In my previous article on assessing your exit options, I mentioned the broker’s opinion of value (BOV). Don’t let the word, “opinion” fool you; a BOV is far more useful than someone simply telling you, “I think your business is worth X.” It’s more objective than subjective, and an extremely valuable tool in selling your business at the right time, to the right buyer, for the right price. Here’s a look behind the curtain of calculating a BOV.
An Overview, Not an Appraisal
First, it’s important to recognize that a BOV is not used for legal purposes. If you need a legal valuation for a dispute or loan, we would recommend a formal appraisal, which typically costs $5,000, at a minimum. We don’t claim our opinion of value to be as in-depth as an appraisal and are more interested in providing an insightful report, quickly and cost-effectively.
A Glimpse into the Market
In a BOV, we first want to know what buyers are seeing when they’re searching for potential businesses to purchase. Just like a real estate broker will show you comparables, or “comps,” of houses similar to the one you’re looking to buy, we will gather listing prices of businesses for sale in your industry. Some will naturally be skewed, as many owners set their original sales prices ambitiously high, but we can expect the average to be a reliable starting point. We also, of course, want to note what businesses are actually selling for at the end of the day, based on archived listings. Unlike the public MLS database for real estate, buyers and sellers do not have access to sold business listings. As licensed Brokers, we provide you with direct access to comparative sold listings to more accurately understand the market.
A Compilation of Research
As business brokers, we have access to valuation databases that we use to further confirm the state of business sales in your industry. These guides give us “rules of thumb” for pricing a business in a given sector based on sales, earnings, and other key factors. Again, the numbers are guidelines and not concrete prices.
A Complete Exit Assessment
At Exit Consulting Group, our Exit Assessment includes a BOV as well as a review of all your exit options, and a roadmap for a successful exit that meets your goals. Equipped with a Business Readiness Score based on eight categories, you can align your exit strategy with the market and, if necessary, take the time to increase the value of your business, with our help, or on your own, before selling. If we collectively determine that you are in an optimal position to sell now, even better.
Learn more about our Exit Assessment and contact us to schedule yours. We will ensure you receive a BOV that you can trust, understand, and utilize to move forward with confidence.