ITEMS REQUIRED FOR A BUSINESS VALUATION
Ultimately, a business is worth what a buyer is willing to pay, and a seller is willing to accept. A good valuation creates a good starting point.
These are items required for determining a good valuation.
- 1. Year-end accounts for the past three years as prepared by your accountant.
- 2. Year to date management accounts including income statement and balance sheet.
- 3. Inventory/Stock list at current market value.
- 4. Furniture, fixtures and equipment listed at current market value.
- 5. A separate copy of the profit & loss statement(s) with references to any of the following, which may apply to a line item:
- a. Any non-business items, such as personal telephone, motor vehicle expenses, life insurance, phantom employees, living expenses.
- b. If there is any salary or owner “drawings” in the payroll figures, please state how much the salary/draw was.
- c. Any non-cash items, such as depreciation, amortization.
- d. Any non-recurring or one-time expenses or income. For example, the legal costs to defend against a law suit, or the
sale of an asset.
- e. Any item (sales, cost, or expense) that does not belong to this business.
- f. Any item that would change for the new owner, such as a rent increase.
- 6. The explanation of each item noted in number 5, above. This needs to be on a separate piece of paper.
- 7. The number of years that the business has been operating:
- 8. The number of years the present owner has owned the business:
- 9. A list of your competitors and an assessment of how much competition they are for the business:
- 10. Factors that are affecting the market for your business’s product AND any factors that make your business unique or differentiate it from the competition.
Please note that the MPSP is a limited assessment MPSP, which is defined by the International Business Brokers Association as “that price for the assets or shares intended for sale which represents the total consideration most likely to be established between a buyer and a seller considering compulsion on the part of either the buyer or the seller, and potential financial, strategic or non-financial benefits to seller and probable buyer”.