SELL-EBRATE! Successfully Exit Your Business

Do most business owners actually know what their business is worth?

Gary Morris

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SPEAKER_00

Do business owners know what their business is actually worth? It's a good question. The answer I would say is probably 70-30, 70% have no clue. They openly admit I have no idea what this thing would be worth, and I I would love some type of you know foundation to understand the valuation of my business. The other 30% have some background, they've done some some research on seller discretionary earnings or eBiddle multiples, and they can come to a rough number. Now, the thing with business owners is the same challenge when business owners actually go to CPAs or financial advisors and get their valuations, is they have limited access to important data sets that change multiples. So some of those could be again things that are obvious, like how how involved is the owner? Um, what are there any subscription services that may increase the multiple? Are there any ongoing contracts that are signed for X amount of years ahead, et cetera, et cetera? All that can change. Those are known uh aspects that might change a multiple. And then there are things like what's the running 12 months multiple for that industry? What's the competitive landscape look like, and how important would this strategic acquisition be to your most direct competitors? Uh there, and there's just numerous nuances to this that don't go into a typical CPA or even an SBA valuation perspective, because they'll typically standardize things at a 2X STE. And so when you go to a business broker, they need to put all that in line and put it in a way to where it justifies the price. Because when we list a business or we do outreach for a business listing that's for sale, the one of the very first questions, if not the very first question, that we get from this the buyer, the potential buyer, is how did you determine that multiple? And we need to be able to justify that multiple. And so understanding that that's technically how it works, you know, is what changes the variables in the business valuation. So to answer the question, 70% have no clue, openly admit that. 30% have some education into how valuations work, but they just have limited access to data sets. And so I would encourage you if you're trying to figure out what your business is worth, go to a broker, local broker, and get your business valuation done to give you some type of benchmark as to where you're at. So I hope that helps. This is Gary with Vantage Brokers.