Selling your business can be a challenging step. Most business owners have invested a significant portion of their life into their business, and selling it signifies the end of a chapter. You need to determine a realistic price for your business based on various valuation factors. The price set mustn’t be too high or too low as either could dissuade buyers from submitting an offer.
Here are a few things to consider when valuing your business and determining the final selling price.
Valuation Factors
There are many valuation factors to look at when selling your business– including buildings, machinery, stock, land, client value, reputation, employees, and much more. You should try to consider as many factors as possible when valuing your business.
Intangible assets can be much harder to quantify than tangible items, like machinery or buildings and structures. Most industries use the Earnings Multiples approach to determine the value of their business. This approach uses a formula to divide the business’ price by their earnings. There are various ways to determine the value of a business, and it’s worth hiring an accountant to crunch the numbers for you.
Get A Higher Multiplier
If you own the business and have staff to run the business when you’re not there, you can ask for a higher multiple. In this case, the company is not dependent on the owner, and thus it is more valuable. You should also consider whether the business can bring substantial new product ranges to the industry and curate new distribution channels to bring in new clients. If your company has a strong brand image that impacts all aspects of the business, the multiplier can further increase.
Get Your Books In Order
You need to get your affairs in order. Take a long look at your finances and make sure your company looks organised and profitable instead of a risk for potential buyers. You need detailed records of your business and thorough reports. Make sure your books are in order, and you know the reasons behind your company's value. Buyers may ask questions, and you need to be able to justify your price with solid evidence.
Sell Smarter With A Viable Valuation
Selling your business can be a stressful and somewhat daunting venture. It can take up a lot of time and energy. Make sure you plan how you will handle this added stress on top of running the business - until you can sell it. Your company valuation and exit strategy are essential!
