BLOG

Measuring Your Business’s Worth – 4 Types of Small Business Valuations in Roanoke, TX

Are you planning to sell your business Roanoke, TX because you want to retire? Or is it due to your health? There comes a time when life throws us a curve ball such as family problems or a divorce, where you feel helpless. You go into your ‘shutdown’ mode and are unable to handle anything. Say, you are now planning to take a vacation and the only thing standing in your way is your business.

Even if you are plan bringing shareholders or investors into the fold, you need to make sure that they are on the same page as your business’s values. However, how do you expect them to invest in your business, when you yourself don’t have all the details about your business’s revenue?

Your business’s balance sheet is the first thing that you should have a look at to determine the company’s current state. One of the biggest mistakes owners make before putting up their small business for sale in Roanoke, TX is that they try to tackle the responsibility on their own. This is the reason why it takes longer for you to sell your business Roanoke, TX because the buyer feels your audit is not credible. Since you may be somewhat reluctant to evaluate your business objectively, it is better to hire business brokers in Roanoke, TX.

Professional valuations in Roanoke, TX done buy a broker ensures that your books are in top order and you will be able to make a successful sale on your terms. A business valuator uses different types of valuation methods, so that he can come up with the best plan that offers a fair price. Following are the four most popular valuation methods:

Method #1

Historical Earnings Valuation

There are four things that determine your business’s current value:

  • Earnings
  • How cash flow is capitalized
  • Repayment of debt
  • Gross income

When a business fails to bring in revenue, it becomes difficult to pay the bills and its value drops. As long as your cash flow is maintained, your business’s worth increases. The calculation is quite simple but requires all the sale receipts from the day you opened the business to current date. The annual compounded growth of the business is calculated and on the basis of that, a report is created, which assumes this growth rate as the benchmark for future earnings per share. The report is created for at least a decade keeping in mind all the spending, so that a proposal can be created by the business brokers in Roanoke, TX for the client to help him understand the worth of the business.

Method #2

Discounted Future Earnings

This is a fairly simple valuation process. This allows you to calculate that how much money your assets will make in the future. This method is used when you believe that your business’s future earning will not remain stable. The valuation is done by discounting future cash flows to the present day values. The figures obtained are what you can expect your business to bring-in in the future.

When a business is transferred, there are certain loses like employees not being able to work under the new owner, change in policies, lower grade level employees being fired, etc. It’s a given that there will be some significant changes. This is why the report also includes a rough estimate of what the business might lose under the new ownership. As a sole proprietor, you might not be able to process this on a statistical level and therefore, it is better to hire business brokers in Roanoke, TX.

Method #3

Going Concern-Based Asset Approach

Asset-based approach can be quite tricky when it comes to sole proprietorship. A going concern approach is based on a list that has all the assets according to the net balance and liabilities incurred during business.  The liabilities are subtracted from the assets and the amount left determines the value of your business.

In corporations, this approach is highly effective because the company owns all the assets. None of the shareholders are affected by this because there were no personal use items. However, in the case of sole proprietorship, it can become difficult to separate equipments according to personal and business use. If you list too many assets for personal use, then you decrease the value of the business and if most of the equipment ends up on the business list, they will not sell for much due to their use.

Method #4

Liquidation-Based Asset Approach

This is the simplest valuation approach because it determines how much net cash you will receive after all the liabilities are paid and assets sold. It’s fairly simple because all you need to do is make a list and include every piece of business equipment you own. The pay might not match the payment you made when you bought the assets but with the help of an accountant, you can convince the buyer about your business’s high worth.

This asset approach is similar to the liquidation exit strategy plan that allows you to sell your business Roanoke, TX. As long as you have an intermediary, along with a team of professionals working with you, you will be able to strike a successful deal.

Valuations are not just about knowing your business’s worth; they also give you the opportunity to think about future business ventures. Selling a business becomes easier when the cash flow is maintained and the inventory is sold out at the end of every season. Even the smallest of details can go a long way in adding more dollars to your sell-out price.

The process of selling a business takes around a year, depending on its size. By hiring business brokers in Roanoke, TX from Kirksey Business Brokers, you can speed up this process and get the job done in six months. The company handles everything from exit strategy plans to buying a business and providing help with loans. To know more about their services, call at 817-637-1508.

OUR VAST NETWORK OF FINANCIAL CONTACTS EXPEDITES FINANCING AND CLOSING THE DEAL.