Things to Consider when Valuing your Business

Obtaining an accurate valuation of your business is the first part of selling your business. Pricing your business too high will have you struggling to find buyers and pricing too low will have you missing out on your money. So how exactly should you do it? Just like when I decide to sell my business, I want to share to you some important considerations.

Valuation Methods

The methods below can help you generate an asking price which is fair for you and your buyer.

  • Asset Valuation

If you are company owns a good deal of assets, you can take advantage of this approach. This looks at the total assets of your business minus its total liabilities. For an accurate valuation, get your books in order and ensure the numbers are correct. Also, the books need to be up-to-date and that they have accurate and representative values.

  • Entry Valuation

This method looks into how much it would cost to buy your business’ assets, building a customer base, developing the product and train staff.  This kind of valuation can be quite useful if you are selling a corporate company. Companies which decide to buy an existing business will consider this method.

Increasing Business Value

After you have determined the worth of your business, you will want to ensure you can raise it for more profits and saleability. Here are some helpful tips:

  • Have your books ready ahead of time. Never let your books get out of hand. Serious buyers will not consider your business if you don’t have an up-to-date records available.
  • Minimize the risk. Buyers will prefer low-risk, high-potential businesses. Running a business on the revenue stream or depending on an employee for the operation will increase the risk for a possible buyer. If possible, focus on decreasing such risk to increase your business’ value.
  • Determine what makes your business unique. While every business is unique for every owner, buyers see them differently. It is important that you show the uniqueness of your business when compared with its competitors. You probably have an exclusive deal with your suppliers, have company partners or situated in a prominent location.

  • Think about the right timing. Although there are always both good and bad sales periods, try to find a valuation during a great time. Remember that buyers are looking for well-performing businesses. Evaluate your value at a great time and you can surely enjoy the benefits.