The Key Elements that Determine Value

To celebrate the simultaneous release of our BizValue Android app and update to our Business Value Calculator, we decided to write a newsletter dedicated to the art and science of valuations. After all, if there’s one thing that seems to constantly puzzle small business owners it’s their company’s value.

Agreeing on your company’s value will make or break a transaction – ultimately, a company is only worth what someone else is willing to pay for it. That said, there are four key elements that impact every valuation:

  1. The Buyer
  2. Cash Flow
  3. Risk
  4. You

The Buyer Continue reading

Year-End M&A Report: Audiology Industry

December 2012 marked one of the busiest months for U.S. M&A activity in recent memory, and the audiology industry made its fair share of contributions.  Last summer, we released our mid-year M&A report for the industry predicting that total deal volume for the year would be $60-75 million.  We will revise that number upward in this report, because
at least $30 million worth of transactions took place in December alone.

We now believe 2012 accounted for approximately $100 million in transaction volume.  Our estimates consider only the acquisition of privately owned audiology or hearing aid dispensing practices in the United States and do not measure transactions involving other entities within the industry.  Furthermore, this figure only measure deals initiated in 2012.  Many deals involve deferred payments, and  millions of dollars were spent covering obligations incurred from transactions that closed in previous years; however, in order to accurately assess deal volume for a given year, only transactions closed in that year can be measured. Continue reading

Comparing Valuation Tools

One of the most common questions that business owners ask us is “what’s my business worth?”  The most effective way to answer this question is to purchase a comprehensive valuation report; however, you have options.  There are three general categories of valuation reports at your disposal, each with their own pros and cons:

1. Free Online Valuation Tools

Spend a little time on Google and you can uncover a variety of free online valuation tools. Like most things on the web, they vary in their complexity and accuracy. The biggest benefit is that they are free, and most are quick and easy to use. They can provide a good starting point for someone who is curious about their company’s value; however, they lack the sophistication of comprehensive valuation reports. Continue reading

Introducing the Business Value Calculator

We are pleased to announce the launch of the Business Value Calculator (BVC), a free online tool for business owners interested in determining the approximate fair market value of their business.  If you’re reading our blog, chances are good that you are curious about the value of your business, and we hope the BVC can answer some of your questions.

Access it here:

The BVC requires you to enter some basic financial data about your business, select an industry, and rank your company across a variety of categories:

Upon completion of these steps, the BVC will provide you with a valuation range containing a low, mid, and high value.

We hope you find it useful and look forward to your feedback.


How Much Is Your Business Really Worth?

By: Greg Dupuis

The most common question I get asked is; What is my business worth?  Unfortunately, there is no easy answer to this question without knowing the specifics of a particular business.  I can address the subject of valuation so you can understand how buyers will value your business when you decide to sell. Although there are various methods to determine value, three of the more popular methods used are Multiple of Earnings, Comparable Transactions, and Income Capitalization. Let’s briefly look at each three methods and remember that the final value of your business will be determined by many factors including the price, terms, and market conditions when you sell.

Multiple of Earnings

Here a multiple of the companies earnings, whether it be EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), net income, or SDCF (Seller’s Discretionary Cash Flow) is used to calculate value.  Regardless of what type of earnings is used, it is generally “adjusted” by adding back any personal or discretionary expenditures that are not directly related to the business. As an example, the expenses your company paid for discretionary travel (perhaps it was more vacation than travel) would be added back into the reported profit of the business. Keeping accurate records and being able to document all adjustments is critical.  Your broker will then use this total discretionary cash flow as a tool to gauge a selling price based on a multiplier for your specific company and industry. Continue reading