How Much is My Business Worth?

We take time to get it right

Far and away the biggest question business owners have when they are considering a sale of their companies is, "what's it worth?" Naturally, providing these potential sellers with an answer to that critical question is one of the first steps in the Sigma DealMap™ process. While there are business valuation techniques used for wealth planning purposes, tax compliance, litigation support, partnership disputes, etc., our focus is on providing the business owner with the company's "fair market value." In other words, an approximate price the business owner can expect interested buyers to offer for the company. This fair market value technique is what Sigma Mergers & Acquisitions utilizes for business owners seeking an exit strategy.

Science and Art

Sigma Mergers & Acquisitions follows a valuation method that not only makes sense to our clients, but also produces a high level of credibility and success with potential business buyers. While some of these processes are proprietary in nature we can disclose that we employ both a science and an art to business valuations. Our process focuses on a knowledge of the business, knowledge of the industry and an understanding all of the value drivers of the business, which can include:

  • Unique competitive advantages
  • Barriers to competitive entry
  • Diversity of customer base
  • Quality of the workforce, including management depth
  • Growth potential
  • Systems in place to operate business
  • Condition and value of facility and equipment
  • Industry type
  • Seller’s discretionary earnings (SDE), cash flow or EBITDA
  • Reason for Selling

Financial Analysis

Each of these value drivers are critical to the valuation process, but the importance of reliable financial information naturally cannot be overlooked and to many buyers is the most important value driver. While many business buyers focus, in our opinion, far to much on financial information, we emphasize that financial data alone does not create or produce the true value of the on going business. Don’t get us wrong, we indeed examine closely the financial data and perform modeling techniques on the financial information.

Different valuation methods view earnings differently but based on the size of the company the cash flow of a business can be characterized as SDE (seller's discretionary earnings), or EBITDA (earnings before interest, taxes, depreciation and amortization).

During the financial analysis phase we review primarily the P&Ls, balance sheets and tax returns.

The objective is to:

  1. Determine the amount of “discretionary expenses” that are not essential to the day-to-day activities of the business
  2. Identify those expenses that are non-recurring or are unique "one-time" expenses
  3. Verify that the expenses associated with the owner qualify as add-backs
  4. Analysis of the balance sheet (although we understand that many of the businesses we review have incomplete or inaccurate balance sheet reports)

FREE VALUATION

Want to know how much your business is worth? Is your business generating over $500K in yearly revenues? Fill out the form below to request a custom valuation for your business.

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