Category: Valuing A Business

I am often asked by various publications to comment on the business for sale market given the economy at any particular time or when there may be an election looming.I am neither an economist nor psychic, so while I always…

A common issue that comes up when attempting to value a small business are the add-backs. The entire concept behind doing add-backs is to normalize a company’s earnings and to present the business as an owner operated entity.For example, these…

The whole issue of inventory can become quite convoluted when buying and valuing a business because there is no set standard for how it is treated and there are many schools of thought on this component of a valuation.Personally, I…

I have always tried to avoid generalities and instead draw conclusions based upon facts and data. So I am always conflicted by trends - are they really quantifiable, or just a recent turn of events? However, I am going to…

As we have discussed in prior posts, business valuations are an art, not a science. So when the time comes for valuing a business, you need to consider how to weigh the financial reports to determine your price.While there are…

I want to continue to discuss valuations and this week we will touch upon the basis upon which the majority of business you will encounter will be valued by the seller.First, let’s get some clarity because there is a wide…

Our company conducted a survey last month with 566 prospective business buyers (people who stated they were actively looking to buy a business). We asked them to identify their single biggest concern about the business-buying process. Twenty-three percent stated that…

Question:If you buy a business that includes the Accounts Receivable (A/R) do you discount this amount? If so, are there certain percentages that are common for certain industries?Answer:While most small business sales are "asset sales" where the AR generally remains…

Question:When reviewing a company's recast statement, what addbacks are considered legitimate when a buyer is evaluating the cash flow of a business? My understanding of this evaluation process is that Depreciation, Interest, Amortization, and Owner's Salary are the only items…

Question:I need some advice on a business I am evaluating and would like to move forward with an offer shortly. The company has good books and records, profitable on the tax returns, and I believe will be approved for bank…