If you are thinking of selling up your business – you need to validate it first! How can I value my business for sale? Read this article and find out!
We totally understand you – the decision to sell your business can be a difficult one. After all, the business owners put a significant amount of time, energy, and resources into building and developing their businesses.
Determining a fair and realistic price should be the first thing you need to do. You need to keep in mind that buyers are pretty sentimental so it is essential for you to be reasonable. Don’t start out by expecting your business to sell for more.
There are a few ways to value your business for sale. You need to consider both tangible and intangible elements. The most common strategy, however, which is used in most industry sectors is known as Earnings Multiples and it is a formula for determining the value of the business based on multiple net profits ratio containing the value of the business divided by the post-tax profits.
There are businesses that may ask for a higher multiple. These are businesses that have employees who are able to run the business even when the business owner is not there. And we all know that when the business is not dependent on the owner, it is more valuable and the price automatically increases.
If your business has tangible assets, for example, a property company, the asset valuation will give you a reasonable value of the assets minutes the value of liabilities. If you are not sure how much to sell your business for, we recommend you to consult with a broker or an accountant.
Before you start advertising your business for sale, make sure to get your affairs in order. This means that you need to solve any financial irregularities and make your business look like an incredible business opportunity and not like a risking investment. The same goes for a company you are interested in buying – if the company doesn’t have a good set of books, you should think again about buying it.
Even though there are numerous strategies to determine the value of your business for sale, the best way is to hire a business broker who can determine the value professionally, give you expert tips and tricks, help you advertise your business, negotiate a better price, and find some interesting potential buyers.