Two of the most common questions business owners ask is, "How much is my business worth," and "What information is required to do a market valuation of my business."

The answer to the first question is ultimately answered by the market itself. What we do is approximate the range of the most probable selling price a business might achieve in the current market.

In order to determine the most probable selling price range, we ask for the following information. This is the bare minimum of documentation needed:
  • three years of tax returns
  • three years of income statements (profit/loss statements)
  • interim (current year-to-date) income statement
  • current balance sheet
  • a list of Furniture, Fixtures, and Equipment (FF&E) included in business operations
  • an estimate of fair market value of FF&E

Tax Returns (Corporate or Schedule C)

We use tax returns in combination with income statements to help determine owner's discretionary cash flow..

Profit and Loss Statements

These statements, along with a Discretionary Earnings analysis, are used to create the spreadsheet that will be used for analyzing the business across a span of years for trends and anomalies.

Interim Profit and Loss Statements

This report will be included in the spreadsheet analysis to project the current year-end numbers and compare the current year trend to previous years. It will play a role in the assessment.

Balance Sheet

The balance sheet is a tool to understand the position of the company in terms of assets and liabilities that may impact valuation.

List of Furniture, Fixtures, and Equipment

This is a complete list of all the tangible assets being used in the business to generate income and is being sold with the business. It is important because it ultimately becomes part of the final purchase and sale agreement. There should be no miscommunication regarding what is included and what is not included.

Fair Market Value of FF&E

In simple terms, this means the value that your FF&E would fetch on the market in its current condition and is not at auction or a forced sale of the items. As defined in a legal dictionary, "a price at which buyers and sellers both having reasonable knowledge of the property and being under no compulsion are willing to do business."

The owner's DISCRETIONARY EARNINGS will be presented in a RECAST FINANCIAL statement that reflects the monetary benefits of owning the business. Discretionary earnings, operations, processes, and other characteristics of the business that DRIVE VALUE will all come into play in determining marketability and the most probable price range.