The first step is the client sharing their last five years of completed financial statements which will include the profit and loss statements, balance sheets, and the depreciation schedules for each financial year. The client will also advise any other relevant information not contained within the statements such as the current stock value, the work in progress value as well as other operational details including any recent changes in staffing or market situations, the future outlook and forecasted business projections. All information supplied remains confidential.
In step 2 we use the client’s supplied information from step 1 to establish the business’s average financial performance and earnings levels to establish a normalised average EBPITDA (Earnings before the Proprietors salary Interest Tax Depreciation and Amortisation) figure. The EBPITDA is also sometimes referred to as the Seller’s Discretionary Earnings (SDE) figure.
The normalised avg EBPITDA/SDE figure is then multiplied against the industry sale multiple from within the same industry sector and assessed considering the current market conditions.
In step 3 the Business Broker presents the comparative market analysis and business appraisal to the client.
The business appraisal is an indicative guide as to the possible sale price range in the current market for the business, which the client may choose to use to help them decide whether or not to sell and to help them set a realistic and achievable listed sale price or asking price if they do choose to sell.
Setting the asking price is ultimately at the sole discretion of the business owner or authorised representative of the business. JL Business Sales recommends clients seek their own independent legal and accounting advice.