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How You can Best Assess the Value of Your Business if You Want to Sell it

How You can Best Assess the Value of Your Business if You Want to Sell it

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Deciding to sell your business could be one of the most significant decisions you will ever make, as selling something you’ve worked long and hard on cannot be easy. Once you have made the decision, there’s no turning back – but it doesn’t end there. You still have to work out the worth of your business and its value, and although you can go the standard route and calculate your business’ worth based on your assets and your business’ structure, there are other factors which can affect your business’ value as well.

Your first task, however, is to get over your emotional or sentimental bias towards your business. That is where you can truly benefit from professional advice, because your broker, financial advisor, and legal advisor can give you the unbiased opinions you need and help you take the necessary steps to determine your business’ value. You need the best help you can get when it comes to assessing the value of your business, and here’s what you should know.

Approaching it from the asset standpoint 

There are various variables which make up the value of your business, but the assets are undoubtedly essential. In your case, you should add up all your business’ assets, but you should also give them a depreciation amount that is reasonable. Your assets can be divided into both tangible and intangible assets. Your tangible assets would include your actual physical premises or property, your furniture, and your equipment, but it also includes your intellectual property such as trademarks, incorporation documents, or patents.

Approaching it from the income standpoint

You can also determine your business’ value based on its income. With this, you can calculate your business’ net value depending on your current income. You can then project concerning your business’ future cash flow and discount it based on your business’ age and instability in future earnings so that you can determine your business’ present worth or value. If you consider that as much as 80% of any business’ purchase price will be financed, your buyers would want to check how well your cash flow can support the repayment of their debt while also giving them a good return on their investment as well as a reasonable salary.

Approaching it from the market standpoint

When you approach your business’ value based on the market, it is the least objective and the most subjective method, as it doesn’t deal with projected cash flow or the prospective return on investment, but an estimate of your business’ potential to earn based on market demand. You can determine your business’ worth in relation to the evaluation of similar business enterprises which have already been sold and comparing these sale prices to other metrics such as earnings or revenue.

Your business’ actual worth will primarily depend on all the three standpoints mentioned above, and if you really want to make it easy to sell your business online or the traditional way, you have to consider the other intangible assets and variables that include location, product, price, customers, website, name, marketing, and vendors. Good luck!

 

Image attributed to Pixabay.com

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