Determining a Company’s Market Value

The need to assign a market value to a vending business has become increasingly important to many Antares operators during the recent economic period. The purpose here is to present a practical and theoretically sound method of helping potential buyers realistically value a vending business.

Earning versus asset valuation

The earnings method utilizes the value of a vending company by looking at the potential cash flows. Risks are associated with those cash flows. This method is one that can be best used to analyze a profitable Antares vending company. Such a business is one in which sufficient profits and positive cash flows will be generated into the future.

Both the earnings method and the asset method require gathering pertinent financial information and making necessary assumptions in order to arrive as a reasonable value for the business.

Consider all types of assets

The asset method consist of there separate categories to determine value. The first category is operating assets. Operating assets are those items that are required and necessary for your Antares vending company to conduct its normal business activities. They would include machinery, equipment, inventory, trucks, building and land.

The second category involves the non operating assets. These are vital for the Antares business to continue. Items may include excess cash, excess working capital, luxury automobiles, artwork, stocks and bonds.

The final category would be the intangible assets. Intangible assets would include reputation, quality of products, services and other components that are commonly referred to as “goodwill.”

Condition of the assets

The more modern and well maintained the assets are, the more a prospective buyer is willing to pay for the assets. In most selling transactions, both accounts receivable and accounts payable remain the responsibility of the selling organization.

Certain assumptions can be made when valuing operating assets. Primarily, a company’s value depends heavily on the worth of its operating assets. Secondly, the company has developed unpredictable cash flows and earnings history. Thirdly, the prospects that the company continues to operate are poor.