Business Valuation Example

You might prefer to state the value of your business in your own terms, of course, but anyone looking to buy your business will definitely want to know how an objective party would value your business, based on a pre-set series of determinations that more accurately calculate the kind of return they can expect to see on the investment.

That said, potential buyers aren’t the only ones who will require business valuations. You may also need a business valuation if you want to:

• Obtain financing for your business
• Settle a Shareholder Dispute or reach a Shareholder Agreement
• Determine the value of your business for a divorce settlement
• Open an Employee Stock Option Program (ESOP)
• Plan your estate or gift taxes
• Put in an insurance claim
• Successfully navigate litigation against your company
• Conduct a merger or a partnership buyout
• Convert from a “C” Corp to an “S” Corp
• Allocate a Purchase Price
• Create a Valuation Report

Three Business Valuation types:

Different types of business valuation

Every potential transaction requires a different type or example of business valuation, and some can be quite complex, but in broad terms there are three basic types:

1. Brokers Opinion of Value (BOV)

If you are the owner of a business considering a sale, you’ll most likely want a Brokers Opinion of Value. This report brings together a Most Probable Selling Price (MPSP) for the business by using three valuation methods – Market Data, Income, and Cost or Asset Approach. This will give you a starting point for setting a price on your business for sale. Click this link to see a sample Brokers Opinion of Value.

2. Business Valuation or Short Report

In non-litigation situations where you need to determine the selling price of your business, such as in the case of entering into a buy-sell agreement with a partner or shareholder, you’ll want business valuation services or short report. This is a restricted-use abbreviated report that gives a formal summary that allows all parties to agree on a selling price.

3. Business Appraisal or Full Report

In legal situations, you will want a Business Appraisal or Full Report. If you are dealing with a court of law or the IRS, this report is suitable for litigation support and review by third parties. It explains in a step-by-step manner exactly what was done to determine the value of the business. It also explains ‘why’ or the reasons for arriving at the value.

A qualified appraiser with experience in all aspects of business valuation and business transfers performs each of our business. The Business Valuations and Business Appraisals Service from Rogerson Business Services in the lower middle market business segment are in compliance with:

• Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation (USPAP)
• Business Appraisal Standards of the Institute of Business Appraisers

Compliance with these industry standards ensures that proven peer-reviewed valuation methods are used and that the valuation meets the highest standards of the industry. This is to your advantage, because it means your business valuation or appraisal includes a defensible opinion of value that makes it very difficult to dispute in legal situations.

Recap: Value & Sell Your Business in California

Hiring a lower middle market business advisor can go a long way in helping you create an extensive market for your business. A certified business broker also provides you with all the information you need, including how much taxes you have to pay during the selling process.

If you are a retiring business owner looking to exit your lower middle market business in California, here are five tips to get you started:

1. Don't wait until the last minute to start planning your exit. The process of selling a lower middle market business can take a long time, so it's important to start early.

2. Have a clear idea of what you want to get out of the sale. Know your goals and what you're willing to negotiate.

3. Choose the right type of buyer. Not all buyers are created equal, so do your research and find the right one for your business.

4. Be prepared for a lot of due diligence. M&A buy-side due diligence is when buyers will want to know everything about your business, so be ready to provide documentation and answer questions.

5. Be flexible with the terms and conditions of the deal. It's important to be open to negotiation to get the best possible deal for your business.

Rogerson Business Services, also known as, California's lower middle market business broker is a sell-side M&A advisory firm that has closed hundreds of lower middle-market deals in California. We are dedicated to helping our clients maximize value and achieve their desired outcomes. 

We have a deep understanding of the Californian market and an extensive network of buyers, which allows us to get the best possible price for our clients. We also provide comprehensive support throughout the entire process, from initial valuation to post-closing integration. 

Our hands-on approach and commitment to our client's success set us apart from other firms in the industry. If you consider selling your lower middle market business, we would be honored to help you navigate the process and realize your goals.

If you have decided to value and then sell your lower middle market business or still not ready yet, get started here, or call toll-free  1-844-414-9600and leave a voice message with your question and get it answered within 24 hours. The deal team is spearheaded by Andrew Rogerson, Certified M&A Advisor, he will personally review and understand your pain point/s and prioritize your inquiry with Rogerson Business Services, RBS Advisors.