The Realty Exchange, Inc

Description

If you are thinking about buying or selling a business, one of the first questions that will likely cross your mind will be - how much is this business worth? There are a variety of different valuation models. Some are elementary, others very complex. Valuation depends on a number of factors including the industry type (e.g. service, retailing, manufacturing, etc.), corporate structure (e.g. division of a corporation, franchise, owner-operated, etc.), present growth rate and local market conditions. Using a benchmark such as annual gross sales, an equipment rental company may sell for a price of typically less than 2% of sales whereas an accounting practice may sell for 90% - 100% of gross sales. Many businesses are fairly valued with the inclusion of goodwill (another word for customer loyalty that we all presume will remain undisturbed upon the sale of the business). Other businesses, such as used car dealerships, are traditionally not priced with an allowance for goodwill. There are a number of excellent reference texts on the subject of business valuations. We encourage you to become familiar with this basic but critical information before venturing into the purchase or sale of any business. The more informed you are on valuation standards, the better the outcome of your venture. With this in mind, the following are a number of key points you should keep in mind as a prospective buyer or seller.

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