Book Value of a Business
What is the book value of a business? You’ve probably heard the common rule of thumb: a business is worth roughly 3 times its EBITADA (Earnings Before Interest, Taxes, Appreciation, Depreciation, and Amortization). While this provides a quick snapshot (blue book value), it often leaves significant value (or detriments to value) on the table.
Traditional valuation methods with businesses valued under 5 million, focus primarily on financial ways like EBIT or EBITADA and overlook the crucial intangible assets that drive a business’s true worth. For example: When a business sells the owner does not go with it, so, the true value of a growing concern considers an ideal business organization where the owner is working on the business and not in it. It is like when you sell a car or house, the owner does not go with it. Yet, a business is different since it is usually so dependent on the Owner to survive. Depending on how much time or sweat equity the current owner puts into the business has a lot to do with the company’s value and when, if the sale will happen and if the business will survive after the sale. Vital areas of any business transaction.
The principle of cash flow, one of the principles in the book, 14 Immutable Laws of Business Value brings the importance of how much the owner is working in the business, to the selling and buying process. Watch this short video about the principle of cash flow, and how the ideal business organization could effect the transaction. Click this link to watch the video on You Tube. Are you assessing the business with the ideal business organization in mind?
Growth Concepts: A real view of business value
At Growth Concepts, we go beyond the surface. We believe in uncovering the maximum potential value of your business and documenting it so a potential buyer, loan officer or investor could realize what you have and pay a higher selling price for more equity.
Here’s how:
We not only use the numbers but we also use principles and laws of business value. The book, “14 Immutable Laws of Business Value” is rooted in proven principles and laws that guide us in identifying and quantifying intangible assets. The above principle of cash flow is one of these principles and laws that guide us. Along with these principles and laws we use a machine learning tool Analyzer II 3.0 Our proprietary machine learning tool analyzes hundreds of thousands of business model variations in relation to the highest business value revealing hidden value drivers that traditional methods miss.
Intangible Value Assessment: We meticulously evaluate and quantify the intangible assets that contribute to your business’s overall worth and document these intangibles in a business value plan. Again the above principle of cash flow is one of these principles and laws that guide us with intangibles. Found out the others by getting the book today.
What This Means for You:
Instead of a generic 3x EBITADA valuation, we provide a comprehensive assessment that reveals the true value of your business and then help you realize that higher evaluation. We help you and others understand how we could leverage the intangible assets that drive growth and maximize your return. Typically our customers receive a 3 to 5 times increase in discretionary cash.
Stop leaving value on the table. Discover the hidden potential of your business with Growth Concepts. Ask for a complimentary review of your particular situation.