How to Value a Small Business (Key Factors You Should Consider Before You Buy or Sell)

Over50tv
Over50tv
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Published 2019-10-09
Years ago I was involved in the sale of a business that I founded. That was way back before the miracle of YouTube when you could go on this social media site and find some videos on how to value a business. So I did what a lot of people did back then, I hired a business attorney to represent me during the negotiations. We went into the negotiation. I remember the negotiation was intense. I remember thinking this isn't going the way I want it to, but I leaned on the knowledge of the attorney. I believed what he was telling me was correct. After a while we negotiated a price. But, I walked out of that meeting thinking, this just doesn't feel right. The number was wrong, but I thought I am going to go ahead with what my business attorney is recommending. Soon after I discovered the price I sold the business for was less than its value. So I resolved to never let that happen again. I dove head first into learning how to value a business and how to negotiate the best price. Since that time I've been involved in almost a dozen startups. I've also offered advice to business owners in the process of selling their businesses. In this video I outline important things you should consider when valuing a small business. There are many other things to know but if you learn the basic steps I outline here you will be much farther ahead of me when I sold my first multi-million dollar business. Feel free to leave comments or questions.
All Comments (21)
  • @svandyk3
    This is pure gold when it comes to an intro to small business valuation.
  • @aarongiggers66
    So much value in this single video. Im definitely going to watch it one more time and take notes. Thank you!
  • @ericgonzales4398
    Thank you so much for this information. The explanation clarified the terms and the approach so much better than other videos I've watched. Thanks again.
  • @DanielMartinez-wy6ir
    Thank you for your useful information, learned a lot!!. I was lookin to get a idea how to value a business
  • @percylekoba8419
    Great stuff. You were clear and spot on. I look forward to more of your videos.
  • @gabesmith2234
    This is absolutely awesome. I am currently a finance freshman in college and this has helped broaden my knowledge a lot. I’ve been wanted to figure out ways to value businesses and this increased that skill for me, so thank you.
  • @henrythomas7112
    Your videos are very useful and provide lots of information. I have received lots of help after watching this post, please continue to share this kind of information. Thank you.
  • @Deals-and-Exits
    Great information! I have business owners ask me all the time what their business is worth.
  • @TaraWagner
    It's amazing how time has created space for more resources to emerge for businesses to grow. Values are very much like underlying motivators and definitely important for all businesses and entrepreneurs. Thank you!
  • @samfungccim
    Besides risk I also take into account of the leasehold interest (if the lease is no good and expires soon and no renewal term), taking out owner's wages from net income if owner is working there, and the inventory has to add back to the selling price at closing. I also use expenses vs adjusted gross as a percentage to compare to industrial standard, if there is one. Goodwill is also an important factor!
  • @fischertoolandgarden
    Good video! We just had someone come in to our shop offering to buy our business. Your example seems like a good way to value our business. Don't know if we are going to sell, but at least we have an idea of what it's worth now. Thank you!
  • @KristofferAtienza
    Hi Lou. Thank you for your video. Do you have a video that explains what 'Multiples' mean and how it is related to risk?