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The Importance of Knowing the Value of your Company

Posted by Paul Visokey

Mon, Sep 15, 2014 @10:39 AM

By, Kevin Freeman, CBI, Managing Partner, Stony Hill Business Brokers

As an M&A Intermediary and Business Broker, I speak to hundreds of business owners every year, and it never ceases to amaze me that 80% of them have absolutely no idea what their business is worth nor any concept of their exit plan.

“Failing to plan is planning to fail…”

Business Owners spend incredible amounts of time, resources and finances growing their business, however, in many cases have no focus on the end goal of the company. They do not plan for an eventual exit and therefore leave hundreds of thousands of dollars or more on the table because they simply did not have an exit strategy. That strategy can change over time, as life throws curveballs and personal factors come into play.

“Your company is worth what someone or another company is willing to pay for it…”

A solid exit plan begins with a business valuation. As I said, I am amazed on a daily basis how many business owners have no clue what their company is worth. They may have a few preconceived notions about multiples of revenue or profits based on another deal they heard about, but no real idea on value.

Ultimately, the final “value” of a company is what someone or another company is willing to pay for it. Understanding that value is a key element of successful business growth. Factors that we look at in determining a company’s value are: Industry trends, Industry Comps, Revenue, Cash Flow (net profit), EBITDA (earnings before interest, taxes, depreciation and amortization), customer concentration, contracts and employees amongst other things. We determine what a business will sell for and why, NOT what it is worth to the owner…this is crucial data that will help in all phases of business growth.

Contact Stony Hill Business Brokers today to begin your exit plan with a Business Valuation.