Simplifying the Valuation Process
Tony Arena
Business Broker & Valuer helping simplify the business sale process ● Specialist in Financial Services and Accounting Sales ● 36 yrs experience ● Doting granddad ● Fundraiser for Cerebral Palsy Alliance
The process of valuing a business can often be compared to the act of opening a can of worms.
For Business owners, it might result in some uncomfortable truths. For Business Brokers, it might result in some migraine-inducing headaches.
I always find it important to simplify the valuation process. It makes it easier for Business owners to understand what needs to be done in order to receive the value they deserve on their business. Read below for the three ground rules you must stick to if you want to properly prepare your business for valuation.
- Prepare your business information
Financial records, legal information and Business procedures/plans are all important documents. These give prospective buyers an insight into the history of your business. Don’t hesitate to start this as soon as possible - this is the foundation of the valuation process.
2) Decide whether to get professional advice
An Accountant, Business Adviser or a Business Broker can help you analyse your finances, determine trends in the market and estimate your businesses future profit.
While of course, I always recommend using a professional for their insight, the decision is yours!
3) Choose a valuation method
If there’s one method I’d like to mention today, it’s the Return on Investment method. We’re going to focus on a formula that calculates a selling price based on an ROI that you set.
Value (selling price) = (net annual profit/ROI) x 100
Say you wanted an ROI of at least 50% for the sale of your business, and your business’ net profit was $250,000, you could could work out the minimum selling price you should set.
Selling price = (250,000/50) x 100
In this example, you’d need to sell your business for at least $500,000 to get a ROI of 50%
If you’ve been thinking about selling your business but weren’t sure where to start, contacting a local professional may be the first place to start. BCI Business Brokers are the trusted voice in Broking, and their track record of over 1,000 successful sales speaks volumes.
🚀 Business Improvement Specialist and Cultural Optimism Evangelist 🌻
4yDelusion is dangerous, especially in this context, Tony. When business owners are deeply immersed in their operations, they definitely need input from experts like you!
● LinkedIn profile writer & positioning strategist ● Teaching leaders to grow valuable relationships ● LinkedIn workshops to lift voices & visibility ● 175+ recommendations
4yGreat to know about the valuation formula! Be good to see this in a short form post too. I think many would find it interesting
I help CEOs, Boards of Directors, Executive teams and individuals future-proof themselves and their organizations.
4yLove this resource
💠Practice Manager at Sydney Endocrinology North Sydney and Wahroonga 💠 Dedicated to making medical professionals’ lives easier 💠 Supporting exceptional patient care
4yThank you for sharing Tony, a very simple explanation
Professional Resilience Keynote Speaker & Program Facilitator for Dispersed Teams 🌼 Trusted by LVMH, MDRT, Coca-Cola 🌼 Helping APAC Leaders and Teams Perform Under Pressure
4yMaking it simple with these three insights is brilliant. Thank you Tony Arena