To put it simply, a business valuation determines the economic value of a company. This process is used to determine how much your business is worth in today’s market based on an estimate by an unbiased third party.
Estimating the value of your business is both a science and an art. There are several formulas and models used to generate an accurate valuation which rely on many factors, including:
As you can see, because there are multiple business valuation models and so many factors that go into each one, getting an accurate estimate is like throwing darts. Sure, your broker may get lucky, hit a bullseye and project your business’ value perfectly… or they may be way off target.
If your business valuation is too high, you’ll never get a serious buyer. Even worse, a low-ball business valuation could leave money on the table. Either way, it’s costing you time and money.
In the 21 years that Sigma Mergers & Acquisitions has successfully sold 700+ businesses, we have provided over 7,500 business valuations in every imaginable industry. With that level of experience, the values we place on businesses are surprisingly accurate.
Because we’ve created, bought and sold our own businesses, Sigma’s professionals have personal knowledge of the blood, sweat and tears that go into building a successful business. We’ve also helped hundreds of business owners successfully sell their businesses. This combination of experiences led to the development of our proven business valuation model — one which helps you to achieve top dollar while increasing the chances of a quick sale.
Sigma prides ourselves on a valuation model that is proven to provide stellar results to sellers while providing complete transparency during every step of the process.
Clear methodology: Many business brokers have a mystery formula they use to perform a valuation, presenting you with a final number but providing very little insight into how they came up with it. At Sigma, we take the time to explain how we came to our valuation, addressing any questions or concerns before the sales process starts.
Comparable statistics: Our valuations are based on real numbers, not best guesses. Thanks to our extensive business sales experience, we’re able to access up-to-date, comparable statistics from our own sales and transactions, as well as those from other valuation experts across the U.S.
Accuracy of value: When we give you a valuation, you can count on it being on target. In fact, after doing hundreds of valuations, they are typically accurate within 5% of the business’ final selling price. In other words, the business routinely receives offers and sells for an amount that is within 96% or more of our valuation.
Advice to increase value: Sigma’s advisors have collectively sold more than 700 businesses over 21 years. With that vast experience of performing valuations, we know firsthand what qualities and characteristics have a big impact on increasing or decreasing value. We’ll provide you with actionable steps that will make your business more attractive to potential buyers while increasing its value.
Interested in getting a realistic business valuation for your Texas or Oklahoma-based business? Fill out our Business Valuation form to schedule a free consultation and business valuation.
There are many reasons to have your business valued. Sometimes it’s a necessity, such as when you are determining the value of your business for estate planning reasons. Other times it’s for a proactive reason, such as helping you understand your business better and plan for the future. Here are a few of the major reasons to get a business valuation.
An accurate business valuation is essential for succession planning. Passing down your business will include several complicated issues, such as how to allocate value and tackle tax issues. You’ll want a thorough valuation so you can assess your company’s financials and determine its position in the market.
A business valuation might be necessary not just to file an estate tax return, but to provide guidance to a personal representative when fulfilling the terms of a will. If you are effecting a gift to minimize your estate tax, this will often require the valuation of your business.
Business valuations might also be necessary for businesses to develop buy/sell agreements. These types of agreements may be important for tax or business purposes. A buy/sell agreement will allow the owner of a business to acquire the interest of another owner – if the owner passes away or decides to retire.
A business valuation is absolutely essential for mergers and acquisitions. Many business owners are uncertain (or unrealistic) about what their businesses are currently worth. It’s crucial to use an objective, transaction-based method of estimating the fair market value of your business.
If you are a business owner going through a divorce, a valuation of your business may be required in order to divide up the marital estate. Sometimes both sides will obtain separate valuations, but in many cases there may be a collaborative divorce where both parties work together with a single analyst.
A business owner might also get a business valuation in order to determine the value necessary to over their business interest value if anything happened to them. This is known as “key person” insurance and is paid out to the owner’s family to allow them to continue the role or buy themselves out of that role.
Are you looking for a professional firm to list and sell your business? We can help. Sigma’s Free Market Approach package includes a valuation of your business for the purposes of considering a business sale, as well as our expert support throughout the selling process.
Do you have your own buyer and simply need our help with the valuation? Sigma’s Fee-Based Market Approach gives you a market valuation for your business. Our fee for this package is based on the size of your business.
Need a business valuation for estate planning or IRS purposes? Sigma’s Certified Business Valuation provides you with a detailed analysis designed to hold up against the most intense scrutiny. Our fee for this package is based on the size of your business and the purpose of the report.
Here are some of the important steps you can take to prepare for a business valuation:
● Determine why you need a business valuation, as the approach to the valuation will depend on why you are having your businesses assessed.
● Gather the important documents required for the business valuation. You’ll need well-documented financial statements and tax returns in order to demonstrate the earning power of your business.
● You’ll also want to provide a customer list to show where your business gets its revenue. (If your business has many customers rather than a few large customers, it will command a higher selling value.)
● It’s also a good idea to conduct market research so you have a better understanding of your industry before you sell your business.
Ready to meet with one of our professionals to gain an accurate, transparent and confidential valuation of your business? Though your paperwork isn’t the only thing we’re interested in, it’s still necessary. Here’s a quick list of items you’ll need to bring with you:
The Value Gap Analysis is a powerful add-on service that builds on your valuation. It identifies opportunities to close the gap between your current value and your potential value, giving you clear, actionable steps to grow your business’s worth.
Sigma is a the leading business broker with offices in Dallas/Fort Worth Texas with roots from 1984. Over 700 businesses sold in Dallas, Fort Worth and all over Texas.
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