Timing the Sale of a Business
The business environment in which the company operates is also an important factor in determining the asking price that the market will bear. If the company in question operates in an industry that is suffering through a downturn, the owner should delay selling the business if at all possible. Few companies are able to buck the tide when the industry in which they operate is stuck in a sluggish cycle, and even attractive businesses will not shine as brightly during such periods. For most business owners looking to sell their company, it is usually wise to ride out the trough and put the company up for sale after the industry enters a more robust cycle. Of course, some industries never post a recovery; business owners engaged in under-performing industries need to determine whether the downturns they experience are simply an inevitable part of the business cycle within a basically healthy industry, or whether changes in the marketplace are fundamentally altering the strength of the industry (establishments as varied as roller rinks and hat manufacturers have been relegated to the fringes of the American economy by the ever-changing tastes of U.S. consumers).

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Weighted Average Cost of Capital (“WACC”)

One of the problems with this method is that the valuator may elect to calculate WACC according to the subject company’s existing capital structure, the average industry capital structure, or the optimal capital structure. Such discretion detracts from the objectivity of this approach, in the minds of some critics. Standard and premise of value

Business valuation results can vary considerably depending upon the choice of both the standard and premise of value. In an actual business sale, it would be expected that the buyer and seller, each with an incentive to achieve an optimal outcome, would determine the fair market value of a business asset that would compete in the market for such an acquisition. If the synergies are specific to the company being valued, they may not be considered. Fair value also does not incorporate discounts for lack of control or marketability.

MARKETING INFORMATION.
Intelligent buyers will want detailed marketing information on the company as well, including data on the business's chief market area, its market share, and marketing expenditures (on advertising, consultants, etc.). In addition, product line information will also be expected. Buyers, for instance, will want to know whether any of the company's products are proprietary, or whether there are potentially valuable new goods in the production pipeline. Descriptions of pricing strategies, customer demographics, and competition should also be available for potential buyers to review. Generational Equity

Company Timing
Many times private buyers cannot purchase a business with declining sales due to the inability to obtain financing on such a venture. From a company timing perspective, a growing, well run business, is worth more than a declining business with problems. You might be happy to have another year of stable sales but for a buyer, it looks like a flat business with no growth potential. You have probably heard of the saying buy low and sell high, this applies to both public company stocks and the stock of your own company.

Income, Asset and Market Approaches

Three different approaches are commonly used in business valuation: the income approach, the asset-based approach, and the market approach. Within each of these approaches, there are various techniques for determining the value of a business using the definition of value appropriate for the appraisal assignment. Generally, the income approaches determine value by calculating the net present value of the benefit stream generated by the business (discounted cash flow); the asset-based approaches determine value by adding the sum of the parts of the business (net asset value); and the market approaches determine value by comparing the subject company to other companies in the same industry, of the same size, and/or within the same region. Generational Equity

Discount for lack of control

The first discount that must be considered is the discount for lack of control, which in this instance is also a minority interest discount. Minority interest discounts are the inverse of control premiums, to which the following mathematical relationship exists: MID = 1 " [1 / (1 + CP)] The most common source of data regarding control premiums is the Control Premium Study, published annually by Mergerstat since 1972. Mergerstat compiles data regarding publicly announced mergers, acquisitions and divestitures involving 10% or more of the equity interests in public companies, where the purchase price is million or more and at least one of the parties to the transaction is a U.S. entity.

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