Business Valuations

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, it’s important to remember that “Value is truly in the eye of the beholder.” 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, and how much they think the company will be worth in a future liquidity event. That means there is no exact dollar figure, but 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 was often much higher than our client’s initial expectation. The way we achieve this outcome is by identifying key areas of risk and opportunities for growth, then working with our clients to shore up these areas in a short amount of time. At the same time, we cast a wide net, talking confidentially with many buyers across many industries to find the best fit and compelling valuations in the market.

Don’t Be Tricked by Our Competitors

The first step to selling your business or even preparing it for sale is to get a professional business valuation. Don’t be tricked by our competitors, who may charge you $5,000-, $50,000 to give you 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 or value enhancement 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 either help you sell it now or help you strategize ways to grow it for a future sale. 

How Much Is My Business Worth?

A business is usually one of the largest financial assets 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 t approach active buyers in the current marketplace for valuation range 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 really amounts to what buyers are willing to pay for that business.

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 its owners an accurate valuation range.

Notice that we use the term value range. We use it because it’s the best estimate of the current market. It’s an estimate and not an exact figure because when we sell a business, we never attach a price tag on the company. Instead, we market the business to our national and international database of thousands of buyers using a confidential, competitive offer process similar to an eBay auction for businesses. If the deal is really attractive, we have buyers competing over the purchase of the business, which often drives the price of the business up. This 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 this is a recent business we sold that received over a dozen competitive offers. We exceeded the initial market valuation range by over 30%!

The only way to know what your business is really worth is to value it using the competitive sale process. It could sell for more, for less, or right in the market valuation range.  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 return you can expect for your company and how you can improve its 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 sales 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 what you currently have, 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 more, spending more time with family or friends, and, ultimately, complete retirement. 

3. Knowing Your Business’s Value Gives You Time to Adjust

Growing business value to a point at which you can achieve your goals can take years. It’s rarely as easy as flipping a switch or making a small change, and many business owners severely underestimate how much time it takes. This commonly leads to burnout, especially when owners view the challenge of spurring growth as insurmountable. Knowing what your business is worth now can prevent you from burning out or staying in the business for longer than you want. A valuation range helps you determine how long it may take to build the business to where you need it to be.

Unless business ownership is merely a side project for you, the value of your business will likely be one of the most important factors affecting your future, the goals you want to pursue, and the people and causes you care about. That’s why when you’re considering selling your business, it’s important that you work with a team of experienced and dedicated professionals like the one at Affinity Ventures. 

How to Get a Free Business Valuation

Contact us online or call us at (505) 881-5352 to speak with one of our business valuation experts and receive a confidential free valuation estimate.