Factors used to determine acquisition price in Maryland

When a company decides to purchase a stake in a business, it will look at five key indicators. First, it will determine a multiple of EBITDA, which is earnings before depreciation, taxes and other costs that reduce final earnings. This multiple will determine how much an investor thinks that the company is worth. For instance, if a company had an EBITDA of $500,000 and the investor went with a multiple of five, the company would be worth $2.5 million.

A company will also have to consider EBITDA margin, which is generally thought as EBITDA divided by revenue. Increasing this margin may make a company more valuable to investors. After taking EBITDA issues into consideration, an investor will have to determine the growth potential of the company as well as how much of the venture the investor will own.

When determining the growth of a company, an investor will take the current rate of growth and discount it to cover for uncertainties. The most important aspect of a deal may be how much of the purchase price can be financed with debt. This makes it easier for an investor to make the acquisition without allocating capital to the purchase, which may increase his or her return.

If a small business owner wants to sell his or her business, it may be worthwhile to consult with a commercial law attorney. An attorney may be able to help the owner calculate how much the business is worth and put together a team to help facilitate the acquisition process. This may increase the odds that the acquisition occurs in a timely manner and that the owner gets a fair price for his or her business.

What are the Types of Business Structures?

Before you launch a small business, two questions you should consider are: What are the types of business structures, and which one best fits my needs? The main types…