Is My Business Worth Selling?
Only you can decide if your business is worth selling and that probably depends on more than money. How much your business is worth hinges on many factors, including the industry, the economic climate, assets and liabilities, revenue, and much more, some of which cannot be easily translated into dollar figures. Some things have value and are important to the sale of a business but are not easy to quantify.
A business may be worth a lot of money in theory but you can't sell without buyers. Conversely, even a new business that is relatively untested could get an offer. Maybe the buyer wants a ready-made set-up or your style. In order to determine whether the business is worth selling and how much it is worth, you have to get organized and creative.
There are different approaches to valuation from a financial perspective. The US Small Business Administration suggests the following three approaches:
- Evaluating Assets and Liabilities: What stuff does your business have? Is there expensive equipment? Have you invested in impressive offices? Just like you do at tax time (or should do), get acquainted with what your business has and what it owes.
- Examine Revenue: How much money comes in to the business from its normal activities? How long have you been able to stay afloat? And do you ever reach profitability? Many businesses survive but never quite thrive. Revenue valuations are done by multiplying money made from usual business activities by an industry multiplier. Again, what that multiplier is depends on different factors (the industry, location, demand, etc.).
- Look at Earnings and Expenses: Your earnings are different from revenue insofar as they represent profit, or money you are making beyond what was spent. Businesses can survive without being profitable necessarily, and still serve a purpose, like supporting you. Just because a business is not hugely profitable does not mean that no one will buy it or that it has no value.
How Sales Are Made:
It is impossible to say in the abstract which one will be right for your business or which, if any of the methods mentioned above will adequately account for all the factors that impact the value of your business.
It is most likely that the true value of your company can be determined by combining approaches. If you can get a sense of all of assets and liabilities, revenue, profitability, you will begin to have a feeling for what your business is worth.But business is strangely mystical even if it seems to be all about numbers. People may pay for the value you created by having an especially aesthetic salon or a particularly personable law office. You know what makes your business special and what you put into it, how long that took and how hard you worked.
Intangibles also go into the valuation and an expert will help you quantify all sorts of aspects of your business. Speak to an attorney about a total assessment.
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