I’m Jon Hunt and I’m here on the Bayfront in beautiful Saint Augustine. Florida.
I’m a business broker and I work with buyers from all over the world to help
them find a business business that’s just right for them
and I work with business owners
to help them find an ideal buyer for their business.
Today I want to talk with you
about how we can work together to determine the fair market value of your business
in today's market.
When I talk with business owners
I often ask
have you ever thought about selling your business and it's interesting how often
I get the same response
and that is
I think about it every day. Perhaps you’ve thought about selling your business
either to retire, to relocate or to take on an entirely new challenge.
I can't help you decide
when the time is right for you to sell your business
but we can work together to determine the approximate value of your business
in today's marketplace and that basically comes down to three very
simple factors: the nature of your business, the annual revenues of your
business and sellers discretionary earnings.
If I lost you on that last point
sellers discretionary earnings
don't despair
we're going to walk through an example to show you exactly how those are
determined. Sellers discretionary earnings
sounds like a complicated term. In fact some brokers use the term adjusted net
some use SDE I prefer the term owner benefits. It really refers to the net
profit or loss of a business with certain add backs such as amortization,
depreciation
compensation to the owner,
a health insurance plan a car payment even a cell phone payment. Any expenses
that are benefit to you as owner
are added back
to determine total owner benefits.
The easiest way to determine the value of your business
is to compare it to other similar businesses that have sold.
It's very similar
It’s very similar to what a residential real estate agent might do in preparing comps if you
decided to sell your home. When we talk about comparing your business other
businesses that have sold
I use information on the database of the Business Brokers of Florida. We have
information on thousands of business sales. For instance
if we look at our database for pizza stores that have sold
I can do a search
and I find two hundred and forty one pizza stores that have sold in
Florida
and I can sort this information by the sold sold price the and revenues
or the owner benefits and that way I can narrow the results too closely mirror
those of your business.
Okay let's walk to an example of how we determine an approximate value in
today's market.
We work with tax returns. Profit and loss statements and other financial records.
Tax returns are the highest and best Evidence. I know you'll find a shocking but
not all business owners report all income on their tax return.
But for an example
let's say that you have a pizza shop with five hundred thousand dollars in
annual revenues.
Let's say that this pizzeria had a tax return profit of thirty thousand dollars.
But that doesn't represent the total owner benefits.
I'd make several add backs.
For instance
if the owner was paid thirty thousand dollars
and the business had fifteen thousand dollars in depreciation
and perhaps another fifteen thousand four for amortization.
Then I'd look for other common add backs
such as meals and entertainment
health insurance, a car payment
or cell phone bill.
Whatever business expenses benefit the owner we add that back.
So you can see then we total these it's easy to have owner benefits of more than
one hundred thousand dollars.
Our Business Brokers of Florida database
reveals pizzerias is in this range sold for about one point four times the owner
benefits.
This would the put the value of our sample
at about one hundred fifty thousand dollars.
Once we determine your owner benefits I can provide you with the lowest, highest
and average prices paid
for businesses like yours
with similar revenues and owner benefits. Pricing your business correctly is key
to generating buyer interest.
Buyers shy way from businesses that are over priced. If you'd like to work
with me to establish an opinion of value on your business I forward to
working with you. Simply drop me an email please note that there are two H’s in the middle
of this address
or give me a call.
I look forward to working with you.