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Realistic Business Valuation

By: Wes Martin
Sound Business Brokers

When a business owner finally makes up their mind to actually sell their company,
the next step of business valuation is of critical importance to the success or failure
of a potential sale. One of the difficult realities of business valuation is its complete
subjectiveness. There are literally dozens of formulas and methods that will assist in
forming a basic value of any particular business; however, not one of them fits all
businesses and all are slightly flawed in some way. This is without mentioning that each
business is different from those even in the same industry and may have, in play, internal/
external market forces that can’t be defined into a formula. The process is laden with
landmines that can derail your effort before you even begin so it’s vital to make certain
that you are using a method that most suits your industry and that you understand how the
regional market is affecting the price that you ultimately come up with.

Despite what a business seller may think, Potential very rarely plays any role in the
value of a company. Buyers typically will not pay and bankers will not lend on potential.
It will, however, keep a buyer at the table if they can see clearly where the company
is heading and how they can grow it. It’s best to keep to the facts of past company
performance and develop a realistic valuation based on historic adjusted cash flow. By
starting the process with a reasoned valuation, the chances of your success increase
exponentially.

If you need a guide to take you through the process of finding out what
your company is worth, Sound Business Brokers of Olympia can confidentially assist
you. www.soundbusinessbrokers.com or wes@soundbusinessbrokers.com

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