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Two tips for determining the value of a business

On Behalf of | Sep 4, 2020 | Business Law And Litigation |

What percentage should I give an investor who wants to fund my company? How is my business going to be divided in a divorce? How much will my bank lend me for my business? How much should I sell my business for?

Whether you are looking for the answer to one of the questions above or your business is involved in a merger or acquisition, you will need to determine the value of your business. To understand how to complete a business valuation, it is necessary to know what factors will catch the eye of potential buyers and how these factors will affect the price your business will bring. Consider these factors as you determine the value of the business you have worked to build:

Revenue is not the only factor.  Along with business cash flow and earnings, make sure to take into account interest, depreciation, taxes and amortization to yield a more accurate and comprehensive value.

Don’t depend on a Fair Market Value (FMV) report. Fair Market Value reports are great for many things, but determining the value of a business is not one of them. Fair Market Value reports provide a hypothetical business value as related to a hypothetical buyer. Instead of investing money in an FMV report, try completing an analysis performed exclusively in the context of a real-world sale.

A business sale is a complicated process for both sides involved in the transaction. The many elements of these types of negotiations sometimes place an individual unfamiliar with the process at a real disadvantage. Individuals who are interested in the purchase or sale of an existing business may enjoy a smoother process by trusting counsel from a business law attorney.