial health.

Key Financial Metrics: A critical component of valuation is understanding Seller's Discretionary Earnings (SDE). Clint notes, "SDE basically reverse engineers that tax strategy and shows... what's the most profit this company could make on a normal year." This metric helps potential buyers gauge the true earning potential of a business.

The Role of Clean Financials: Patrick emphasizes the importance of maintaining clean financial records, stating, "You definitely want to always have good clean financials that are closed every single month." This transparency not only aids in valuation but also builds trust with potential buyers.

Determining the Asking Price: Valuation isn't just about numbers; it's also about market perception. Clint shares, "We usually look at it through several lenses... we look at the balance sheet... and we build up that recast of the profit and loss statement." This comprehensive approach ensures that the asking price reflects both the tangible and intangible assets of the business.

Navigating the Sale Process: Once a business is valued, the next step is taking it to market. Clint and Patrick discuss the importance of setting realistic expectations and preparing for the due diligence process. As Clint advises, "Keep your foot on the gas... don't count your chickens before they hatch."

Conclusion: The business valuation process is a blend of art and science, requiring a keen understanding of financial metrics, market trends, and buyer psychology. By following the insights shared by Clint and Patrick, business owners can better prepare for a successful sale, ensuring they maximize the value of their hard-earned enterprise.

Full Video and Podcast Link: https://inspiredoracquired.transistor.fm/episodes/business-broker-insights-how-to-value-a-business-how-to-sell-a-business