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How to Get a Business Valuation in New Jersey: What Business Owners Need to Know
Getting a realistic business valuation starts with understanding the company's financial performance, assets, industry, market conditions and, most importantly, what a qualified buyer may actually be willing and able to pay.
If you own a business in New Jersey and are wondering what it is worth, you are not alone. Business owners ask me this question for many reasons. Some are thinking about selling. Others are planning for retirement, considering a partner buyout, or simply want to understand the value they have built over the years.
How Is a Small or Mid-Sized Business Valued?
For many privately held businesses, value is based largely on earnings rather than revenue alone.
Depending on the size and structure of the company, a business broker may analyze Seller's Discretionary Earnings (SDE), EBITDA or another measure of adjusted cash flow.
The process usually starts by reviewing financial statements and tax returns and then identifying legitimate adjustments to the reported earnings. These adjustments, often called "add-backs," can include certain owner compensation, discretionary expenses and qualifying one-time expenses.
Once normalized earnings are established, an appropriate market multiple may be applied.
But a multiple is only part of the story.
Two businesses with identical earnings can have very different values.
What Factors Affect the Value of a Business?
Buyers look beyond the numbers. Factors that can affect value and marketability include:
Revenue and earnings trends
Customer concentration
Recurring or repeat revenue
Dependence on the owner
Quality of employees and management
Condition of equipment and other assets
Lease terms and facility requirements
Industry outlook
Licenses, certifications or contracts
Growth opportunities
Quality and accuracy of financial records
Availability of buyer financing
A business that operates successfully without requiring the owner to handle every important function may be considerably more attractive to buyers than one that depends completely on the owner.
What Is the Difference Between a Broker's Opinion of Value and a Certified Business Appraisal?
This is an important distinction.
A Broker's Opinion of Value is generally designed to help a business owner understand a reasonable market value or potential selling-price range based on financial performance, market conditions and the perspective of likely buyers.
A certified appraisal is a different service and may be appropriate when a formal appraisal is required for litigation, certain tax matters, estate planning or other legal or financial purposes.
If your primary question is, "What might my business realistically sell for?", a broker's market-based valuation can be an excellent place to start.
What Information Is Needed to Value a Business?
Although every situation is different, I generally want to understand several years of financial performance as well as the current year.
Useful information can include:
Business tax returns
Profit and loss statements
Balance sheets
Year-to-date financial results
Owner compensation and benefits
Potential add-backs
Equipment and major assets
Inventory, when applicable
Lease information
Employee structure
Major customer or contract concentration
Good financial records make it much easier to evaluate a business accurately and ultimately make the company easier for a buyer to understand.
Can I Get a Valuation If I'm Not Ready to Sell?
Absolutely.
In fact, understanding value before you are ready to sell can be very useful.
If the current value isn't where you hoped it would be, knowing that two or three years before a planned exit gives you time to improve profitability, reduce owner dependence, strengthen the management team, diversify customers or address other issues that may be holding the value back.
Waiting until you are ready to retire to discover what your business is worth leaves you with far fewer options.
How Much Does a Business Valuation Cost?
The answer depends on the purpose and depth of the valuation.
At Atlantic Business Brokers, LLC, we offer a Broker's Opinion of Value for $995 for owners who want a professional assessment of their business's potential market value.
We also offer a more comprehensive Business Value & Marketability Review for $1,500 for owners who want to understand not only potential value, but also factors that may affect the company's attractiveness and marketability to prospective buyers.
These services are designed for business owners seeking market-based guidance. They are not certified appraisals.
What If I Decide to Sell?
A valuation is only the beginning.
Before bringing a business to market, I also look at how the business should be positioned, how confidentiality will be maintained, who the likely buyers are, whether the transaction is likely to qualify for financing and what issues could arise during due diligence.
The goal isn't simply to put a price on the business.
It is to understand what the business may realistically command in the marketplace and prepare it for a successful transaction.
Thinking About the Value of Your New Jersey Business?
Atlantic Business Brokers, LLC works with owners of privately held businesses throughout New Jersey, Pennsylvania and Delaware, with particular experience in healthcare, home services and other owner-operated businesses.
Whether you are considering selling now or simply want to know where you stand, understanding your business's value is an important first step.
Request a confidential consultation or learn more about our Business Valuation services. Ready to Understand What Your Business May Be Worth?
Whether you're considering selling now or planning several years ahead, understanding value is an important first step.
Broker Opinions of Value and marketability reviews are intended for business planning and potential sale purposes and are not certified business appraisals.
Thinking About Selling, But Not Ready for a Valuation?
Download our Free Guide to Selling Your Business to learn more about preparing your business, understanding the sale process, and avoiding common mistakes.
Penny Papaioannou, Business Broker | Atlantic Business Brokers, LLC Serving business owners throughout New Jersey, Pennsylvania & Delaware
Penny Papaioannou is an experienced business broker and business owner who helps owners of privately held businesses understand value, prepare for an exit, and confidentially navigate the sale of their companies. Her focus includes healthcare, home services, and other owner-operated businesses.
Atlantic Business Brokers, LLC Business Sales | Business Valuations | Exit Planning
Penny Papaioannou Business Broker | Atlantic Business Brokers, LLC Serving New Jersey, Pennsylvania & Delaware
Business Sales | Business Valuations | Exit Planning
📞 856-524-5178✉️ info@atlanticbizbrokers.com🌐 AtlanticBusinessBroker.com
Confidential consultations available.
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