Many people ask how to value their business. The problem is, like the stock market, there is more than one price. There is the rational price that is pretty scientific and can be calculated from cash flows. Then there is the market price, which is influenced by rational and irrational purchases.
As with the stock market, if there is an expert saying it is a bargain at this price – the market will buy at that price in droves. In my opinion, the better option is:
- Know the value of the cash flows.
- Find high return businesses that reside below that price.
- Buy them at an further reduced price if possible.
There is a lot to be made from buying the right business at the right price, applying the right leverage, and then optimizing the financials. You can find out more at www.businessoptimization.biz