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How To Get The Best Price When Selling A Business

Thursday, November 26, 2015 · 0 Comments

There can be a number of reasons why you'd consider putting a business up for sale. Whether it's just time to move on, you have another idea that simply can't be left alone, or you want to set yourself up for retirement, there's one decisive factor in any scenario: Your business' worth.

So, what's the process of coming up with a valuation to enter the market with? And how much planning does the whole endeavour take?

Taking action

Well, first things first, many business owners fail to prepare properly in the build up to their operation going on sale. In fact, according to the author of 'Exit Signs: The Expressway to Selling Your Business With Pride and Profit' Pamela Dennis, most sellers dread the process so much that they fail to plan correctly.

Essentially, figuring out exactly how long you'd like your business to be on the market for, and how quickly you'd like the sale to progress, are critical indicators of where you should aim with the price. My Own Business explained that going in too high will leave you with a lack of interest. Too low, and you could essentially be giving parts of the operation away for free.

Consequently, striking a balance is key, and there are a number of methods that can allow you to come up with a solid opening valuation.

Crunching your business' financial facts and figures is one of the first steps in establishing a sale price.

 

Crunching the numbers

Essentially, anyone assessing businesses for sale will be looking for an opportunity that can present them with biggest return on their investment. To that end, your opening valuation should be based around current profitability and projections for the entity's bottom line in the future.

Consider annual net profit after taxes, and use the figure to build a better picture of what your business is worth in the here and now, and the kind of opportunity that it could present to

An outside perspective can actually be critical to getting the price estimation right.

a potential buyer.

Talking with the experts

There are a raft of factors that can go into defining the price of your business, and taking on board opinions with an outside perspective can be critical to getting the estimation right. To that end, even if you have a thorough understanding of your business and its potential, consult with a business broker and utilise their expert opinion. 

The majority will likely have experience in selling businesses similar to yours, they can give you a broad idea of how the wider market is performing, and offer you a good starting price point at which to initially pitch your company.

 

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