Jeff Slaton Business Valuation Principles - Guide to Understanding ODCF

There is a great deal of confusion concerning the calculation and significance of ODCF. Jeff Slaton offers a few helpful guidelines.
By: Jeff Slaton
April 5, 2010 - PRLog -- I have published a number of articles including the enclosed which may be helpful in understanding how small business value is calculated.

There is a great deal of confusion concerning the calculation and significance of ODCF. Jeff Slaton offers a few helpful guidelines ... .

Reputable Business Brokers should be able to provide business comps or  historical comparable sales data within most industries.

Almost all businesses under $500,000 in top line revenue are sold on the basis of accepted industry multiplier of ODCF and also compared to historical comparable sales transaction data bases.  Depending upon industry, ODCF may or may not include inventory.  

While pricing is critically important, Broker negotiated terms acceptable to both Buyer and Seller will make the difference in getting a done deal over the goal line.

While other valuation methods can be utilized, they generally serve the purpose of offering what is referred to as a sanity check to reaffirm the transactional sales data and industry multiplier of ODCF. Upon the occasion where historical comparable sales transaction data and or accepted industry ODCF is unclear, we will utilize a certified valuation professional.  Typically, Buyers or their advisors will have access to available industry ODCF and historical sales transaction information when performing due diligence and making an offer to purchase.  

If NetWorth finds that it is necessary to make a recommendation for an independent Business Valuation, we will credit the cost of the Business Valuation against our compensation at closing.  

An indispensible reference tool is the 2010 Business Reference Guide The Essential Guide To Pricing Businesses and Franchises 20th Edition by Tom West.  This guide contains 20 years history of transactional sales data for almost every imaginable business.  Including Pricing Tips, Benchmarks, Advantages, Disadvantages, Industry Trends, Industry Resources and websites.

Finally, a word of precaution regarding Seller Business Valuations specific to a small businesses.  Initially, the Buyer should be allowed to independently arrive at their own conclusion of value.  Very often, the Buyers initial conclusion of value may be higher compared to the Sellers Business Valuation or at the very least serve as a departure point for negotiations.  Introducing the Sellers Business Valuation to early in negotiations can often leave money on the table to the disadvantage of the Seller or create questions and concerns that sideline an otherwise closable transaction.

Jeff’s Maxim: “Once the ceiling of price is firmly set in the mind of the buyer, you can never go up”.

Expertly prepared Selling Documents to include Seller Summery, Seller Portfolio, Financial Documents and Confidential Exposure to Qualified Buyers and a Motivated Seller = the Ability to Sell.

Jeff Slaton is with belongs to one of the nation's largest networks of business consultants. Jeff has been working closely with business owners for more than 15 years, ensuring their sales, marketing, financial, and exit objectives are successfully executed. NetWorth Business Brokers delivers face-to-face business consulting to small business owners seeking a future exit from their companies. He can be reached at or 612-419-2905 for more information.

The current recession brings about a unique opportunity to sell your business for top dollar. With over 15 years experience in more than 200 industries, NetWorth Business Brokers Management has weathered the challenges of our economy's peaks and valleys. We continue to net positive results for Minnesota business owners, with a high level of customer satisfaction. Contact Jeff Slaton today to find out why now may be best time to sell.

After helping sellers and buyers for more many years, I have found that honesty, integrity, full disclosure, patience and a willingness to consider various alternatives makes the probability of success for all parties very high.

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NetWorth Business Advisory M&A is a company of people who believe all independent business owners have the right to a fair price when they sell their company, or to follow a strategy that will create the highest value during their ownership.

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