Factors Affecting Business Value

Factors that can affect the value of a private business:

1. Recent profit history: This is based upon recast earnings adjusted for extraordinary owner-related expenses and other one time adjustments
2. Market demand for a specific type of business
3. The general condition of the company: This includes the accuracy and completeness of company records, condition of facilities and equipment, and an evaluation of the human resources
4. Regional and national economic conditions: Consider the cost and availability of capital and other economic factors that can affect the business
5. Competitive climate: Includes issues of market share and ease of substitution for the companies product or service
6. The ability to transfer the benefits of the intangible assets to the new owner
7. Future growth and profit potential
   

These seven factors determine the fair market value of your business. However, there are four additional factors that complicate the "fair market" consideration and affect the price:

1. Relative tax consequences for Buyer and Seller that depend on the structure of the transaction
2. Special circumstances of either the Buyer or the Seller
3. A tradeoff between cash and terms
4. Available synergistic value from a Buyer's perspective

We firmly believe that a professionally prepared Valuation is a critical tool necessary to sell your business. It will justify the price based upon the current condition of the company from an unbiased perspective. This gives both the Buyer and the Seller confidence in the validity of the asking price. More importantly, it establishes a price that a Seller can expect to obtain.

The cost of a professional business valuation from a financial professional will cost from $3,000 to $4,000 and up, depending upon the size and complexity of the business being valued.

(Factors Affecting Business Value)
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