A question that is most asked or most misunderstood within an acquisition, is HOW to value your business? Sales revenue? Cash on hand? Assets value? Real Estate involved? We took it upon ourselves to build a quick cheat sheet for you, and we hope it helps: 1. If you weren't in the business anymore, what would the Adjusted EBITA or SDE be? Who would need to get paid as a GM or operator? Remove any specific insurance or cars that are your own to get this number. 2. We can now take that adjusted number and provide a multiple to it. What industry are you in? What's the market look like? What could it be worth to a buyer? How do we determine the multiple? Well keep reading... 3. The business is only worth what someone is willing to pay for it...sure. Do you have systems in place for someone to jump in right away or is there work to be done to ensure you have the right team and processes? If the current owner left today, would the business fall apart? 4. Can you fund the purchase? Well, not everyone has a few thousand or million laying around, so we look to loans or investors, and not everyone wants their dirty laundry out there. Sometimes it means getting creative for a win-win solution versus a tax audit. 5. After funding the purchase, how is that cover ratio looking? Can any and all liabilities be covered without immense stress? Using cash flow can be helpful but don't get over your skis! 6. Clients, customers, suppliers and even employees! Is the team capable of maintaining those relationships and are they diverse enough if one or two were to leave, or would all the profits go with them? This could make or break any business in a transaction. 7. We do love our summer beaches and snow slopes -- how will that affect the business? Does it at all? Would another COVID disaster take your business with it, or would it persevere? 8. That final offer someone is giving you for your business. Does it make sense? Have you reviewed it with your spouse, financial planner, lawyer? Do you feel like you're getting an equitable offer or do you need to negotiate more? Ask yourself if the business really is for sale... you may find you like the stress and are just leading others on. ?? #learn #invest #consult #buyingandselling #valuation #empower #growth #weprospera
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