FAQ

What is my business worth?

A Business Valuation is the first step in deciding what your business is worth. Redwood Advisors will prepare a complimentary Business Valuation to allow you to make an educated decision on when to go to market. 

The Brokers’ opinion of value will offer you a range of value for your business.  This range is based on a multiple applied to the three-year average of the SDE.  The size and type of business you are selling play a major role in determining the multiple for your business.

Absolutely, the key to our success is to ensure your information and intentions are protected from the public.  We advertise in a generic manner, and all potential Buyers are thoroughly vetted and required to sign an NDA (Non-Disclosure Agreement).

Using a business broker is highly recommended for most owners, as the selling process requires specialized knowledge in valuation, marketing, and negotiation. A broker will help maximize your sale price, maintain strict confidentiality, and let you focus on running your daily operations.

SDE is the acronym for Seller’s Discretionary Earnings. This is the cash-flow metric used to value small businesses.  It represents the financial benefit a single full-time owner/operator would receive from the business on an annual basis.  It is calculated by taking the pre-tax net income and adding back interest, amortization, and interest along with owner compensation and one-time/non-recurring costs.

EBITDA is the most common measure of the earnings of a company in the middle market. It measures profitability from the core operations of the business before the impact of debt (interest), taxes, and non-cash expenses (depreciation and amortization). It eliminates the impact of financing (interest) and accounting decisions (depreciation and amortization), which can vary.

SDE and EBITDA are two common ways of measuring profit or cash flow.  SDE is the most common measure of cash flow for an owner-operator business.  EBITDA shows the core operational profit of the business while treating the owner’s salary as a standard expense.

In general, it takes six to eighteen months to sell a business from the time you execute a listing agreement till the time you close. 

A Confidential Information Memorandum (CIM) is a professionally prepared summary of your business that is presented to prescreened buyers who are interested in purchasing your business