Things To Consider When Selling A Business: The 3 Valuation Models

things to consider when selling a businessIf you are selling your business, you will likely want to get the best price possible. Since there are so many different factors that contribute to your business’s valuation, professionals are available to help explain your selling options. Basically, though, your company’s present value coupled with potential future value will make up the sale price. There are a variety of ways that the numbers can be crunched, as there are many different things to consider when selling a business.

Now and Later
How far has your business come, and how far will it go? These are questions any prospective buyer will ask. You must also ask yourself these questions and answer with brutal honesty. That way you will list your business for the correct amount and not over or undervalue what you’ve worked hard to build. There are three main methods of valuation.

  • Asset-based valuation is when you quantify the value of investments, equipment, infrastructure, cash, and every last asset that a company has, and add them together to get the dollar value of the business.
  • Earning value approaches vary in terms of formulas for calculation, but all revolve around the same theory. The potential revenue of the business, based on past revenue, is calculated to determine profitability.
  • Market value approaches involve gathering data from other similarly sized businesses in the area, or in similarly populated areas, and calculating how much they are worth. This is not the most effective model but works for buyers who for whatever reason don’t have immediate access to the seller’s asset or earning records.

What does a business broker do?
One of the first things to consider when selling a business is hiring a business broker. They are the facilitators of business sales. Those often tricky valuation models are something you need not stress about when you go through the process with a business broker. They will handle all the initial steps of a business sale transaction, including advertisement, buyer interviews, and negotiations.

It’s hard to sell a business that you’ve worked hard to build. It’s even harder to do it alone. A business broker can handle the overly involved valuation and buyer sourcing process to take a bit of the burden off your shoulders. Call today to learn more about the process and get started selling your business for the best price.