Source: Acquisition
Cincinnati, OH 
"What is the Market Value of Your Business?"

Simply stated, the whole process of deciding to add, change, buy, or sell a business should begin with a professional valuation to determine its "real world" market value. And when a business has been valued properly, everyone wins. Here's a representative example drawn from experience with hundreds of business appraisals over many years: my firm has worked with:

TYPICAL BUY-SELL SCENARIO - An industrial distributor marketing products and services within a 100-mile radius of its Midwest location. Present annual sales, $1,750,000. In business 25 years; present staff of 13 includes 2 salespeople. In this situation, using a professional business valuation as a basis for monetary buy/sell negotiation has proven equitable for both buyer and seller. Here's why.

The blended approach (the HBVS System) allows the business valuation to factor in more than just the income stream and owned assets, which for smaller firms in particular, can be a substantial component of value.

(Three types of consulting firms were valued in the study; 1) Micro-Niche Firm @ $200K revenues, 2) Small-Medium sized generalist firm @ $2.5M revenues, 3) Mid-sized niche firm @ $17.5M revenues. The results were illustrated by spread sheet which allows for interesting comparisons)

This exercise highlights the down-to-earth usefulness of a non- subjective business valuation system, as a consistent and comprehensive approach to the market worth of consulting (or any other) firms. Financial performance and assets pull no punches.

An information based small business valuation system, as a baseline, centers on factual and insightful data. Subjectivity can come into play, but only after financial inputs have produced a price level that seems fair to both a motivated seller and a willing and qualified buyer. Put more simply, its hard to get excited when the P/E Ratio is in the teens. Need we say more.

Source: Atlanta Small Business Monthly 
"Selling Your Business?"

Businesses are sold for many different reasons, but the three most popular are retirement, burnout, and major illness.

After owning a business and fighting the battle over the years there comes a time when you're ready to cash it in and turn it over to someone else. You talk to your family, your CPA, and your attorney -- and you put the business on the market. A year and a half later -- after negotiating with two individuals and two corporations -- you do the deal with "Pete," the nice guy from Cincinnati. He seems to be a good person with a nice family, and he has the background for the business. You've structured the deal with a good down payment and agreed to finance the balance with interest over seven years. Sweet deal, right? Well, maybe.

If owner financing is part of the deal, be careful! It could come back to sting you, especially if you plan to retire after the sale.

Source: Insights
Charlotte, NC 
"Positioning Your Business Today to Sell at a Profit Tomorrow"

In the context of selling the business outright, the two-part question becomes "What is a reasonable price that will, first, reward the owner for developing this profit-producing entity, and second, will also treat the buyer fairly in that the the price can be justified by the income stream produced in a reasonable period of time?"

And here the water becomes murky, because most small business owners tend to be cautious when declaring the actual profit of the business in view of tax implications. And that is a sound practice. If, for example, a profit of $50,000 were considered, owners might opt to pay bonuses to themselves and/or other key employees because they believed it better for people, rather than the company, to pay taxes.

But if the business is to be sold or otherwise divested in the near- to mid- term, planning for that event should begin early. Why? Because with proper planning the firm's profit/assets report card can show a consistent history of business profit. This is referred to as "exit planning."