Question on estimating a business value

[mlwhite79]

Hello everybody, I have a quick question regarding business valuation. Does anybody have experience or preference with a valuation tool that can help me understand what a business is worth? Thanks.

[d's insurance store]

There is no universal, quick business value evaluation tool. The 'worth' of a business has far too many factors such as business history, outlook, profit, owner withdrawal, inventory, business location, lease terms and length, client list and good will. And that's not even the entire list.

If you're interested in selling see a good business broker. If you're interested in buying, see a good business broker.

To post such a wide ranging question on a site like this with limited information is silly.

[mlwhite79]

For somebody who doesn't want to pay thousands on a broker, do you know of any online service or website that considers some of those factors? It doesn't necessarily have to be free...

[AgencyEquity]

You can find a list of Insurance Agency Valuations professionals by going to:
https://www.agencyequity.com/listings/i ... appraisals

[mlwhite79]

I'm sure that valuation professionals are great at what they do, but do you (or anybody) know of any good online tool that could provide a rough ballpark estimate? It doesn't have to be free.

[mhutch69]

I have brokered many agency acquisitions and sales and always paid more than my costs.

Hoping there is an Excel spreadsheet with 200 formulas to value a business is very unlikely.
Not possible to consider human capital etc.

Hire a broker and you will be better off.

Negotiating directly with a buyer does not work nearly as well as Me negotiating on your behalf.

[mlwhite79]

Thanks, but I don't need to know the formulas or variables, nor do I need a professional at this stage. Does anyone have experience with a website that can provide a ballpark estimate -- sort of like comps within an MLS?

[ossgraphics]

You can easily make a research on Google for ballpark estimate websites. You'll surely get numerous lists that could help you out in this regard.

[ValuePro]

It seems like you need a valuation but don’t want work with a professional (at least not yet)? For a ballpark valuation, there are a few sites to consider, like Valusource for small business at http://valusource.com/Products/Business ... lders.aspx

If you need something legal, you may end up needing to use a professional, but this could be what you are after. A lot of the pros use their higher end stuff, but this is affordable and should work.

[mlwhite79]

It seems like you need a valuation but don’t want work with a professional (at least not yet)? For a ballpark valuation, there are a few sites to consider, like Valusource for small business at http://valusource.com/Products/Business ... lders.aspx

If you need something legal, you may end up needing to use a professional, but this could be what you are after. A lot of the pros use their higher end stuff, but this is affordable and should work.

Thanks for the response. Does anybody have experience with this kind of service?

[mhutch69]

I have neglected to review this post for several months.
Does anyone want to work for free?
That should be your question!

[yoyowordup]

I don't really think the poster is looking for a free lunch and everyone keeps giving the same response . . . hire someone.

Is it really so hard for everyone to understand that he's just looking for a basic "rule of thumb" to see if is worth pursuing and opportunity.

Different business types have different "rules of thumb" as to the value. Anyone that has been a business owner in the same industry can probably give you a starting point.

In the insurance industry for example, for many years, the rule of thumb has been that a book of business has a value of approximately 1.5X annual revenue. There are obviously many factors that go into this, but it's certainly a good starting point. Most sales of agencies recently have changed to a formula using EBITA/EBITDA, but 1.5X revenue is still a good starting point.

I would say 1.5X would come close for a preferred book of profitable business with a good mix of personal, commercial and life/health. If your talking non-standard business or heavy in the life/health side, that number would change substantially. If you have a book of commercial accounts that are all above $15,000-$20,000 premium, that number could certainly go up.

I know that Brown & Brown and some other larger agencies were paying 2.5 - 3X annual revenue a few years back, but that was when times were good and they would do anything to acquire an agency.

[talkcarinsurance]

I would agree with the previous poster. You need to think how long it would take to earn the money you paid. If it is a solid business, I wouldn't mind paying a premium of 3 years earnings. So, it would depend on how highly you rate the business and how comfortable you are with it. For example, some businesses may have royal client bases and very little competition. They would fetch more money compared to a business that requires constant hard work and fending off competition.