Selling a Business

According to industry analysts, only about 30 percent of all businesses for sale actually sell.  These are not the most encouraging odds if you are trying to sell your business, but there are some ways to get an advantage over the competition.  One way of doing this is learning how to price a business to sell.  Business valuation is probably the most difficult part about selling a business, and most people know very little about it.  The method you use to price your business will depend on the type of business you’re in, where you are located, your cash flow, and even your competition. 

If you are an entrepreneur, one of the hardest things that you will ever do is to put your business up for sale.  Even if you are retiring or moving on to a new venture, you have poured a lot of time and energy into making your business a success and you will want a good return on your investment.   This is where a good business broker can help.  Not only will they take over the marketing of your business to potential buyers, they will help calculate the appropriate selling price and respond to any offers, freeing you up to run the day-to-day operations of your business.

A business broker is a lot like a real estate broker, in that they match up buyers and sellers of businesses, but a good business broker will also help you get the maximum dollar value.  That’s why it is so important to hire the right one.

While the U.S. economy continues to sputter, it is difficult for business owners to know how to evaluate the value of an existing business.  There are three basic approaches that can be followed when valuing a business, so it’s important to choose the right one for your industry. 

Asset Based Approach: An asset-based approach is where the value is derived from the costs of tangible assets, or the replacement value of such assets in similar condition.  This approach is best used when the earnings of the business won’t support a greater value than its tangible assets. 

As a Colorado business broker, I often hear sellers lament that selling an existing business in today’s economic climate is a losing proposition.  But the truth is, selling a business is not the same as selling a piece of real estate; the value of a business depends on a lot more than the current economy, and the method of business valuation that you use.

Any broker will tell you; business valuation can get quite complicated.  A business broker uses financial tools and advisors to apply specific calculations to the company’s gross revenues, cash flow, and annual growth depending on the type of business it is. Then, the assets of the business are valuated separately.  These include the physical property of the business, if owned, plus equipment, inventory and financial assets. 

No matter where you live or what type of business you are in, there is always wisdom to be gained from speaking with a tax professional – especially when it comes time to sell your business.  Sure, there is plenty of sound advice available on the subject of “tax considerations when selling a business”, the best way to avoid a surprise tax bill is to speak directly with a professional business tax advisor. 

That being said, there are some basic ideas to consider when you structure your sale, since you never know how quickly things will progress with an interested buyer. 

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Click to contact us for help buying or selling a business.  Since 1980 we have been in the "business of business." We are a professional company specializing in bringing For Sale By Owner Business Buyers and Sellers together. Being one of the Nations leading firms in our industry, we are best equipped to help you because of our background and years of experience in working with business buyers Nationwide and businesses of all sizes and types. Your business purchase or sale information will be handled by experts and conducted in a confidential manner.

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