Appraisals
Dr. J's team will provide you with a valuation using the following information:
1. Purpose of the Appraisal
- To determine a fair market value (FMV) for the business.
- Used to price the business for sale, support negotiations, or assist in legal, tax, or internal decision-making.
2. Information Gathering
The broker collects detailed documentation, including:
- Financial Statements (3–5 years): Profit & Loss, Balance Sheets, Tax Returns
- Owner’s Discretionary Earnings (SDE) or EBITDA calculations
- Inventory, equipment, and asset lists
- Lease agreements and real estate data (if applicable)
- Customer and vendor contracts
- Operational info: number of employees, systems, industry specifics
3. Recasting Financials
- Adjusts the financials to reflect the true earning power of the business by removing:
- Owner’s salary and discretionary expenses
- One-time or non-recurring costs
- Non-operating income or expenses
4. Valuation Methodologies
The broker may use one or more of the following:
a. Market Approach
- Compares business to similar ones sold recently
- Uses valuation multiples like:
- SDE x Multiple
- EBITDA x Multiple
- Revenue x Multiple (less common)
b. Income Approach
- Based on the present value of future cash flows
- Often uses Discounted Cash Flow (DCF) or Capitalization of Earnings
c. Asset-Based Approach
- Values the business based on net asset value (NAV)
- Used primarily for asset-heavy or unprofitable businesses
5. Risk and Industry Analysis
- Industry trends, economic conditions
- Competitive landscape
- Dependency on owner, customers, or suppliers
- Location, scalability, and market demand
6. Final Valuation Report
- Provides a range of value or a specific asking price
- Includes explanation of methodology
- May include recommendations for improving value
7. Presentation to Client
- Broker reviews results with the seller
- Discusses pricing strategy for the market
- Aligns expectations to improve sale success
