How to Determine the Value of Your Business in Oklahoma Before You Sell

If you are selling or buying, understanding the Value of Your Business is essential to the success of the purchase or sale. If you’re preparing to sell your business in Oklahoma, one of the most important steps is determining what your business is actually worth. The proper Value of Your Business not only helps you set a realistic asking price but also gives buyers and sellers confidence, supports financing, and protects you from leaving money on the table.

Business valuation can feel overwhelming, but understanding the fundamentals can help make it easier to approach the sale with confidence. Here are the key methods and factors that go into determining what your business is worth.

Understand Why Business Valuation Matters

A business valuation gives you:

• A realistic sale price. Let’s face it, a realistic price is where success or failure begins. If you’re the seller, you can never attract a buyer if you are unrealistic about your firms value.
• Negotiation leverage. If you understand the true value of a business, you are in a better position to negotiate.
• Credibility with potential buyers and lenders is enhanced when you understand the value of the business
• Insight into the strengths and weaknesses of your business
• Protection against undervaluing or overpricing your company

By starting with a valuation, you create a solid foundation for a smooth sale process.

Gather Key Financial Information

Before valuing your business, collect the financial documents that buyers will want to review:

• Profit and loss statements (3–5 years preferred). This is an absolute requirement for both buyers and sellers. Moreover, lenders like the SBA or other financial institutions won’t lend money for the business unless there are financial statements.
• Balance sheets. This goes together with profit and loss statements.
• Tax returns that should span several years.
• Accounts receivable and payable records. This is another part of a proper balance sheet.
• Inventory and asset lists
• Contracts, leases, and agreements
• Business debts and liabilities

These documents not only drive the valuation but also build trust with buyers.

Use the Three Main Valuation Methods

A. Income Approach (Cash Flow or Earnings-Based)

This method focuses on how much money the business is expected to make in the future.

Two common income-based methods:

1. Seller’s Discretionary Earnings (SDE) Multiple
   • Used for small businesses and medium-sized businesses.
   • Owner earnings before taxes, depreciation other benefits to the owner.
   • Adds back the owner’s salary, benefits, and any non-essential expenses
   • A multiple (often 2–4x SDE) is then applied based on industry and risk factors. This multiple really is industry-specific.
2. Discounted Cash Flow (DCF)
   • Used for larger, more complex businesses
   • Projects future cash flows and discounts them to today’s value

B. Market Approach

This method looks at what similar businesses in your industry and region have sold for.

Think of it as “comparable sales” in real estate.
If similar businesses sell for 3x annual earnings, that becomes a benchmark.

C. Asset-Based Approach

This calculates the total value of your business assets minus liabilities.
It works well for:

• Asset-heavy companies
• Businesses that are not profitable
• Businesses with significant equipment, vehicles, or real estate

This approach is less useful for service firms or businesses where goodwill and customer relationships drive value.

Consider Intangible Assets (Goodwill)

Many Oklahoma business owners forget that a business is worth more than just equipment or inventory. Intangible assets can add significant value, including:

• Brand reputation. Nothing spells value like a strong brand reputation. Brand reputation drives future sales and profitability, and it does this without future advertising and marketing dollars being directed towards it.
• A Loyal customer base goes together with brand reputation.
• Contracts and recurring revenue. Think about subscription kinds of businesses.
• Trademarks and trade secrets are valuable and considered intellectual property.
• Strong online presence in both digital and social media platforms.
• Skilled employees and management that can run a business without additional investment from the new owners.

Businesses with reliable, repeat revenue often receive higher valuation multiples.

Identify Risk Factors That Impact Value

Buyers look closely at factors that affect the stability and profitability of the business:

• Dependence on the owner (can the business run without you?). Also, does the business have a trained staff that can transition to a new owner?
• Customer concentration (relying on one major client lowers value). Is the customer base broad or does it focus on a few special clients?
• Outdated equipment or systems that are up to date can add or diminish value.
• Industry trends and economic conditions
• Legal or regulatory issues that work in favor of or disfavor
• Accuracy and transparency of financial records

Lower risk generally means a higher valuation.

Work With a Professional When Needed

Many business owners start with an estimated valuation but later hire:

• Business brokers
• CPAs
• Certified valuation experts
• Attorneys experienced in business sales

A professional valuation is often required for SBA financing, partnership buyouts, and negotiations with sophisticated buyers.
Your attorney can guide you through this process and help protect your interests.

Prepare Your Business for a Higher Value

If you have time before selling, you can increase your valuation by:

• Cleaning up financial records
• Reducing owner-dependent tasks
• Securing long-term contracts
• Improving profitability by even a modest amount
• Paying down debts
• Updating equipment or processes
• Strengthening your online and community presence

Small improvements can translate into significant increases in the final sale price.

Tulsa Business Lawyers In Your Corner

Determining the value of your business is a critical part of preparing for a successful sale. By understanding how buyers evaluate businesses, gathering your financial records, and considering the different valuation methods, you can confidently set an asking price that reflects your company’s true worth.

If you’re thinking about selling your business in Oklahoma, the experienced Tulsa business lawyers at Kania Law Office can help you evaluate your options, protect your interests. Call for a free consultation today 918.743.2233. Or you can ask an online legal question by following this link.