Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

November 10, 2020

Everything You Need to Know About Valuating a Business

By Achim Neumann

A business valuation in New York, Pennsylvania, or anywhere in the country is important to buyers and sellers alike. After all, without proper business valuation methodology, it becomes very difficult to establish a fair selling price for any business.

However, despite its undeniable importance, many buyers and sellers take the wrong approach when valuating a business. This either completely minimizes their chances of buying or selling a business, or potentially means they pay more than they should have or end up selling their business for less than it’s worth.

Common Business Valuation Methods

There are many different methodologies and schools of thought when it comes to determining how much a business is reasonably worth. Some of the most widely used methods to calculate a business’ value are applying a set multiple to average yearly revenues or average yearly profits, or looking at a company’s assets and liabilities to get a sense of how much it is realistically worth.

For the first two methods ofvaluation, it’s important to note that the multiple used is often dependent on the industry or type of business, and using profit – or better cash flow – instead of revenue is typically the best way to go about this calculation.

This is because the bottom line is what actually matters to an existing or new owner, and profit margins can vary massively from business to business or even from year to year.

However, even with the aforementioned considerations and adjustments, all three of these methods of valuation are still, in most cases, too simplistic and therefore don’t give the full picture.

The Alternative: Professional Business Valuation

Even if you’re good with numbers and can read a balance sheet, it’s best to hire a professional when it comes to a business valuation, irrespective of whether you’re the buyer or the seller.

The valuation an accredited professional business valuation firm or individual consultant provides is much closer to the real, inherent fair market value of a company. This is because they consider countless other factors and variables which most of the commonly used business valuation models neglect to take into account.

This includes things such as brand value, management structure, how profits have increased or dropped over time, cashflow fluctuations, plus many other important considerations.

Note: For someone to be properly qualified to valuate a business in the United States, they should be certified by an organization such as the Appraisal Foundation and the Institute of Business Appraisers, among others.

Market Value vs Investment Value

There are a few different ways to look at a business’ value, and the two most important are its market value and its synergistic (investment) value.

A company’s market value is how much it’s worth based on what a buyer or investor would realistically expect to pay to buy a particular business in the market at a particular point in time. On the other hand, a business’ synergistic (investment) value not only involves looking at how much it is worth based on market conditions, but also how much it is worth to the particular prospect buyer after obtaining certain costs savings in combing operations with the buyer’s company.

In some cases, a business’ market value will be identical to its investment value, but in many cases there can be a significant difference between the two.

About A Neumann & Associates, LLC

A Neumann & Associates, LLC is a professional mergers & acquisitions and business brokerage firm having assisted business owners and buyers in the business valuation and business transfer process through its affiliations for the past 30 years. With an A+ Better Business Bureau rating, the company has senior trusted professionals with a deep knowledge based in multiple field offices along the East Coast and has performed hundreds of business valuations in its history. The firm’s competitive transaction fees are based on successfully completing transactions. For more information, please contact A Neumann & Associates at 732-872-6777 or

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Client Testimonials

“ I appreciate your diligent approach to screening buyers and sellers as well as the high quality CIM that you produce.”

Andrey O, Investor

“Finally enjoying retirement after recently selling my business using the services of A Neumann & Associates. Joe Oddo provided the conduit to a successful transaction. Joe knew when to inject input and when to simply listen and allow the buyers to vent, step back and regroup. The outcome met our expectations and got us to the finish line, which included my staying with the company six months in order for the buyers to get their footing and keep our workforce in the loop. He helped at every step by providing his expert guidance & resources. Thank you!”

Emily Parker Myers, Co-Owner - Myers McRae

“I had been in touch with Karin and Gary from A Neumann & Associates regarding some opportunities and was looking forward to meeting with them. Hence, when they organized a seminar in Princeton, NJ, I was quick to sign up. The seminar was very informative as the team walked the attendees through various scenarios and referenced real life buying/selling situations they had been through. The sessions by Gary, Karin and Achim were crisp and focused and brought clarity to potential seller and buyers. I strongly recommend the team and look forward to continue working with them.”

Gaurav Tyagi

“Thank you for your Event on "How to value, Sell, and Buy A Business for Maximum Profit" and the insight into ANA’s approach on what is involved in the Business Exit for sellers. Garys Hervieiou's "Business Valuation", Achim's "Deal structure" presentation and Karin’s "Preparing the Package" are real street knowledge shared. They answered attendees questions which makes it more interesting for learning from others. Great for small businesses like us. The presentations were totally worth our time and travel for the event to Princeton, NJ from Rockville MD. Ravi Bhutani, President, CIPS”

Ravi Bhutani

“Gary, this is to thank you for an excellent job done in selling our business. We could never have done it without your professional expertise, dedication and time put in without reservation to make it happen. We will gladly and highly recommend you to anybody in our position.  It was a pleasure to work with you.”

Pat Iammatteo, Owner

“Your vetting is simply outstanding, among the best I've seen from a broker.”

Eric H., Investor

“I recently contacted A. Neumann and Associates about getting a valuation of my business done. I spoke with Marc, who explained the process in detail. After meeting with Marc in order to get a clear understanding of my business, and what I was hoping to accomplish. His patience in answering all my questions and his knowledge of the proper way to market my business gave me great confidence that this is the firm I will be using to sell my business for max value. Working with Marc at A Neumann & Associates was very easy and professional. I did not know all that was going to be involved in selling my business but they helped me through the process. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. I highly recommend this firm to anybody who wants to sell now or down the road. Marc not only knows his stuff, but actually is a real nice guy.”

Double Diamond

“Used A Neumann & Associates to sale my business. could not imagine having done it with out the patience and experience Gary provided. Thanks Gary,”

Dennis Frazier

“Working with Marc and his company was a pleasure. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. Marc handled most of the interaction and he has one of the greatest demeanors. Again, it was a pleasure working with him and his firm.”

Douglas DiCeglio

“I recently completed an acquisition using A Neumann & Associates. Tony Valentino was very helpful and accessible during the entire process. They do a thorough job vetting both parties and got us to the finish line.”

Srini Mudambi
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Contact A Neumann & Associates, LLC

If you are considering selling your business, please contact us to learn more about our comprehensive service spectrum. Our experienced professionals will answer all your questions about selling a privately held business in complete confidentiality. Please fill out our contact form, or call us at 732-872-6777. We will contact you directly and will never identify ourselves to your employees.

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