What Is My Business Worth?

Buyers Pay for Earnings, Not Sales

Revenue gets attention, but it does not set the price. Two Charlotte companies with the same sales can be worth very different amounts because one keeps far more of each dollar.

A buyer boils your company down to one question. How much cash does it really throw off each year, and how many years of that cash are they willing to pay for today?

For most owner run companies, that cash is measured as seller’s discretionary earnings. Once a management team runs the day, buyers switch to EBITDA. Our guide on SDE vs EBITDA walks through both.

Recasting Shows What the Company Really Makes

Your tax return is built to keep taxes low, which is smart. It also hides what a buyer would earn. A broker opinion of value starts by recasting those statements to show normal, ongoing profit.

Recasting adds back items a new owner would not carry. These are the add-backs most likely to survive a buyer’s review:

• Your salary, payroll taxes and health insurance
• Personal vehicles, phones or travel paid by the company
• A true one time expense, like a lawsuit or a move
• Family members on payroll who do little work
• Interest and depreciation, when pricing on EBITDA

Some add-backs fall apart under questioning. Money from selling equipment or a bank loan is not earnings. Cash you never reported cannot be proven, so it adds nothing to the price.

The Multiple Is a Price on Risk

Once earnings are set, the broker applies a multiple drawn from sales of similar companies. The safer a buyer feels about next year’s cash, the more years of it they will pay for.

These push the multiple up: recurring or contract revenue, a spread of customers, a team that runs things without you, clean books and a long track record.

These pull it down: one big account carrying the company, an owner who holds every key relationship, a short or expiring lease, and sales that are sliding. Our guide on customer concentration covers the most common one.

What to Have Ready Before the Call

You can start with a rough idea. The more of this you bring, though, the tighter the number gets.

1. Three years of business tax returns
2. Profit and loss statements and balance sheets, including year to date
3. A list of your own pay, perks and personal expenses run through the company
4. Revenue by your top ten customers
5. Your lease, or details on the real estate if you own it
6. A list of equipment, vehicles and inventory

Everything you share stays private. Nobody contacts a buyer, employee or lender as part of a valuation.

Why Online Calculators Miss

A calculator takes revenue or profit and multiplies it by an industry average. It cannot tell a clean add-back from a weak one, and it has no idea whether your top customer is about to retire.

It also cannot see who is buying right now. Charlotte draws private equity groups, larger competitors and individual buyers with SBA backing, and demand from each group shifts the real number.

Calculators tend to miss in both directions. Some owners walk away thinking they are rich, others thinking their company is worth little. Both make poor decisions from there.

A Number Worth Having Even If You Stay

Exit Planning Institute research found that roughly three out of four owners have no formal exit plan. Knowing your value is the easiest first step toward one.

A valuation shows which parts of the company add value and which drag it down. Many owners use it to fix a weak spot, then sell years later for more. If you are in no hurry, our page on succession planning is a good next read.

It also helps with insurance, estate planning, partner buyouts and the next unsolicited offer that lands in your inbox.

Get your number by filling out the valuation form or call (704) 555-0187. It is free, private and you are never pushed to list.