Florida Business Brokers use a number of different methods
for determining the value of a Florida business for sale. Although most Florida Business Brokers are
not certified business appraisers, many can provide an “opinion of value” which
will use the same basic principles and guidelines as a certified business appraiser.
Statistics show that many businesses for sale in Florida never actually end up
selling for the price they were listed at and this is most often due to the
business being overpriced to begin with. Understanding business valuations and
getting an opinion of value from of Florida Business Broker is always a great
first step to selling a Florida Business. Often times there can be a confusion
in the valuation methods because multiples get applied to the wrong numbers or
the valuation method is not fully understood.
Industry Method
The industry method calculation varies according to a
particular industry but most commonly uses a
straight percentage of the sales or
gross revenue. This could range anyway from 15% to 100% depending on the
industry and it is usually advisable to consult with a Florida Business Broker
to determine where a particular industry might fall. With the exception of some
professional practices or businesses with a large amount of re-occurring
revenue most business will be well below 50%.
Income/Asset Method
The income/asset method takes into consideration both the
income and assets of the business. Income is often stated as discretionary
earnings, owner benefit or for larger corporations as EBITDA. A multiple is usually then applied to this
number based on the industry, the amount of the earnings, or the size of the
business. The assets are typically valued at a fair market value taking into
account any added costs to put them in place and into use. A Florida Business
Broker will almost always need to apply some subjectivity when using this
method for a pricing a Florida business for sale.
Comparable Sales Approach
The comparable sales approach which is most commonly used
with the sale of residential or commercial real estate is also a great way to
value a Florida business. Since the selling prices of businesses are not
publicly recorded this information can be a little more difficult to obtain. Florida Business Brokers will usually have
access to data for what particular business have recently sold for and in which
industries they have been sold. This information becomes invaluable when pricing
a Florida business for sale, because it takes into account what the market is
doing and what businesses are actually selling for.
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