The beholder of the value for any product or service is the buyer. This dictum is equally true for the value of a business.
Buyers of businesses outnumber sellers by almost eight to one. A smart and serious buyer knows that he or she is committing to run an on-going business for a long time, and what he or she must get out of it in ‘carry home cash’ besides pay its debts. This is the vantage point of main street business buyers for marketplace of businesses put out to sale.
Business Box: An Income Production Creature
Value of a business lies in risks a buyer is faced with. Regard running of a business as a creature made of following elements with its associated risks that produces income for the owner:
- Product or service
- Geographic location
- Legal ownership of the real property
- Infused capital
- Owner & Management
Historical performance of a business is the indicative measure for futuristic performance for the new owner of the business. Reading of returns and accounts with forensic eyes may make a good scientific breakfast; however, it may make a poor supper for prognosis of business performance. This is where art meets the science.
Structure of Business Value
The structure of the terms of sale of a business that is being offered is based on the financial engineering of the sale, and the measure of the confidence of the seller in the futuristic performance of the business. The meeting ground between the buyer and the seller is where both win, and Uncle Sam passively loses!
At SUNRISE BROKERS
We are educated and equipped with a number of mathematical and arithmetical methodologies by taking different approaches to evolve a range of market values within which the seller may place sale price of the business, and the buyer may be curious to look at. However, we go beyond to apply the artistic principles to business valuation that attract the buyer and persuade the seller. The tacit test of this artistic approach is as to what ought to be an acceptable risk factor for the business that the buyer may consider fair such that the buyer may make a reasonable living and recover investment in reasonably short time.