Here is a common and much-used breakdown by the federal government: Small Business Administration (SBA): Very Small Business = 19 or fewer employees Small Business = 20 to 99 employees Medium-Size Business = 100 to 499 employees Large Business = 500+ employees
1. Start with the business – Value Drivers: Size, growth rate, management, niche, history – Value Detractors: Customer concentration Poor financials Outdated M&E Few assets Lack of agreements with employees, customers, suppliers Poor exit possibilities Small market Potential technology changes Product or service very price sensitive 2. Financial analysis: Market Value – comparables Multiple of Earnings – based[…..]
“There are many reasons for valuing an entity, and those circumstances can lead to different outcomes…For instance, a business’s value for sale on a going-concern basis will differ from its value for liquidation purposes. It similarly makes a difference if the valuation is for an orderly liquidation as opposed to a forced one. For example,[…..]
Many courts and the Internal Revenue Service have defined fair market value as: “The amount at which property would exchange between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having a reasonable knowledge of relevant facts.” You may have to read this several times to[…..]
Is there pricing elasticity? What’s proprietary? What’s the company’s competitive advantage? Status of employment agreements and non-competes? Post-Acquisition: Are there cost savings after purchase? Are there significant capital expenditures pending? Is there synergy with the seller? Is it perceived the integration will go smoothly? Are there substantial cross-selling possibilities? Will the cultures blend? The Financials:[…..]
What is the value of your business? There are many ways to approach that question — based on complex formulas or just a good hard look at the balance sheet, but no answer based purely on numbers is going to be exactly right. Even factoring in that most popular of abstracts — goodwill — the[…..]