The Leading Business Brokerage firm, Business Sales, Mergers & Acquisitions
in Dallas Fort Worth For Companies $500k to $100 Million+ in Revenue

Call us: 214-396-8100

How Much is My Business Worth?

One of the biggest questions we get from business owners when they want to sell their business:

How Much is My Company Worth?

The process of valuing a business in our process is found in step 2 called the Viability Step™. While there are many reasons for a business valuation, we typically value businesses in the process of selling the business. There are Valuations for wealth planning, individual/corporate tax compliance and valuations that are prepared for litigation support related to family law/divorce, partnership disputes, etc. The most common form of valuation, however, is one that provides a business owner seeking to sell his or her business an approximate value that the company can reasonably expected to be sold called “Fair Market Value”. Fair Market Value form of valuation is what HBG Advisors Inc. offers as a service to its clients seeking an exit strategy.

A valuation that is done for the purposes of selling a business assumes a couple of factors. First that the business owner is not selling the business under duress. For example divorce, partnership dispute, financial crisis. It assumes that a business owner has 6 to 12 months to sell the business. It also assumes that the buyer will not be under any kind of duress.

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  1. Science and Art

    As the #1 Business Sales firm in Dallas, North Texas (and the country) HBG Advisors Inc. follows a valuation method that not only makes sense to our clients, but also produces a high level of credibility and success with potential business buyers. While some of these processes are proprietary in nature we can disclose that we employ both a science and art to business valuations. Our process focuses on a knowledge of the business, the industry as well as an understanding all of the value drivers of the business that includes:

    1. Unique attributes of the business that can potentially serve as an economic “moat” and therefore separate the business from its competitors
    2. Barriers to competitive entry
    3. Diversity of customer base
    4. Quality of the workforce including management depth (if any)
    5. Growth potential
    6. Systems in place to operate business.
    7. Condition of facility and equipment
    8. Industry type
    9. Seller’s Discretionary Earnings (SDE), Cash-flow, or EBITDA
    10. Asset value including Inventory
    11. Asset sale vs. Stock sale
    12. Return on Investment (ROI)
    13. Number of Years in Business
    14. Reason for Selling
    15. Length of transition and training new buyer
  2. Financial Analysis

    Each of these value drivers are critical to the valuation process, but the importance of reliable financial information naturally cannot be overlooked and to many buyers is the most important value driver. While many business buyers focus, in our opinion, far to much on financial information, we emphasize that financial data alone does not create or produce the true value of the on going business. Don’t get us wrong, we indeed examine closely the financial data and perform modeling techniques on the financial information.

    Different valuation methods view earnings differently but Based on the size of the company the cash flow of a business can be characterized as Sellers’ Discretionary Earnings (SDE) or Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA).

    During the financial analysis phase we review the P&L and Tax returns.

    The objective is to:

    1. Determine the amount of “discretionary expenses” that are not essential to the day-to-day activities of the business,
    2. Identify those expenses that are non-recurring or one time,
    3. Verify that the expenses that are associated with the owner to be certain they qualify as add-backs.
    4. Analysis of the Balance Sheet (we understand that many of the businesses we review have incomplete or inaccurate Balance Sheet reports.)
  3. BenchMarking

    Once the review of the financial data outlined above is complete we can then benchmark the SDE or EBITDA, as appropriate, with comparable sales activity and relevant industry standards. This should be a key ingredient to any valuation.

    Envisage is defined as positioning the business in a way to highlight the best characteristic. HBG Advisors business profile and marketing package demands confidentiality while at the same time creating the most positive Envisage.

  4. Sale Price Multiple

    No valuation would be complete without reviewing the “Multiple of cash flows” concept that is so widely employed by business buyers. Unfortunately, we find that many business brokers and prospective buyers alike often focus strictly on this concept/rule of thumb as a sole means of determining value and do not consider the underlying factors of the valuation process. Too many variables, to include the role of value drivers, exist to just routinely apply a multiple of cash flows to SDE or EBITDA in order to establish a value. This approach, commonly applied by many business brokers or business intermediaries to value a business, is a disservice to the client and one that fails to provide a professional level of representation. HBG does not take these shortcuts.

  5. “Do the numbers work?”

    Specifically, based on the source of financing and the size of the transaction, the cash flows (SDE or EBITDA), should provide a minimum Return on Investment for the typical business purchaser. I business buyer must receive a good return on their investment for a business purchase, the business price is too high.

    In summary, HBG Advisors Inc. embodies, without exception, the desire to fulfill our clients’ objectives and perform the many services we offer at a level that is beyond reproach; adhering to this philosophy has resulted in HBG Advisors being recognized as the #1 Business Broker and Business Sales firm in Dallas, and North Texas.


HBG Advisors Inc. 18170 Dallas Parkway Suite 203 Dallas Texas 75287,
Dallas Business Broker, Mergers & Acquisitions Dallas / Fort Worth / Texas

214-396-8100 Office
972-838-5202 Fax