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NJ Business Valuation

NJ Business Valuation

Not as Easy As You Might Think

If you are considering the sale of your New Jersey business, the value you establish is extremely important. Furthermore, its advertised rate will determine the response rate, since the higher the price the longer it will take to sell.

Quality of Life

The price that you receive for your business is eventually going to impact the quality of your retirement and the overall value of your estate.  Buyers in and around New Jersey are sophisticated, so is unlikely that a business buyer will purchase the business at a price that is above fair market value.   Additionally, if a financial institution is involved in financing part of the transaction, it will usually require that an outside valuation firm perform a valuation.

Valuation

Valuation firms are very knowledgeable. They use a variety of measurable techniques developed on Wall Street and in academia, applied to your financial data. This helps them to arrive at a conclusion of value. There is nothing that kills a deal faster than a buyer and seller agreeing upon a price, and the valuation coming in at a lower number.

The Going Rate

There is a going rate. For example, childcare centers presently are selling for between 2.5 and 3.0 times seller discretionary earnings. This depends upon the size of the center, how long it has been in business, and the ages of the children enrolled.   Likewise, gas stations are presently selling for 1.5 times seller discretionary earnings. If there is a convenience store included as part of the sale, one can expect a multiple of approximately 2 times discretionary earnings.

For larger New Jersey businesses, there is usually no established “going rate.” The seller needs to apply valuation techniques to arrive at a value.  The income method is the preferred valuation technique, and the two standard valuation methodologies within the income method are discounted cash flow and capitalization of earnings.

Crown Business Brokers, LLC is expert at valuing small and mid-sized businesses and Brad Palmer, C.P.A. has testified numerous times in N.J. State Superior Court as regards valuation related matters.  If you would like a cost-free consultation, please contact them at (908) 931-9300.

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NJ Business Valuation

NJ Business Valuation

 

 


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