Are you thinking of selling your business? Here’s how to calculate its value.
There are many considerations to think about before you sell your business. You’ll need to know how much it’s worth, what your exit strategy will be, and whether or not it’s the right time to exit. Here’s how to calculate the value of your business and more, so you can make an informed decision about the future of your company.
How do I get an idea of what my business is worth?
You have a really unique business and can’t quite get the pulse on what it is worth, but that doesn’t mean you’re out of luck! There are various ways to evaluate what your company might be worth, even without anyone knocking down your door with an offer.
The simplest and most common method is asking a professional third party. Hiring a broker or finding an appraiser will help bring unbiased opinion into play as they assess the hard numbers behind the valuation process including cost analyses and more subjective factors such as risk-reward analysis and other buyer criteria which may affect the final purchase price for their services, such as commission rates.
What are some questions to ask when talking about selling my company?
-How much money will I get after taxes?
-Will the company continue operating in my absence? If not, does this affect the valuation?
-Do I want my family members to have access to my company and potentially benefit from it posthumously?
-Is the company profitable with or without me as a key employee for generating revenue and/or running day-to-day operations in various departments and positions within the organization?
How does the process work from start to finish?
Figuring out the value of a business is not an easy task and it often comes down to either gut instinct or hard numbers. If you are considering selling, here are some steps that will help ensure the process goes smoothly:
1) Calculate Income for a Period – Be specific about the time period, such as one year or five years (if data has been collected over a longer time period). Include all sources of income that have contributed significantly in recent periods and exclude those from previous periods. Also add in recurring expenses like insurance and other ongoing costs, as well as additional capital costs if necessary for the new owner to maintain similar income levels.
What if I decide against it in the end?
If you decide against it in the end, then a valuation will provide peace of mind as to the state of your company, its current direction, and what could be expected for the future. A completed valuation will also help identify areas for improvement and allow for a change in strategy if needed.
Where can I find out more information about this sort of thing?
Wondering what your company is worth? There are a few different ways to find out the current market value, so you can make an informed decision about what to do with it.
If you want an unbiased opinion, consult a professional appraiser and get them in touch with potential buyers. You can also use websites like Exitround or D&B Appraisal Tools for Estimating Business Value (DBAT) for more information.
Talk with a tax professional if there’s anything complex in your industry that might affect the sale price–they will know better than most whether the future income is accounted for correctly on paper or not and can help navigate any gray areas that might hinder interest from prospective buyers, like pending lawsuits or lack of competitive advantages in the marketplace.