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Business Valuation & Buyers - The Right Buyer & Right Price

Business Valuation is what the Company is worth? Putting a price on a business & finding a buyer can be a challenge.

Selling a business is a big step, and finding the right buyer can be a challenge. However, you'll have better luck finding an eager buyer if you put a price tag on your business and look for potential buyers you already know.

 

 

 

Business Valuation: What's the Company Worth?

Putting a price on a business – business valuation – is the first step in finding the right buyer. A commercial business broker is one source of valuation services. Your bank also may provide information on similar sales of businesses in the bank's service region.
 

 

 

Business valuations are based on numerous factors:

  • How long has the company been in business?
  • What kind of reputation does the business have within its service region?
  • Does the company have a stable client base?
  • Does the company have tangible assets, i.e. business-owned office space, equipment and machinery, a fleet of trucks?
  • How much are these assets worth?
  • Does the company own intellectual property: patents, trademarks, distribution rights, copyrights? These all have value to a prospective buyer of your business.
  • Are there any liens, pending lawsuits, or legal issues on the horizon?
  • Is the company up-to-date on all tax filings, certifications, licenses, etc.?
  • In valuing a business, consider a range of acceptable prices based on realistic expectations of potential buyers, not pie-in-the-sky projections. Once you have the range of high-low acceptable offers, look around for buyers you already know.

 

Vendors, suppliers, wholesalers and other business associates know your company, they've seen growth, they know the industry, and they may be looking for opportunities to grow through acquisition. Talk to the people with whom you do business about selling your company. You might be surprised to find the right buyer is only a phone call away.

Family members also may be suitable buyers. The Small Business Administration (SBA) offers advice to business owners on transfer options to family members including an outright sale, a gradual buyout or even a lease agreement. Choosing the most suitable option likely may require some legal and accounting advice.

Family members who've been part of the business may benefit from transfer of ownership more than outside family members who don't know how your company operates.

Make sure terms are reasonable to protect your interests and the interests of the new owners.

Competitors are another great source of potential buyers for your business. When a competitor buys your business:

(1) it eliminates a competitor

(2) it adds value to the existing business through acquisition.

Employees may be interested in buying "their company", especially when it is privately held. Employee-owned businesses attract talented people who recognize that the success of the company depends on the professional success of each employee-owner.

Talk to an attorney familiar with ESOPs – Employee Stock Ownership Plans  – and learn the basic IRS and SEC rules regarding these plans.

Entrepreneurs looking for promising businesses based on business valuations are another option. Look for someone who's worked in your business sector and recognizes the reasonable valuation you've determined. Expect entrepreneur-buyers to perform due diligence and check the books, tax filings, client records, and other details.

Private investors, either U.S.- based or overseas, often buy businesses to establish a foothold in a new service area, or a base in the U.S. from which to expand.

Again, a licensed business broker may be a good source of private investor prospects who want to buy a business, and then turn daily operations over to their own team.

Valuate your business, know what you need from the sale ,then start talking to people you know. You might be surprised who that perfect buyer for your business is.


This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.

 

 



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