Business Valuation for Buying a Business
Buying a business can be a big undertaking. One way to make sure you get a fair price is to get a business valuation. A business valuation shows the company’s worth broken down. A valuation report shows information about cash inflows and outflows, debts, taxes, assets, among other information. The best practice is to obtain your own business valuation for the company you are buying.
Choosing a Business to Buy
To buy a business you must first pick what you are passionate about. Choosing an industry after knowing what interests you is much easier. There are hundreds, if not thousands, of businesses for sale across the country. Be patient when narrowing down your options.
Determine what interests you, what your skills are, and how much time you can put into the business. Some businesses are self-sufficient while others are completely dependent on the owner of the company. A company that is more self-sufficient will value higher than one that is owner-dependent. Lastly, consider location. If you are willing to relocate, you will have far more options of what to buy. However, not everyone has the option to pick up and move. Consider both before settling on a business.
For more information see How to Find a Business That is a Good Fit.
Determining a Fair Purchase Price
Landing on a fair purchase price is difficult without a business valuation. Oftentimes sellers think their business is worth more than it is. Whereas buyers want to pay the least amount possible. A business valuation establishes the company’s worth based on numbers, data, and facts.
The worth stated in the valuation is a good starting point to negotiate a purchase price. If the business isn’t performing as well as the owner states, you may be able to talk them down in price. Ultimately, using a business appraisal to your advantage will help you settle on a fair purchase price. You don’t want to pay more than the value of the company. Peak Business Valuation provides business valuations that provide the fair market value of the company.
Using the Business Valuation in the Long Run
A business valuation will continue to be an asset even after the transaction closes. The appraisal shows you where your business needs improvement, where it can grow, and where it is already succeeding. It also showcases key value drivers. Paying attention to key value drivers will give your business specific goals to focus on. By doing so you can increase the value of the company.
Helpful when Funding a Business
Many people do not buy a business because of lack of funding or the transaction falls through because of insufficient funds. When you find a business you want to buy, having a business appraisal done will help you understand how much funding you will need. You can then determine what type of funding to pursue.
Consider using an SBA loan to buy the business. SBA loans have many benefits like low-interest rates, access to capital, free SBA resources, and flexible repayment terms. Peak Business Valuation is happy to connect you with an SBA lender who services your industry. Schedule your free consultation today to get connected.
Peak provides SBA business valuations for dozens of lenders across the country. If the loan amount is greater than $250,000 the SBA lender requires a third-party SBA business valuation.
For more information refer to Financing a Business Purchase.
Tool for Answering Questions
Peak Business Valuation helps individuals all over the nation fulfill their dreams of owning a business. We receive daily questions when individuals are looking to appraise a business. Some of these questions usually look like this:
- Is this business a good fit for me?
- What does the business look like long term?
- What is the value of the business?
- How much should I pay for the business?
- Does the business have sufficient cash flow to meet my financial goals?
If you have similar questions, we would love to take a look at your potential business. Schedule a free consultation to get started on a business valuation for buying a business.
Summary
Obtaining a business valuation is very beneficial before buying a business. Peak would love to help you feel confident and assured in your purchase. Buying a business can take time and often feel overwhelming. Be patient in the process and look for trusted professionals to do the rest.
Don’t hesitate to reach out, as Peak Business Valuation enjoys helping future business owners. Schedule your free consultation below. We look forward to talking with you!
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