This guide is provided by BusinessesForSale.com – the leading global website for the buying and selling of small and medium sized businesses.
When you have made the decision to sell your business you need to define your assets.
If someone bought your business, what would they really be acquiring? There may be an inventory of machinery, a list of employees and a certificate for the premises but these are only part of what your business is worth.
Consider what you’ve established over time and how to define it. An honest assessment of your business’ assets will attract potential buyers and be financially rewarding for you.
- You’ve built up a reputation which is now intrinsically linked with the name of the business
- You have a phone number, fax number, e-mail address, maybe even a website which are already known by your clientele
- There’s the goodwill of your customers, who are loyal to the business because they appreciate the standard of your service
- Trade links are already in place, involving contracts with warehouses and suppliers, for example, with their consequent goodwill
Whoever buys your business will profit from it being unique and ready-made. You can expect them to pay more for these advantages.
Whether buying or selling a business, the valuation process can be both revealing and rewarding. But it is also complex. So here are some reasons to go through the process of valuation:
- A valuation can expose the best time to buy or sell according to market fluctuations
- An honest opinion of the business’ worth means both parties involved in the sale will be more willing to complete the transaction quickly and simply
- A valuation can help the seller agree a fair price for shares – a price that will satisfy the buyer
- Announcing that a valuation is to take place will encourage the management team to tighten up its act and get the business into shape
There are many ways to assess a business’ worth, so make sure that the valuation technique you use plays to your individual business’ strengths. The valuation approaches include:
- Asset valuations
- Price/earnings ratios
- Entry cost valuations
- Discounted cash valuations
- Industry rules of thumb
Read our how to guide on choosing the right valuation technique for your business to find out more about these approaches.