Considering
selling your business but not sure what it is worth? Find out how to value your
small business.
Millstone or touchstone? What is your own business worth
and has it paid you to mind it?
How Do I Value My Small Business? by:
Pete Arkwright
The problem with selling any small business
($500,000 and below) is how can a realistic value be put on the business. If a
business is valued too high no one will be interested or worse value it too low
prospective buyers will think there is something irregular. Also where it is
listed for sale is important, EBay is a tremendous medium for certain things
however fraud is common place.
Unfortunately there is no fixed system when it comes to valuing any private
business, the IRS, Courts of Law and the Inland Revenue all use there own
systems. There are also many wonderful mathematical formulas that can be used;
however there is no fixed system. To be honest the whole system is complicated
with no fixed rule apart from one. What price is a person is happy to sell a
business for and what is the buyer happy to pay?
If you are either buying or selling a small business do not be afraid of
negotiation, it is a natural process within business. There are many good
negotiation techniques; Maitland Kalton of Kaltons Solicitors London is
considered an expert in this field.
The following list is a simple aid to assist people who are interested in
finding a value of a business, either for the sale or purchase.
- Does the business have employees either full
time or part time? Prospective buyers should be aware that any business in the
UK which employs 5 or more people has specific duties in regards to Health &
Safety.
- Is the business purely an internet business?
Be warned it is very easy for an online business to appear to be doing very
well, when the truth is completely the opposite. This practice unfortunately
is leading to the devaluation of genuine online businesses.
- Does the business have fixed assets or
stock? It is much easier to value a garage where real estate and equipment can
easily be valued, where as it is less easy to value a business with no fixed
assets i.e. Legal specialists, Solicitors, Health workers etc.
- Does the business have a full audit trail;
it is surprising how many small businesses listed for sale do not.
- What area is the business in; it goes
without saying that businesses located closer to major cities are valued
higher than businesses in a rural district.
- What are the future growth prospects for the
business?
- Will the business require
insurance/liability policies?
These are just a few factors that have to be
considered, as you can see there is much more to take into account than how much
revenue is generated by the business. I hope this short article has been of some
assistance to any potential buyer or seller of any small business.
About The Author
About the author - Peter Arkwright recently
retired from the military, he is now the Managing Director of
www.bizseller4u.com
A new portal that allows people to list their Business for Sale
Article Source:
http://www.articlecube.com