At some point in the history of creating and developing your business you might decide to take a step back, delegate the everyday management of your company or even sell your business. Selling your business may be a long and difficult task that doesn’t have to be taken all by yourself – you can reach out for help to professionals, for example internet business brokers at Website Closers would be able to help you every step of the way with their experience and expertise.
Even if you are not sure at the moment and just want to learn a little bit more about your options in the future, or you’ve already in the process of preparing your business for sale – sooner or later you would be facing a simple question of the price of your business. Unfortunately all your hard work and countless hours invested in developing and building your company from the very beginning can not be measured and put into specific numbers and that is one of the valid reasons to look for a professional business broker who would help you with this task and explain how to calculate business worth. This is not the only reason to seek the help of a professional business broker, and we would get back to some of the reasons a little further in the article.
Business valuation methods
Bad news is there is no strict formula that can be used to calculate the final and fair price, because every business is unique as is every sale and there are a lot of factors affecting business valuation at every given moment in time. But there are several methods that could be used in order to find a close number that would satisfy the owner and the future buyer. Every method is more suitable in some situations and it is important to find the right one for you.
- The method of evaluating an existing market. How much is a similar business worth? If you don’t know where to start – you could visit local business broker marketplaces and websites and get a better understanding of the value of the functioning businesses in general. This would be a very important role of business brokers in selling a business – their unique experience and their ability to find similar cases with understanding the point of view of the potential buyer and the value of your business in the eyes of the market.
- The method of assets valuation. How much are all company assets worth? This may include all the equipment, raw materials, realestate, patents etc. This could give you the basic understanding of the price of your business, and it could be used in some cases. For example if your business is a part of a rapidly decreasing industry, or if it faces a very intense competition and shortage of customers.
- SDE method. SDE of Seller Discretionary Earnings is the amount of profit that your business would accumulate for the owner annually. It is a widely used method and the SDE becomes the basis of evaluation in a vast number of cases. But it is not the final number as it gets a multiplier that depends on different factors. Some of those factors are out of your reach and some of them could be changed by your preparation. And that brings us to the next chapter of the article.
Tips for selling your business successfully
Now, with your better understanding of the process of evaluation of your business and what would be the main points of attention of possible buyers – it should be easier for you to figure out how to increase business value before selling. As you can imagine the services of a professional business broker are not free, but as most professionals from Website Closers can tell you: “Great business broker pays for himself”. The usual fee for the services of the broker is about 10 % of the final value of the company and is paid by the owner of the company who is selling the business. So it is in the best interest of the owner and the broker to reach the best possible price for the business.
With the valuable experience of the broker and better understanding of the processes of due diligence and selling the business he can provide some valuable insights and useful information that would help increase the evaluation of your company as well as the chances to sell the business in the first place. There are several key features that would improve not only the value of your business for any potential buyer, but also would make it much easier for your broker to prepare an intriguing presentation of your company:
- Prepare your financial information. Work closely with your accountant or bookkeeper to make sure that the financial side of your business would be as clear and transparent as possible.
- Improve your cash flow if possible. You may try to slightly increase prices for your products or services, launch marketing campaigns that would attract additional customers or improve existing production processes in your company to minimize the expenses.
- Tune business processes. For some clients it may not be their first and only business, and they would be very pleased to find out that the business may run without their presence at all times.
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