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The value of a company can be perceived differently depending on the type of buyer - view tip
Why should you do a business valuation even if you are not selling your business? - view tip
Calculate an estimated company valuation using two valuation parameters - view tip
#5 What does the business valuation look like? - view tip
#6 What buyers see when pricing a company - view tip
#7 How lenders value a company - view tip
#8 Why use a 3rd party valuation? - view tip

Valuation Tip #1

How to Price Your Company

Price is derived at what the buyer will pay

Understand that there is NO magic formula for setting price. Price is calculated with this one rule in mind:

Price is set at what the buyer will pay — it is not derived from any mathematical equation but rather as a psychological perception by the buyer.

If the buyer perceives that the value of business is great, they will pay a higher price. That will be dependent on the buyers needs, strategy, and resources. That is why you should target your selling strategy to those buyers who will perceive your offering at a greater value.

Setting price by your marketing strength

If your business has intrinsic value such as goodwill, established contractual relationships, prime location, or patented technology, you may set a value that equates the cost it would take for the buyer to replicate that value.

For example: if you have patented technology that would cost the buyer $YYY in development, the value of that technology would be priced at $YYY if the technology can be used in the going operations of the business.

If your business has contractual relationships that would take a buyer $ZZZ dollars to develop, the value of those relationships would be worth $ZZZ if those contracts can be transferred to the new buyer.

Setting these values can be tricky. We highly recommend that you use a professional valuation based on:

  1. Income Based Approach
    measures the present worth of anticipated future net cash flows
  2. Market Comparison Approach
    compares recent transactions of similar businesses that have been sold

    see what is your company worth: contact us
Setting price by asset holdings

Asset valuation is less complex than market valuation. You simply price the company based on the replacement or liquidation value of your company assets and equipment.

If you have specialized equipment that is not easily compared in value with other readily available equipment, you might consider a professional valuation based on:

  1. Asset Based Approach
    considers the replacement cost as an indicator of value. This will substantiate the asking price for your asset holdings

    see what is your company worth: contact us

How much is your business worth? Contact us

Contact us

for a FREE consultation

Krayton M Davis
Executive Director, Novars Group, Inc

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