How much is my business worth?

When you decide to sell your business setting the selling price is extremely important. There a many ways that business can be valued and we will try to cover the most commonly used methods for you. It is a common mistake of many sellers to try and sell a business which is overpriced. During the process of determining the sale price you must constantly put yourself in the position of the buyer. It is true that your business is only worth what someone else is prepared to pay for it,which will usually be the market value at the time of sale.    

People buy businesses for many different reasons, the person that buys your business from you may buy it for a totally different reason than you bought it. Usually it will be for a change in lifestyle, as a way to utilise their own trade skills, or to break out of the 9-5 rat race and be their own boss. Whatever the reason you must try to put yourself in their position when considering the current market value of your business. Take a really objective view of all of the different aspects of the business and ask yourself how much you would honestly be prepared to pay.  

The expectations and future plans of buyers will also vary greatly. Some buyers will be looking to buy a steady cash flow income that they are able to build on, others may be looking for capital growth. You should prepare and price your business with both of these types of buyers in mind.  

One thing that nearly all buyers will have in common is that they will not buy an overpriced business. By putting an unrealistic sale price on your business you will have fewer inquiries and the prospects that you do get will probably walk away rather than putting forward an offer. Most buyers will be comparing your business to several others and if it is obviously overpriced they will stop considering it at a very early stage.  

Having made the point about not overpricing the business it is also important not to go the other way and under price the business. Most people will only sell a business once or twice, the business has been your life for the time that you have owned it and you must get a price that you feel happy with and that makes all of the blood sweat and tears worthwhile! More importantly you must make sure that you clear enough funds to pay all outstanding liabilities (including the tax due on the sale) and have enough to either start something else or provide you with an income.

Valuing a business