How to price business for sale: a basic guide

How to price business for sale: a basic guide

Did you know that just 3 out of 10 businesses offered on the market sell? One of the reasons for that is the unreasonable price that business owners have for their businesses. That’s why it’s crucial to evaluate your business for sale in the best possible way. In this article, you will find some basic tips that will provide an answer to one important question – how to price business for sale.

Getting an Estimate

First of all, you should be prepared to spend some time and energy on this activity. In order to get an estimate, you will have to consider a few things. First of all, you must collect information about your business. Start by checking the situation on the market. Focus on the sale price of businesses that are focused on the same industry and have similar characteristics with your business and are located in the same area. The next step is to check the assets. You may have to analyze the income capitalization or liquidation value. Finally, you must evaluate the cash flow you have at the moment. The so-called seller’s discretionary cash flow plays the most important role here because you have to multiply this specific cash flow by 1, 2 or 3 to get to a realistic market price.

Confirming the Estimate

The next phase involves the analysis and confirmation of the estimate. It is crucial for business owners who want to sell their business to double check all the things we’ve mentioned before because it’s easy to make a mistake. When you get a price, it’s time to compare it to the price of similar businesses from similar areas. This should give you a better picture of the real value of your business.

Another thing that is important to understand is that the method you use for selling your business may affect the final price too. If you are using a middleman in the process, you will have to pay a fee. Some buyers are using cash while others prefer credit. In the recent periods, there is growing number of buyers and sellers that are using specialized business for sale website. This is a very convenient way to promote your business for sale. Some of them are asking for certain fees, but the fact is that they are speeding up the process of sale.

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