How to Value Your Business - Part One

THIS IS PART ONE OF A SERIES OF POSTS ON HOW TO VALUE YOUR BUSINESS

Your business is probably the largest asset you own (next to your house, which has probably gone down in value the last few years), and it's almost like your only child. You've nurtured it for years or decades, and when it's time to separate, you want it to be well-taken care of. Or, maybe you don't - you just want the most amount of money you can get for it (your business that is, not your child....) - neither viewpoint is wrong; on the contrary, it's something you've created, and you have the absolute right to determine how you want to divest it and spend your retirement.

The first step in understanding the value of your business is understanding the definition of the word "Value." Now, I'm not talking about the Clinton-esque stylings of asking for the definition of the word "is", but I recognize that there are differing definitions of value....For example, how many times in the last few months have you heard a neighbor say they want to sell their house, but they can't get what it's worth right now....That's actually a very good object lesson on the difference between Fair Market Value and Stragetic Value. "Fair Market Value" is what the property is worth to the average, uninterested buyer - but Strategic Value is what it's worth to YOU. Strategic value is always higher than Fair Market value.

The first step in selling or buying a business is to understand the definition of "value" and how that affects your purchase / sale decision. To get a better understanding of the definitions of "value" and how it affects your decision, feel free to contact me.

B. Dane Byers, CPA, ABV, CFF
Bassett & Byers, P.A.
Partner
3701 Lake Boone Trail, Ste 201
Raleigh, NC 27607
(919) 303-1049
dbyers@bassettcpas.com