The first step to selling your business effectively is finding out what it is worth in today’s market.
At OCA, we help Business Owners (and Buyers) determine what the business may be worth in the current marketplace.
Knowing the sellable value is paramount to getting your deal done.
Without knowing specifically what is being compared it would be unfair to speculate. However, you should be aware that many FREE (or “Napkin” style valuations) are based upon “for sale” listings or on “sold” comps – and they are predominantly irrelevant and untrustworthy. There are many elements to properly developing a business valuation., and it is rarely deemed credible by trained and skilled valuation analysts to use a database of “listings for sale”. Why? Because people (including uncredible or misleading representatives) will “list” their business with unrealistic and overly inflated value and result in never being sold. If you get a “valuation” based on flawed information (although you may like the value presented) it will not serve you well in getting your business sold. Flawed information produces flawed results. The “sold” comps can also have elements that are misleading and askew. Some online “valuation calculators” only ask for your most recent year of financials, and that is highly inappropriate and incorrect. Why? Because no Buyer will purchase or value a business based on one year of financial information, nor will a lender provide funding to a Buyer based on just one year. Each level or type of our value ranges are based upon industry valuation approaches, methods, and techniques and coupled with what Buyers in the market will pay and what Lenders will loan to Buyers to purchase a business. Our valuations and value ranges are more of a “Practical” approach than a philosophical one – this helps you actually sell your business rather than “try to sell it.”
Yes, we have access to market database details. We even utilize the same database and screens most commonly used by lenders who provide funding for buyers to purchase businesses.
Our founder has been performing business valuations for over 35 years and has earned credentials. He has performed valuations for the purposes found on this site, and for legal and litigation purposes as an expert witness. Oftentimes he will perform USPAP valuations, that is, in accordance with Uniform Standards of Professional Appraisal Practices (the Appraisal Foundation).
There are only three industry recognized Approaches (Asset, Income, and Market), and various Methods of calculation within each approach. OCA does not employ a boilerplate method (or madness) when performing various type of valuations. All of our valuations (for whatever purpose) are customized for each project – this assures the Client that the value is in line with market conditions and based upon the specific attributes and dynamics of the business. We do not perform, nor do we recommend the use of valuations based upon “listings”, or cocktail discussions of “multiples”, or a quick meeting with a “napkin approach”, or a one-year online calculator.
“Sellable ranges of value” are usually based upon certain industry accepted valuation methods that produce a range of business values that are embraced by buyers and the lenders who are needed to fund the business purchase. Regardless of what value a Seller may want or what a Buyer is willing to pay, ordinarily it’s a matter of what a lender will fund for the purchase (after the Buyer invests capital). After decades of experience in the market of helping people value and buy and sell businesses, we have seen a lot of online “Free Valuations” being offered that oftentimes deliver inflated values and unrealistic expectations to those wanting to sell their business. This is done because it promotes what sellers want to hear and it entices them to “list” their business with a representative who will unlikely be able to deliver the value or they will get the seller “listed” and then try to gradually work the expectations of the seller downward (bait and switch). We believe this is inherently wrong and is a disservice to sellers. The question you must ask yourself is: “Do I want to get an inflated value to make me feel good, or do I want a value that will help me get my business sold?”