Published May 2004

What’s your business worth? How to find out

Dear BizBest: I’m thinking about taking on a partner who would buy into my business. Before that can happen, we both need to know what the business is worth. We’d rather not spend big dollars for a formal valuation or appraisal, but we will if we have to. What are some of the options for valuing a small business? — Unvalued

Dear Unvalued: Placing an accurate value on a small business is a tricky affair. But it’s also an exercise that may be necessary for a variety of reasons. Valuations, or appraisals, are a must, of course, for anyone buying or selling a business, but they are also vital for partnership deals such as yours, as well as buy/sell agreements, family-business succession planning, personal and estate planning, and situations where you need bank or other financing. Other reasons you might need a valuation include divorce, spin-offs, liquidation and business disputes.

One of the best reasons for tracking the value of your business, however, is simply this: so you know. Most entrepreneurs are capable of boosting the value of their businesses by 40 percent simply by paying attention to the things that make a business valuable. Too often, business owners brush aside valuations, believing them necessary only if they decide to sell. As a result, only about one in 20 small businesses have done a formal valuation, according to the National Association of Certified Valuation Analysts.

You can determine the value of a business in many different ways, from quick and cheap software-based calculations you do yourself, to full-scope, certified valuations by professionals. The price range is enormous, from as little as $15 for the simplest software to thousands for a detailed analysis performed by certified pros. Business brokers, hoping to sell your business, may even do them for free.

Try to match the person or method you use for a valuation with the reason you are doing it. If the valuation is for loan purposes, for example, look for someone who has done small-business valuations for that purpose. Here are some top BizBest resources and solutions for business valuations:

n The National Association of Certified Valuation Analysts (NACVA) offers a free service online to help you find a business valuation expert in your area. NACVA provides training, certification and support for professional valuators in cities and towns nationwide. Look for the “Find a Valuator Directory” at the Web site, www.nacva.com. Call 801-486-0600 or e-mail nacva@nacva.com.

n Nationwide Valuations offers a variety of valuation levels for small business. Visit www.nationwidevaluations.com, call 800-330-5250 or e-mail info@nationwidevaluations.com.

n Arrow Business Appraisers specializes in valuations for small, privately held businesses of all types. A basic valuation starts at $690. Visit www.arrowappraisers.com, call 561-351-1717 or e-mail info@arrowappraisers.com.

n Halas & Associates offers a computer-modeled small-business valuation system based on hard numbers. The Halas method does not include subjective items such as reputation or market presence. Visit www.halas.com, call 704-364-4440 or e-mail hbvs@halas.com.

n For do-it-yourself types, Value Any Business offers do-it-yourself business valuation manuals for specific types of businesses, such as flower shops, restaurants, video stores, beauty salons, gift stores, clothing stores and others. The manual is $24.95 and has a 30-day, money-back guarantee. Visit www.valueanybusiness.com or call 800-279-3506.

n PriceYourBusiness.com offers simple small-business valuation software you can access online 24/7. Results are quick and available anytime. Cost is $14.95 for six months. Visit the Web site or call 800-350-3311.

n Other good software packages you can use yourself include BizPricer ($99, call 860-691-0081 or visit www.businessbookpress.com), Business Valuation ($395 from MBAware.com, call 866-236-3404) and Corporate Valuation ($295 from MoneySoft.com, 800-966-7797).

BizBest publishes “The 100 Best Resources for Small Business” and other resource directories. Visit www.bizbest100.com. E-mail questions to dan@bizbest.com.

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