How Much Is My Business Worth?
Answering this question is “loaded”, meaning… it depends on sooo much. There are many brokers and franchisors who might just take a percentage of sales to come to the price or use a “rule of thumb” out of a certain book that amalgamates various sales. While there is some worth to running this exercise, it can grossly under value your company or grossly over value it. If you think about business in general, we all know that you can have all the sales in the world and not make a penny, and even lose money – General Motors has proven this time and time again. Additionally, if you get a “broker opinion of value”, that’s fine, but most brokers are not appraisers. In fact, out of hundreds of brokers, we don’t know anyone who is SBA (Small Business Administration) accredited. Why? It’s very time consuming (years) to get this accreditation. There are plenty of appraisers out in the world, but, again, not many are SBA accredited or specializing in businesses, and you need an appraiser that a banker would use if you want solid credibility. This set of standards that are required by the SBA keeps the appraisals relatively in alignment with one another, all data being equal. Consistency is important when you have hundreds of appraisers out in the world. Further, there are several other significant advantages to using this level of valuation which helps you get THE HIGHEST PRICE FOR YOUR BUSINESS, but again that is reserved for a phone call with us or go to our “Why Blue Stone” section for more information on this (it is password protected however).
The point to this discussion is that you are likely going to need a bank if your business is going to price over $500,000 (unless you just want to carry a note). Therefore, ensuring that the business is priced right so that a banker will get the deal done is critical on multiple levels. We’ve worked hard over the years to determine the appraisal firms most of the national banks (Wells Fargo, US Bank and dozens more) employ, and there are only a couple of firms that are used on a regular basis. Working with these firms is part of our “secret sauce” and is worthy of a discussion over the phone to learn more. Ultimately, if you can’t get a bank to carry the deal, you’re faced with not selling, carrying a large note yourself, or waiting for an all cash buyer. None of these are great options for you.