|January 11, 2008
Mr. John Smith
456 Any Street Drive
Middletown, Texas 75080
RE: Opinion of Fair Market Value for ABC Supplies Inc.
Dear Mr. Smith,
This Opinion of Value is provided for ABC Supplies Inc., and is offered at the request of Pope Estates Arizona Inc. The purpose of this report is to provide the requestor with an opinion of fair market value in contemplation of a more comprehensive valuation and/or the potential sale of the business.
Based on our review of the financial information provided, we have determined that this business could be purchased in one of the following methods:
There are several key factors that may affect the price and terms, including the amount of the sales price that is financed, the type or category of the business, the value of assets and the available cash flow. Information regarding the effects of these factors can be obtained by contacting your BBN Affiliate. Additional information is included in the attachment.
In review of the information provided to RWS, it is our opinion that the price range for the business, depending on price and terms, can be reasonably stated as $570,000 to $880,000.
The three most common mistakes a business owner can make are over pricing the business, requiring improper terms and failing to professionally prepare the business for sale. Staying within the price range outlined in this letter should help you accomplish the sale of your business at the best price obtainable in the market place today.
We appreciate the opportunity to review your company’s financials and to provide you with this “Opinion of Fair Market Value”.
RWS Business Valuation Services
POPE estates 1962
Merger & Acquisition Specialists
Commercial Realtors Motel Brokers National Affiliate Business Brokers Network®
Additional factors that can have an impact on price and terms are:
Accounts Receivable & Inventory
The actual balance of accounts receivables and inventory will be adjusted at close. If the actual amount of inventory or the balance of accounts receivables is not what is reported on the balance sheet, there will be an adjustment made at closing that could require a greater amount of seller financing or a reduction in sales price.
Any liabilities or potential liabilities that the buyer will assume will reduce the amount of the seller note by the amount of liabilities taken.
When a buyer assumes debt, the amount of money available for down payment is reduced making it more difficult to complete a transaction.
Often, business valuations are compared to property appraisals in real estate. While two houses of similar size and shape located in the same neighborhood are typically close in price, businesses will have different values based on the variables and factors of consideration in determining fair market value. How a businesses is managed, salaries and wages, debt service, profit margins, expense management and, asset depreciation are just a few of the factors that determine cash flow and consequently value. Some indicators of high value are:
On the other hand, a business with a poor industry outlook, poor ratios of cash flow to assets, heavy company debt load, and low or no profits will be looked upon negatively by most potential buyers, and the eventual sale of the business, will be less likely to occur.