Business valuations can be complex and multifaceted, depending on the industry the business operates in and the size of the company. Luckily, the qualified M&A business valuation professionals at Affinity Ventures can accurately value and prepare your business for an eventual sale. While there are many formulas and methods for estimating the value of a business. You must think of your business’s enterprise value as the amount a buyer is willing to pay for it, how much they value the company’s combined assets, how much value they can add, and how much they think the company will be worth in a future liquidity event. That means there is no exact dollar figure in value until the business is sold, only a range or estimate of value. Every situation is different and influenced by a variety of factors.
Affinity Ventures has years of experience in estimating business value and closing transactions. The value exchanged at closing is often much higher than our client’s initial expectation and our initial valuation because of our proprietary controlled facilitation process.
How Much Is My Business Worth?
A business is usually the largest asset a business owner possesses and the cornerstone of their personal wealth and retirement plans. But while many owners believe they know the value of their business, they don’t know what buyers will pay for it. This uncertainty can lead to surprises when selling or missed opportunities to enhance the business’s pre-sale value. The truth is that nobody can provide an exact dollar figure for what a given business is worth.
So, let’s discuss our process for producing accurate market valuations.
We use multiple methods to determine the value of a business including Multiples of EBITDA, Discounted Cash Flow, Industry Comparables, and Fair Market Asset Value. We also use active buyers in the current marketplace for valuation ranges in the specific sector of our client's business. Once these metrics are attained, we use a blended model for the most accurate value range possible. After all, the value of a business equates to what buyers are willing to pay for that business.
Complimentary Business Valuations
The first step to selling your business or even preparing it for sale is to conduct a professional business valuation. A seller should never be charged for a professional market valuation as it is part of the process for a seller and their trusted advisor. Some firms charge between $5,000 and $50,000 to provide an estimated market valuation for your business. Affinity Ventures will perform a full market valuation for free, 100% complimentary, with no obligations.
We’re so confident that after you see our work and meet our veteran team, you’ll trust us to handle the sale of your business. Regardless of the industry you’re in, our M&A advisors can provide you with a comprehensive estimate of your business’s current value and help you get the business market ready, and ultimately sold.
Our Business Valuation Process
A recent IT business valuation we performed offers a prime example of our market-oriented business valuation approach. Affinity Ventures recently opened a dialogue with a buyer that had completed over ten transactions in the IT space in the last 15 months. They gave us insight into their transaction sizes, multiple range, earn-out, holdback, equity roll, and all the attractive M&A deal terms we look for in this industry. We gained active, current information we could apply to that company to give the owners an accurate valuation range.
We use the term “market valuation range” because it’s the best estimate of the current market. It’s an estimate and not an exact figure because when marketing a business, we never attach a price on the company. Instead, we market the business to our extensive national and international database of buyers using a confidential, competitive offer process. This creates the dynamic of buyers competing for the business, which tends to maximize the value ultimately delivered to our clients at close. Our process allows the market to determine the true price of the business and normally results in a higher price for the seller. A great example of our process maximizing value is a business services company we sold that received over a dozen competitive offers. We exceeded our initial market valuation range by over 30%.
The only way to know what your business is truly worth is to conduct a competitive, facilitated sale process. Our business sale and valuation professionals can provide you with an accurate valuation range and a strategy to make your business even more attractive to potential buyers.
Why All Business Owners Need a Valuation
Regardless of whether you plan to sell your company this year or in the next 10 years, a business valuation can provide you with valuable insights into what value you can expect for your company and how you can improve the value in the near or long term.
1. Knowing Your Business’s Value Can Guide Future Growth
A business’s value can indicate how well (or whether) it’s growing. Although you may assume you have a good idea of your company’s growth and value by using indicators such as gross revenue and cash flow, other factors often impact the actual value of the business.
2. Knowing Your Business’ Value Can Solidify Your Planning
Just like in personal finance, without knowing the value of the specific asset, it’s difficult to create a plan that allows you to pursue what you want and need in the future. This applies to goals you may have for your post-business life, such as traveling, spending more time with family or friends, investing in future opportunities, and ultimately a complete retirement.
3. Knowing Your Business’s Value Gives You Time to Adjust
Growing your business value to a point at which you can achieve your goals can take years. Many business owners severely underestimate how much time and strategy it takes to maximize the value of the business. Knowing what your business is currently worth will give you a benchmark for where you are and will need to be for a successful exit.
The value of your business will likely be one of the most important factors affecting your financial future and the goals you will want to pursue. Therefore, when considering selling your business, it’s important you work with a team of experienced and dedicated professionals like the team at Affinity Ventures.
How to Get a Free Business Valuation
Affinity Ventures Valuation Products:
1. Complimentary Fair Market Valuation
- This free valuation service is provided to prospective M&A Clients that would like to establish a range of value for planning purposes. Please contact Affinity Ventures to learn more about this confidential, no obligation.
2. Brokers Opinion of Market Value (BOMV)
- Reduced fee valuation helps establish a reasonable listing / selling price for asset sale.
3. Calculation of Value Report (COV)
- Used for calculating the purchase of 100% interest in a business. Not appropriate for Lender valuation purposes.
4. Business Valuation Report (BVR)
- Buy / Sell stock or assets, 100% or a minority interest. Can be used for lender valuations.
5. Business Appraisal Report
- Appropriate for Estate Planning purposes, such as gifting or exit strategies.
6. Litigation / Divorce / ESOP
- Defensible valuations used in legal proceedings or for fiduciary reporting