Learn How to Value and Sell your Business

Are you ready to move on to the next chapter and are looking to sell your current business? Selling a business is a complex, multi-step process that can be time-consuming and seem like a hassle at times, but all that effort is well worth it when you find the right person to buy it from you at the right price. But when you don’t know how to sell a business, this can seem like a very daunting task.

Although the sale of every business is just as unique as the business itself, there are certain steps you should always take, tips that will always help, and fundamental aspects of a sale that you can familiarize yourself with. Doing so will make the sale of your business a much smoother process and allow you to maximize its value as well. Consider this your “how to sell a business guide,” where we’ll take you through all the essential knowledge you need to be aware of, from how to value a business for sale and find the right asking price to what you can do to increase the chances of selling it.

How to Value Your Business

Before discussing how to sell a business, we first need to ensure you know the value of what you’ll be putting up for sale. Ideally, you should begin the process of finding out how much your business is worth a year or two before actually attempting to sell it. When determining how to value a business for sale, there are a few different methods you can rely on.

  • Determine the value of your assets by simply totaling up everything your business owns, including equipment and current inventory, and then subtracting any debt or liabilities.
  • With the help of a stockbroker or business broker, calculate how much a typical business in your industry is worth for specific levels of sales.
  • Estimate your businesses’ earnings for the next few years and calculate a P/E (price to earnings) ratio to calculate how much your company could be worth.
  • Perform a discounted cash flow analysis to find the value of present cash flow, project for the future, and then discount that value for an interested buyer today.
  • Consider geographical factors, business synergies, brand image, and other things that can’t be quantified into a number when determining how much you’re asking for your business.

You’ll also want to get a third-party evaluation to make sure the number you came up with is reasonable. A qualified valuation professional can provide a practical estimate of what your business is worth, albeit for a fee of generally $3,000-$7,500.

How to Sell Your Business

Now that we’ve gone over how to value a business for sale, it’s time to discuss how to sell a business and see all of your hard work pay off. This will obviously involve different strategies depending on industry and size, but there are two fundamental parts of selling a business that are universal: cleaning up the financials and increasing sales.

Cleaning up your financials will help make many of the tasks listed above for how to value a business for sale a lot easier, and getting your finances in order will make your business more appealing to potential buyers because that is less work they’ll have to do. Furthermore, one thing you should understand about how to sell a business is that today’s buyers are looking for transparency. Presenting clean financial statements along with business tax returns dating back three to five years and other important information gives potential buyers more information to help them make a decision and shows that there’s nothing shady going on that could turn them off.

Increasing your revenue also makes your business more attractive to potential buyers because most value sales and gross profit records are more important than anything else when determining the viability of a business, and thus their interest in purchasing it. So, do what you can to boost sales, maximize profits, and improve the overall performance of your company. Thankfully, this aspect of how to sell a business shouldn’t be too demanding since you’re already intimately familiar with the industry and the market, meaning you should already know what can be done to increase revenue.

 

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