The 4-steps to valuation
Seller’s Discretionary Earnings
or
Owner’s Cash Flow
×
A multiple supported by marketplace
intelligence and informed by
comparable sales
+
Wiggle room
=
Asking price
Example
1 A pet store produces an SDE of $345,678.
2 The marketplace for this industry sector supports a multiple of 2.
So, following the Business Reference Guide,
the asking price would be —
$345,678 × 2 = $691,356.
3 We round this up to $719,000. And we find comparable sales on BizBuySell that support this price.
4 The recommended asking price is $719,000.
Seller’s Discretionary Earnings (SDE) is your net business income before deducting the owner’s compensation and benefits; other discretionary, non-operating, or non-recurring income or expense; and depreciation, interest, and taxes. This is what buyers buy.
We use (a) nationally validated multiples found in the Business Reference Guide published by Business Broker Press, and (b) comparable sales found in BizBuySell.com.
We may round-up or adjust the price to allow for movement during negotionations.
The fact is your business is only worth as much as a buyer is willing to pay for it. So to increase the perceived value of your business, I will help you offer …
The 12 Things that Matter Most to Buyers
- A good return on their investment
- A good place of business and website
- Good FF&E
- Good products and services
- Good employees
- Good customers
- Good industry
- Good vendors
- A business that is competitive
- A business that is well run
- A business operating system
- Seller financing