Why Your Business Needs a Valuation
Here at Bay Area Business Brokers, we take our responsibility to market your business very seriously. That means thoroughly understanding the nature of your business, your competition, industry trends, neighborhood trends, growth potential and all your financial records. It also means establishing an accurate asking price. Accordingly, we require each business that we list to have either an in-house market analysis performed or an independent professional valuation accomplished by GCFValuation (“GCF”), an industry leader in business valuations. Yes, there is a cost involved, but our buying power enables us to offer these valuation products at a fraction of what your CPA would probably charge.
GCFValuation is one of the leading independent business valuation firms in the United States, serving hundreds of clients annually. Ninety percent of all GCFValuation engagements are Merger & Acquisition related, which means the client is assured a valuation conclusion from experienced appraisers who have a solid understanding of the transaction market. The appraisers at the firm work with small to mid-market businesses on a weekly basis that have sold or are in the process of selling. The firm and its appraisers belong to the most respected appraisal associations in the country and hold the highest industry designations, making them experts in their field.
Among the many reasons why it makes sense to have your business valued:
1) For all but the smallest businesses, it is irresponsible to price a business using simple rules of thumb. On a $500,000 business, if the broker prices the business just 1% too low, the difference is $5,000, which is double what the standard valuation costs! Foregoing an accurate valuation because of the small cost involved is penny-wise and pound-foolish.
2) Unlike the business owner’s CPA, or the business broker, who might benefit from a quick sale at a low price, GCFValuation has no stake in the result of the valuation. Therefore, the valuation will tend to be a more accurate reflection of the market value of the business.
3) Businesses with valuations are more likely to sell that those without. National statistics reveal that 60% of businesses with a current valuation sell, but only 20% of businesses without a valuation sell.
4) Businesses with valuations are more likely to sell closer to the asking price. It is hard for a buyer to make a low-ball offer in the face of an accurate, independent valuation.
5) Unless the seller intends to carry a substantial note, the buyer is most likely going to apply for SBA financing, which requires an independent valuation (much like a mortgage lender requires an appraisal on a house). GCFValuation is on most banks’ approved list.
6) Even if you decide not to sell, it’s important to have a valuation of your business on hand for reasons such as estate planning, insurance coverage, tax planning and divorce.
Valuation Products Offered:
In-House Market Analysis – $500 (only for businesses w/ revenues under $500,000)
GCF “Calculation of Value” – $2,500
Speak with your Bay Area Business broker about which valuation product is right for you.