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.
- If you’re ready to cash out of your business and move into a different phase of life, it helps to work with a business broker who can position your company for sale. For example, one of the first questions you will hear from a prospective buyer is, “Why are you selling the business?” What they really mean is, “Is there something wrong with this business that you’re not telling me about?”
- A business broker can provide the kind of answer the buyer is looking for, without giving away more information than necessary. When you are selling an existing business, a broker can package it to make it more appealing to buyers. They can even recast your financials to focus on income potential for the new owner, which is especially useful when dealing with a potential owner-operator.
- Selling an existing business in a tough economy may also require owner-assisted financing, which means you could be lending as much as 70 percent of the selling price to the new owner. A good broker can also ensure that your financing deal is airtight and they buyer is creditworthy.
You may want to use an online for-sale-by-owner directory when selling an existing business. Directories such as BizSale.com are a great way to draw attention to your listing.