The problem with selling any small business is how can a realistic value be put on the company. If a business is valued too high no one will be interested or worse cost it too low prospective buyers will think there is something irregular.
Unfortunately, there is no fixed system when it comes to valuing any private business, as the government and insurance agencies all have their operations. There are also many excellent mathematical formulas to use; however, there is no fixed system. To be honest, the whole system is complicated with no fixed rule apart from one.
What price is a person is happy to sell a business for and what would the buyer be glad to pay?
If you are either buying or selling a small business do not be afraid of negotiation, it is a natural process around the world. The following list is a simple aid to assist people who are interested in finding a value of a business, either for the sale or purchase.
- Does the business have employees either full-time or part-time? How is the sale going to impact them?
- Is the business purely an internet business? Be warned it is very easy for an online business to appear to be doing very well when the truth is completely the opposite. This practice, unfortunately, is leading to the devaluation of genuine online businesses.
- Does the business have fixed assets or stock? It is much easier to value a garage where real estate and equipment can easily be valued, whereas it is less easy to value a business with no fixed assets i.e. Legal specialists, Solicitors, Health workers etc.
- Does the business have a full audit trail; it is surprising how many small businesses listed for sale do not.
- What area is the business in; it goes without saying that businesses located close to major cities are valued higher than businesses in a rural district.
- What are the future growth prospects for the business?
- Will the business require insurance/liability policies?
These are just a few factors that have to be considered, as you can see there is much more to take into account than how much revenue is generated by the business. I hope this short article has been of some assistance to any potential buyer or seller of any small business.
If you would like to learn more about Starting a Business check out our Selling a Business Workbook. This guide has been designed to give you an overview of what it means to sell your business and to provide you with reference links so that you can make an informed decision about your new business needs.
If you would like to learn more about Starting a Business check out our Buying a Business Workbook. This guide has been designed to give you an overview of what it means to buy a business and to provide you with reference links so that you can make an informed decision about your new business needs.