01 Apr How much should you Sell Your Business for? What you may not know.
How much should you Sell Your Business for? What you may not know.
Many things need to happen for an entrepreneur to sell their business, and the first thing they need to do is place a value on their business. The entrepreneur may think they know the value of their own business, but the key is figuring out how much their business is worth to a buyer. The entrepreneur can handle the valuation on their own, but there are several steps that need to take place to properly value their business.
The first step the entrepreneur should take is to get all their financial statements in order. Financial statements such as balance sheets, income statements, cash flow statements, and the seller’s discretionary earnings statements are needed for the valuation. Once the necessary numbers are pulled from these statements, a standard multiplier is used to place a value on the business.
Second, the entrepreneur should consider the type of business they are in and the overall business economic environment. Is the economy up or down? Does the entrepreneur’s business cater to a specific clientele or a broad-based clientele? Is the business located in a city, suburb, or rural area? Does the business have a strong reputation? These and other factors contribute to the overall value of a business.
Third, the entrepreneur should always check to see if the value of their business is competitive with other comparable businesses. Overpricing the business may make it harder to get it sold, and underpricing the business may give buyers the impression the business is struggling. An entrepreneur should use the services of a business broker who has the expertise to place the right value on a business.
Engaging with an experiences business broker will help you to sell your business more quickly and for the right amount. There are many things that can be done to make your business more appealing to sell, contact us today for a consultation!