Let’s discuss how to value your business for sale. If you are considering selling your business the number one element to consider before beginning the selling process is to determine what your business is worth.

Understanding the value of your business and net worth verses gross value will help you negotiate properly during the sale of your business.

The following are a few key factor elements to consider which may affect the value of your business.

  1. Financial History – The current gross and net revenues will be important when determining the overall value for your business.
  2. Financial Cash Flow – Current cash flow and profit projections for the upcoming year verses previous year. Prospective buyers are looking for upward movement from previous year to existing current year to projected upcoming year. Another way to value cash flow is by a discounted Cash flow method.  This valuation is based on the estimation and discount for any future cash flow that includes short term and long term cash flows. Keep in mind typically short term cash flows will be valued higher.
  3. Financial Business Verified Assets and Liabilities – Business assets equate to the overall additional value for your business. Some of the assets may include owned property, business stock, business furniture and equipment, online website and “CRM” customer records management files or client information, website, and accounts receivables.
  4. Financial Debt – Review total monthly and annual existing liabilities and debt.
  5. Financial Indirect Factors – Many factors need to be taken into consideration for the overall value of your business based upon the timing that you choose to sell your business. For example: The general state of the economy will affect the level of demand for your business, such as interest rate levels and inflation rate. You should research the value of similar businesses, the saturation of your market and the number of potential purchasers that may be interested.
  6. Financial Intangibles – These items are not tangible.  However, they may be considered in the overall value for your business. For example: Existing growth of your business verses the potential growth, number and strength of customer relationships, intellectual property which may be copyrights, patents, trademarks and trade secrets and goodwill which by definition equates to the value of the business that exceeds its assets minus the liabilities. It represents the non-physical assets, such as the value created by a solid customer base, brand recognition or excellence of management. Business goodwill is usually associated with business acquisitions.
  7. Financial Roles for Personnel – Is the business dependent one single person? Is the business dependent solely on the owners’ involvement? Will the business earnings meaning gross and net values immediately decrease when the previous owner exists the business? If applicable, will staff and management remain in the business once business has been sold?  These are additional factors to consider when evaluating a business value.
  8. Financial Earnings – Businesses must keep a record of sustained profits. This is known as multiple earnings whereby a business shall be valued by a multiple of future earnings resulting in an estimate of average earnings.

The Bottom Line Management team, as seen online at https://www.botline.com/services/valuate-your-business/ desires that every business seller comprehends the plethora of factors involved in the sale of a business and understands when that these factors may be outside your control, such as economy scales changing depending on economic climates, pandemic urgencies, interest rates, treasury notes and many other factors.

Because of these crucial factors which remain outside your control, it is always best to seek expert guidance and advice before putting your business up for sale.  Get the needed ethical, professional and personalized business brokerage services needed to sell your business and earn top dollars by contacting Bottom Line Management when it comes time to sell your business.