What is business valuation?Vincent Murphy Business Broker

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What is business valuation?

Panther Equity Advisors Vincent Murphy Business Broker

Understanding the valuation process is important for sellers because it will allow
you to understand the mindset of that optimal business buyer. It will also help
you to maximize the value of the business by learning and applying what you
need to do to prepare your unique business for sale.

Likewise, understanding business valuation is vital for buyers because it can
help you determine if a seller is being fair and realistic in their asking price. And,
if that’s not the case, this knowledge provides powerful leverage during
negotiations. It also serves as a key means of identifying great buys and
prioritizing potential purchases over time.

So, let’s dive into exactly what business valuation is, how it’s accomplished, and
what you, as a prospective buyer or seller, should be doing to get the most out of
this valuable skill.

What is business valuation?

Put simply, business valuation is a broad umbrella term that covers numerous
methods buyers and sellers can use to place a dollar figure on the total
quantifiable and unquantifiable value of a company. Since both tangible and
intangible assets and liabilities are often included in the transaction, business
valuation is far from a simple, straightforward equation. In fact, calculating
figures are only a small part of the total process.
Many experts claim business valuation is more of an art than a science. What
they mean is that valuation involves a lot of educated guesswork and creative
thinking.

There is truly no right answer because the same exact business could be worth
half as much to one buyer as another. So, valuations are often presented as
reasonably wide ranges with qualifying factors included. This provides the best
negotiating tool for buyers and sellers alike, although in most cases, buyers and
sellers will arrive at different overall ranges and may still need to settle outside of
them. (This is a challenge known as “the valuation gap,” which is discussed in
more detail in the next section.)

Due to all the factors involved, and the highly unpredictable human side of the
equation, business valuation is a specialized skill that smart business owners
and buyers will outsource to experts with plenty of experience. These can include
business brokers, experienced attorneys, or accountants that specialize in
business sales transactions.Buying or selling a business, business broker, a business selling

Vincent Murphy Business Broker Intermediary

To accommodate these varied factors, there are numerous models you can
consider using to estimate the right price for a business. Some are more
appropriate to particular sectors or company types, but there’s no “best”
approach for anyone business. panther_equityadvisors

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