Valuing Your Business for Sale

Establishing an objective market value for your business is not an exact science, and can fluctuate depending on the kind of business you own and why you need a valuation done. There are a number of aspects to take into account, ranging from the book worth of your assets to some indefinable elements. How much your business is worth will depend on an in-depth analysis of your company’s cash flow, your previous and more recent earnings, and how viable your business will be long-term. Ultimately the value of your company will depend on its ability to make a steady profit.

Using the services of a Businesses4Sale broker

The team at Businesses4Sale is responsible for the process of purchasing, divesting, and facilitating the sale of privately-owned businesses. We have a proven track record of successfully enabling the sales of over 200 companies throughout South Africa.

Businesses4Sale’s inclusive database supported by the statistical information we gather, and our access to some industry-related databases, can show us how much your business is worth and how profitable it will be in the future. We use the PE (Price to Earnings) Ratio, which can vary depending on economic factors and how the market is feeling at the time.

While most company valuations focus on how much your business has earned in the past, using the PE Ratio is not always the most accurate gauge of a company’s value. Robust, but under-performing resources and revenue streams that can be affected by price to sales, can also be key to determining your company’s true value.

Businesses4Sale’s experienced and innovative team has produced an industry-specific methodology that is based on “real world” scenarios. We believe that the way businesses are valued should identify with and be substantiated by market evidence and factors that are specific to that particular industry.

Traditionally there are three ways a company can be valued:

    • Income-based
    • Asset-based
    • Market-based

At Businesses4Sale we take all three of these factors into consideration when we do an appraisal on your business. We take an impartial approach that is centred around our extensive industry experience and equivalent sales statistics, giving you what we believe is the correct indicator of how much your company is worth.

How Businesses4Sale values your business

At Businesses4Sale we use real-world industry-related data as the foundation for how we value your company.

Different methods will be used subject to how big or small your company is, with statistical indications and real-time data from actual industry-related sales being the most precise indicator of the value of your business.

The Valuation Appraisal Opinion

When we establish the sum value of your company it is normally given on a going concern basis.
How sustainable your company’s income will be centred on both previous and current earnings, that is a guarded expectation from the purchaser of how the business is expected to perform over a set period.

The team at Businesses4Sale put together a conclusive report based on all facets of your business, including:

    •    All available financial documentation.
    •    The values and principles of the business culture and its infrastructure.
    •    How relevant the company is to its segment in the market.
    •    An in-depth assessment of any risk factors both in the company and the specific industry.

Our estimation of your company’s business value will be correlated with:

      1. The industry standard multiplier on true earnings. This multiplier is determined by the market and        fluctuates according to identified risk factors, how much your company is expected to earn in the future, and assessments are done in the past.
      2. The reasonable market worth of your company’s unencumbered assets, being equipment, fittings and fixtures, debtors, etc. which is equal to how much your stock is worth historically.
      3. Goodwill/Intangible Assets. With goodwill not being set in concrete and how this affects the value of this asset, we use a methodology that is based on the unique circumstances of each business. There is no set way to estimate a company’s worth, as each business has its own particular characteristics when it comes to tangible and intangible assets. At Businesses4Sale we realise this and have the expertise to establish the required rates of return (ROI) for business investments that have some risk factors.

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