Finding the Street Value of a Privately Held Company

Summary, if you don’t understand the Value of your company how can you improve it?
Are you looking to determine the real (street) value of your company?  Are there too many opinions and methods for you / your team to work through? Do you need to straightforward way you can repeatably determine your street value?

This article will help you get there.

“What is the Value of My Business?”    

When dealing with the owners of a closely held business, one of the first questions we are asked is to determine the value of their business. The valuation of a company is different depending on who is doing the valuation. Banks value business differently than buyers. Buyers can be broken down into two main groups:  financial buyers and strategic buyers. Each has a different view of value.

Financial or economic buyers are willing to base value on assets, earnings, growth potential and return on investment. While financial buyers are looking for companies with growth potential, they usually base the price they are willing to pay on current and past performance, not future or projected profits.

Strategic buyers may or may not place much weight on the economics of the business and instead may have strategic reasons for acquiring the company. The reasons could include such benefits as distribution rights; the ability to eliminate a major competitor; gaining market entry without startup cost; patented products, and the reduction of manufacturing or production costs. For these reasons, a strategic buyer may pay a higher price than a financial buyer would. Strategic buyers represent less than 10% of the total buyers. As we do not recommend setting value based on this group of buyers.

To read the full article, click here.

This entry was posted in News From The CBB Group. Bookmark the permalink.

Comments are closed.