Get a Free Consultation, and a Free, No Cost, No Obligation Business Valuation Report!

Once you have your “Market Comps Report” you can decide if you want to take the next step.

The next step, the broker needs to prepare an actual business valuation. We use the most probable selling price MPSP Method. We have access to DataBases that include Tens of Thousands of Sold Businesses. We will pull the Business that are most similar to yours to come up with a market range of what your type of business is selling for in the current market place.

Items needed for the Valuation Report include;

Last 3 years Business Tax Returns

Current Year to Date P&L and Balance Sheet (same date as P&L).

Value of Business owned Tangible Assets (Furniture Fixtures & Equipment) FF&E and Intangible Assets (Franchise Agreements, Patents)

We also “shop the deal” for financing thru 3rd party lenders such as Banks and preferred SBA Lenders.

Once we review the Valuation Report and Financing options, we enter into an engagement agreement with you to confidently present your business to buyers. There is no cost or obligation on your part until we sell your business as per the engagement agreement.

Once we have the listing agreement, we market the business confidentially. See some of my personal recent Sold Businesses here.

We respond to all inquiries and have them Sign a confidentiality / non-disclosure agreement prior to disclosing any details that would give away that your business is for sale. Once we have the NDA from the buyer, we release some info on your business. We will be on all calls / phone meetings and continue to “drive the deal” until the buyer decides it’s not for them or until closing. We are engaged every step along the way.

Next Steps needed for the Valuation Report include;

 1. Phone Consultation

2. Last 3 years Business Tax Returns

3. Current Year to Date P&L and Balance Sheet (same date as P&L).

4. Site visit, either before hours, after hours or on the weekend

5. Lease Terms (if applicable) Monthly Rent and Expiration Date, Lease Options?

Small Business Valuation Methods Explained

A Comprehensive Guide to the Art and Science of Small Business Valuation Methods

Valuing a small business is often described as both an art and a science. Because small businesses aren't traded on public exchanges, their value is determined by looking at what they own, what they earn, and what the market is currently paying for similar "Main Street" companies.

Core Small Business Valuation Methods

• Income-Based Approach: Focuses on the company’s ability to generate future wealth.

  • Capitalization of Earnings: Best for stable businesses; it takes a single period of relief (like last year’s profit) and divides it by a "cap rate" to find the total value.

  • Discounted Cash Flow (DCF): Best for high-growth or fluctuating businesses; it projects future cash flows and "discounts" them back to their value in today's dollars.

  • Seller’s Discretionary Earnings (SDE) Multiple: The gold standard for small businesses. It takes the net profit and adds back the owner’s salary, benefits, and one-time expenses, then applies an industry-specific multiplier (e.g., $2\times$ to $4\times$ SDE).

• Asset-Based Approach: Focuses on the "floor" value of the company’s tangible items.

  • Adjusted Net Asset Method: Calculates the difference between the fair market value of all assets (equipment, inventory, real estate) and all liabilities.

  • Liquidation Value: Determines what would be left if the business ended today and assets were sold off quickly.

• Market-Based Approach: Benchmarks the business against real-world sales of similar companies.

  • Guideline Public Company Method: Compares the business to similar publicly traded companies (rarely used for very small businesses due to size disparity).

  • Direct Data Market Method: Uses databases of private sales to find "comparables" (see details below).

The Direct Market Data Method (DMDM)

The Direct Market Data Method is a specific type of market approach that relies on transaction data from private, closely-held companies rather than public stocks.

Why it is used for Owner-Operated Businesses:

1. Peer-to-Peer Accuracy: Most owner-operated businesses (like a local dry cleaner or a small HVAC company) have nothing in common with a multi-billion dollar public corporation. DMDM uses databases (like BizComps or DealStats) to find actual sales of similar "mom-and-pop" shops.

2. Reflects "SDE" Realities: Public companies use EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) to measure value. However, owner-operated businesses are often managed to minimize taxes. DMDM allows appraisers to see how other buyers valued the Seller's Discretionary Earnings (SDE)—the total financial benefit available to a single owner-operator.

3. Captures "Intangible" Local Value: This method accounts for the reality of the local market. If three bakeries in your specific city recently sold for $2.5\times$ their annual SDE, that is the most "direct" evidence of what a buyer is actually willing to pay for your specific type of operation.

4. Simplicity for Buyers: Individual buyers of owner-operated businesses often use SBA (Small Business Administration) loans. Lenders and buyers find the DMDM intuitive because it answers the simplest question: "What did the guy down the street get for a business just like this?"