We are Vested Business Brokers
Reply
Tag Archives: business valuation
Ready to enjoy the fruits of your years of hard work?
As a business owner you know exactly what it takes to build and run a profitable business. You have spent countless hours and put in years of your blood, sweat, and tears growing your business. As a business owner, you truly understand the definition of sacrifice. So when the time comes and you’re ready to enjoy the fruits of your years of hard work, do you know the steps to take in order to sell your business expeditiously and get paid what it’s worth?
Well that’s where we come in. Our company is called Vested Business Brokers. We were established in January of 2000 by our CEO Nathan Goldstein to help business owners just like you. Since our inception we’ve helped over 1600 clients either buy or sell profitable privately held businesses. As our clients can attest, we here at Vested Business Brokers believe in our proven system, confidentiality and preparedness. One of our dedicated and seasoned brokers will work with you through the entire process of selling your business. Your broker will work with you to determine the true value of your business in order to price it correctly with the market. The next step is entering your business into our database, which contains over 230,000 pre-qualified and registered business buyers. Our database, which is constantly updated, will match your business with prospective buyers from all over the world. Once a potential buyer of ours is interested, your broker will be by your side through the negotiations, due diligence inspections, consultations, and meetings. We literally walk you through this entire process up until the completion of sale.
During our 17 years in this industry, we’ve seen it all. We know the do’s and don’ts. Our goal is to walk the shortest and straightest line in order to get your business sold for the price you deserve.
FOR MORE INFORMATION PLEASE CONTACT US
Toll Free: 1-877-Sell-A-Biz (735-5224)
Main: 631-265-7300
Visit us on:
Facebook: https://www.facebook.com/Vestedbusinessbrokers
Twitter: https://twitter.com/Vestedbb
YouTube: https://www.youtube.com/user/VestedBBVideo
Increase the Value of Your Business by Improving Your Collateral Material
Want to Increase the Value of Your Business?
One of the easiest ways to increase the value of your business is to upgrade your collateral material. In this video, owner and CEO of Vested Business Brokers, Nathan Goldstein discusses this important yet often overlooked part of any company…
Is Your Collateral Material Up to Date? If Not, You Are
Seriously Limiting the Value of Your Business…
This is Nathan Goldstein and I am the CEO of Vested Business Brokers. We help people buy and sell privately held businesses. Somebody came to me today and they asked, “What is the single biggest mistake that you see in small business today?”
Without a doubt, hands down, it is collateral material.
The sad truth is that most small businesses have very weak collateral material. This is an unfortunate mistake because a business’ collateral material is what a business uses to tell the world what they do for a living.
Many times I will go into a listing, I will sit down with the owner and he’ll tel me about his business then he will turn around and tell me that his sales are in a decline. When I hear this the very first thing I ask him is, “Could you please show me your collateral material?”
Typically, the business owner will then go to the top of the file cabinet and he’ll blow dust off an old brochure that was created by his Uncle Harvey in 1963. Then I’ll learn that this is the only collateral material this business has.
Really? Are you kidding me? I mean, we are looking to build enterprise value. If you are going to work every single day, you might as well go to work. My very dear friend Robert says, “Either go big or go home.” I live under that presence and I can tell you that if you don’t have the right collateral material, then you are NOT “going big” at all.
So get your collateral material right, there are a lot of great websites out there that can help you with that. In fact, there is one called 99Designs.com where artists compete on your project and create your collateral material.
The goal here is for you to build enterprise value in your organization so that when you come to us and ask us to sell it we don’t have to say, “Can we see the collateral material?” Because we know that the collateral material that you are using for your business is very powerful.
Don’t make the mistake that other entrepreneurs have, keep a keen eye on your collateral material and you will be very successful.
As always, we here at Vested Business Brokers are very interested in helping you increase the value of your business. Please let us know how we can help you. Call us at (877) 735-5224 to speak with an experienced business broker.
How to Determine Business Valuation When Buying a Business
How do you determine the value of a business that you are interested in buying? This is a critical question that you need to answer if you want to purchase a business for the right amount and you want to avoid paying too much.
In this video, Vested Business Brokers owner and CEO, Nathan Goldstein explains the concept of multiples as it applies to determining business valuation in the purchase and sale of a business.
The Basics of Business Valuation
Privately held businesses sell based on owner’s discretionary cash flow, which is the monetary benefit to the operating owner. Here’s an example of how to determine business valuation:
First, take all the income that the business makes, let’s say for instance the owner or manager of the business takes an officer’s salary of $150,000 a year and then after they pay payroll and all the expenses, let’s say there is another $50,000 there. Now, the value is $200,000.
Next, we need to account for any “add backs”. Add backs are benefits that a seller would have over and above his salary. For instance, if he pays his car through the business we would need to take whatever amount that is and then include it to thee final number as an add back. Likewise, if the owner pays for anything, such as health insurance, life insurance, disability insurance…those are all add backs.
After accounting for the owner’s salary, as well as any and all add backs we would get to a particular number, let’s say that will all those add backs it adds another $25,000 for the year…a grand total $225,000.
The Concept of “Multiples” and Its Effect on Business Valuation
Every business trades at a different multiple. A “multiple” is an industry term which refers to the yearly business value (owner’s discretionary cash flow) and whether the market value of that particular business is worth 1x, 2x, 3x, or more of that yearly value.
What this means is that, for instance, certain types of businesses, for example those that are absentee owned, will trade at a higher multiple than a company that has to be run by an operator or the owner.
Why is this so? Think about it…if you have a business that is an absentee run business, it will always trade at a higher multiple because the person who is buying the business will have the ability to keep his regular job which would mean that the new income derived from the absentee business would be added income instead of his whole income. Does that make some sense to you? I hope it does.
If you have any questions about this you can always call Vested’s main office at (877) 735-5224. We would be delighted to answer any questions that you might have.
Now, those multiples are generated by what we call here at Vested, “a moving market”. A moving market value is generated by how many listings we have in a particular market, what geographical area the business is selling in and then we pay it in a live moving market. We could tell you at Vested what the average cost of goods is, what the average payroll is, what the average expenses are, what the benefits to the owners are, and then we come to what is called the multiple.
Essentially, we take whatever the benefit is and we times it by the multiple and that is typically how we come to the price. This system really works.. This way you are not over paying for the business because you are paying exactly what everybody else would be paying in the moving market.
When I first started this business 11 years ago car washes were trading in high, five to six time multiples. Today, because we peg it to the moving market, they are trading in the four time multiple because most of them are run absentee. We could tell you the statistics, we could show you the statistics, or we could bring you on our back end and show it to you so you could get comfortable with it. We want you to be able to do all your due diligence and take your time which is the most important part of any deal we are going to have with you. We want to make sure that you understand how the revenue is generated, you could prove where the generated revenue is and you feel comfortable with the numbers.
We strongly suggest that you get a competent accountant to help you unwind all the financial information that a seller has given us. These are their representations, not Vested’s and we want to make sure that you are comfortable with those numbers.
Call us at (877) 735-5224 for help with the purchase of a business for sale.
Incoming search terms:
Business Valuation: How to Determine What Your Business is Worth
Business valuation is a question that comes up a lot at Vested Business Brokers. How do we determine the market value of a business when the owner wants to sell? Getting this right is critical if you want to sell your business quickly.
There’s all different rules of thought here…There’s the income value. There’s the asset value, etc. However, the way we at our firm look at any enterprise that we’re either going to acquire or help sell is: “What is the earnings potential, and how much is it earning today?”
Every business trades off “multiples” of earnings. In other words, we determine how much the business is earning, and what type of documentation does the seller have to prove to us how much it’s earning. That’s how we determine business valuation. Every industry has a multiplier that it will trade against. We have that database with all of that information.
At Vested, we leverage the information we’ve gathered since we began in 2001. Through our analysis of the data we know that sometimes in geographical areas the multiple is larger than others. In addition, if the business is an absentee run business it might trade at a larger multiple; whereas, if it’s just a cash cow or where the financial buyer will lay out the money and let your management team send them a check every month—that’s a financial buyer—or a financial buyer who wants to be a part of that management team. But, if it’s absentee run, it will always trade at a higher multiple.
Our brokers will be delighted to tell you what the multiplier is. I don’t want to get into it in our meeting today because we represent, I think, four or five hundred different categories of businesses that are for sale.
If you have a profitable business, it will trade against the multiple of the profitability of that business. Our job is to find out how profitable you are and how to tell that story to a potential buyer who is interested in buying it.
If we can help you, it would be our pleasure. Don’t hesitate; give us a call today at (877) 735-5224 to speak to me or one of our experienced brokers.