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By Jim Moran From Bplans After spending years building your small business, it can be hard to quantify the time and energy you’ve poured into it and the sacrifices you’ve made to get where you are now. Your company probably seems priceless to you, but there inevitably will come a time when you must calculate precisely how much your business is worth. The value of your company is subjective. Buyers and sellers don’t always agree on what’s valuable and what isn’t, which is why hiring a valuation consultant or a CPA who has experience valuing businesses is a good idea. That said, it’s not overly difficult to come up with a reasonable ballpark valuation on your own—you’ll just need to avoid some of the common misconceptions first-time sellers have. In nearly every case, small businesses are bought and sold based on the cash flow they produce—with prices adjusted up or down to reflect other qualitative features. Rather than focusing only on cash flow, however, most intermediaries use

As someone that has started several small businesses over the years and advised many small business owners, one challenging area for a lot of people is the idea that you need to set a strategy. Business owners need a strategy that will enable them to understand the value that they bring to the market, and to ultimately target an audience of buyers that will need and buy their products and services. Setting your strategy Like most challenges we face as business owners, the challenge of strategy comes down to one of focus. Not so much focus on achieving activities or doing so many things, but focus when it comes to understanding the key drivers that will propel your business forward. Read more at bplans

One of the most common methods of business valuation is using valuation multiples. What are Valuation Multiples A factor wherein a value or price serves as the numerator and financial, operating or physical data of the company being valued serve as the denominator. What is Valuation using Multiples Valuation using multiples or relative valuation is a method of estimating the value of an asset by comparing it to the values assessed by the market for similar or comparable assets. The process consists of: identifying comparable assets (the peer group) and obtaining market values for these assets. converting these market values into standardized values relative to a key statistic, since the absolute prices cannot be compared. This process of standardizing creates valuation multiples. applying the valuation multiple to the key statistic of the asset being valued, controlling for any differences between asset and the peer group that might affect the multiple. Valuation u

Whether selling or purchasing a small business, determining the value of the business is essential. There are multiple different methods for valuing a business.  Below is a description of some of the most common methods of valuing/pricing a business. Descriptions have been provided by American Business Masters & Investments, Inc. (1) Rules Of Thumb Rules Of Thumb (ROT) can be useful tools for appraising small and medium size businesses. But, there is no one, universally acceptable, “Rules Of Thumb” method. All of them are only rough descriptions of reality. They are all gross simplifications, and can be as inappropriate as they are appropriate. Some are based primarily on “comps” (comparables with the sale of similar types of businesses), some are based on standard accounting approaches, some are based on the experience of the compiler/publisher of the ROT, and can be in conflict with ROT’s available, on the same business, from a different compiler/publisher. So, Rules Of Th