You’ve built a business up from scratch, sweated blood and invested all your time and money into making it successful, and after all your efforts you’re now the owner of a profitable enterprise. You may have started out with the intention of selling your business in order to realize a profit, or just because you like the challenge of starting from scratch again. Or you may have been forced into selling for health or family reasons. Maybe you’d just like to retire and live a life of luxury!
What is it worth?
You will find it hard to have an objective view when it comes to valuing your business. You will see all the work and time, not to mention the financial investment you’ve made, and as a result, you may have a distorted view of what your business is worth. Prospective buyers won’t know or care about how hard you’ve worked and the sacrifices you’ve made, they will want to know how much profit the business makes, what value there is in the stock or the client list, and what the prospects are for your business’s sector. To get a realistic figure for selling your business, you need to analyze your figures and calculate reasonable projections.
Profit + assets + prospects
It may sound like a simple calculation, but as business models are so variable and prospects so changeable, it can make it hard to come up with a figure. If your business is based on selling products, you will be able to start with the value of your stock, premises, and equipment, which may add up to a sizeable number. On the other hand, if you sell services, you can only value your premises and equipment, which may not amount to much, plus the value of the clients you have. It can be quite disappointing because clients are not necessarily tied to doing business with you, and your buyers will know that clients could leave as soon as the business changes hands. With such an important and complex calculation, you need to be sure you know what you’re doing, so use a service such as overheadwatch.com to help you, or get a valuation from an agency that specializes in selling small businesses.
Getting your books in order
If you decide to sell up, you’ll need to make sure the business is running smoothly and looking like a good investment. You need to have all your accounts, financial records, licensing requirements and tax returns up to date, accurate, and readily accessible for appraisal. Have a look at your premises and see if you need to redecorate, lay a new carpet or replace outdated equipment. Is everything clean and tidy? Get the windows washed and the outside looking pristine and inviting. You may be reluctant to spend money on a business you want to sell, but presenting it well will attract buyers and help you get what you the full value.
Whatever the reasons for selling your business, it can be a lengthy and tricky process, so it pays to be sure it’s what you want to do and prepare for the job of selling. When you’re fully prepared, you can advertise your business and look forward to the moment when the deal is done!